What are people using bitcoin for?
With the price of bitcoin reaching all-time-highs and trade volume taking off around the world, it’s easy to lose sight of the fact that bitcoin is solving real problems for real people on a daily basis.
As someone who’s been working on the front-lines, dealing with average(mostly new) users for many years, I’m constantly surprised by the new ways people are finding to use bitcoin.
A few years ago, most outside observers would have associated bitcoin with the Silk Road and people buying drugs online. Since then bitcoin has evolved significantly. What the new users I’m seeing have in common with those drug buyers is that they are using bitcoin to solve a problem that the legacy financial system is not set up the handle.
Most of the time, the simplest problems bitcoin can fix involve inefficiencies created by the reversible nature of credit card or Paypal transactions. This is what brought an entire class of recent high school graduates into our store to buy bitcoins. The tour operator that they’d selected for the class graduation trip had become sick of having 20–30% of his paid deposits charged back by parents who’d changed their minds. That tour operator now only accepts bitcoin for deposits.
Similarly, this is what allows several small business owners I’ve spoken with to negotiate 10–20% discounts from their suppliers in China by paying in bitcoin. These Chinese suppliers avoid the risk of charge-backs and the small business owner saves money up front.
Another common problem being solved by bitcoin is the avoidance of financial censorship. Whatever you may think of the legality or morality of people buying drugs or escorts paying for ads on Backpage, its undeniable that there is a demand for these products and services. The legacy financial system is obviously not filling the needs of these users. For better or worse, bitcoin offers users the financial sovereignty to make these choices for themselves.
This level of freedom also became important for Wikileaks when Visa, Mastercard and Paypal effectively blocked every payment channel they had for donations. In fact, entire industries of legal businesses have been targeted for financial censorship by measures like Operation Chokepoint.
The irreversible, censorship-resistant nature of bitcoin isn’t always at the forefront of every use-case. Sometimes people are just looking for an easy, low friction way to make international payments. It’s very common for parents of international students to make bill payments using services like Bylls.com to easily pay bills from afar.
The other major reason people are currently buying bitcoin is likely what’s driving a good portion of the price increase. Namely, people are looking to store or increase their wealth. In other words, speculation. Along with the idea that you might be able to buy bitcoins today and sell them at a higher price in the future, people are increasingly aware that investing in bitcoin can protect a portion of their wealth against the possibility of a future calamity or collapse in the traditional financial system.
Some view an investment in bitcoin as speculation. However, more and more people are deciding that they are unwilling to speculate on whether the banks will continue to effectively protect their wealth. Baby-boomers have begun moving funds into bitcoin with the awareness of a possible bail-in happening sometime in the future.
Of course speculation is driving the massive bump we’ve seen in the price of altcoins over the last few months as well. The difference is that the price of bitcoin is backed by ongoing real world use-cases. Even large projects with a ton of potential like Ethereum are currently not being used at any significant scale to solve problems that could not be addressed more effectively either by bitcoin or centralized systems like banks.
Bitcoin on the other hand, is solving real problems for real people everyday.
and its growing…