Photo via Flickr
You don’t necessarily need dollars to buy a slice at Lean Crust Pizza at 737 Fulton Street in Brooklyn. Lean Crust is one of Dan Lee’s family-owned businesses that accept Bitcoin as a form of payment.
What is Bitcoin?
Well, I’m so glad you asked! Bitcoin is a form of digital currency that is currently not regulated by the U.S. government. It allows for wireless transactions from a digital wallet. If a consumer wants to pay with Bitcoin, the cashier gives the consumer a QR code to scan with his or her smart phone.
The $2.75 price of a thin crust pizza is then converted to Bitcoins depending on the conversion rate at that moment. The transaction happens instantly but takes about 15 minutes to process. Customers will see the Bitcoin amount deducted from their virtual wallet then.
So right now if I went to the cash register I would be charged 0.006652 BTC (the currency abbreviation for Bitcoin) and that amount would be deducted from my Bitcoin Virtual wallet.
That’s because 1 BTC = $413.4 US Dollars (right now).
Please, I didn’t do that math. There’s a reason I’m a reporter and not in finance. The handy dandy “Simple Bitcoin Converter” website: http://preev.com took care of that for me!
The other Brooklyn stores accepting Bitcoin that Lee runs are nearby. They include, Greene Ave. Market, Oxford Kitchen, Fresh Garden and Mirai Nail Salon. Lee began accepting Bitcoin at Lean Crust Pizza about 7-8 months ago but admits for the first 6 months no one used it.
This has begun to slowly change over the past two months. He says he is now seeing about 5-7 Bitcoin transactions per week.
Lee sees benefits for both the consumer and the merchant. For the consumer, he says they “don’t have to carry cash. A free, quick transaction, that takes 20-30 seconds.” For the merchant he discusses the lower processing fees as his motivating factor. He says with a credit card the processing fees can be anywhere from 2-4% on every transaction and with a Bitcoin transaction the fees come out to a maximum of 1%. He adds that it was “really, really easy to set up.”
Who’s actually using Bitcoin to pay at Lee’s stores?
He says that he has people who “travel from the Upper East Side or Upper West Side just to use it.” He quickly follows up, noting “People who use Bitcoin are very passionate about it. They try to use it to support it any way they can.”
Just to give a little context, that’s about 60 New York minutes spent on the subway, each way to buy a slice of pizza on your phone.
So I can buy a slice of pizza with my phone, SO WHAT?
While seemingly easy and convenient buying pizza isn’t really what drives the Bitcoin market.
It’s Wednesday evening in Manhattan and 130 Bitcoin proponents have packed themselves into a Micro Office Space in Times Square with, ironically, pizza and Bud Light.
I step into the freight elevator en route to the 9th floor “Bitcoin Start-up Meet-up” and immediately the person next to me is questioned, “You buying or selling tonight?”
On the elevator is Dorothy Chang, who runs a Tech PR firm and is also a founding partner of Liberty City Ventures, which invests in Bitcoin start-ups, responds that she set up the meeting and is just here to bring the Bitcoin community together.
Four presenters were given eight minutes each to wow the zealous crowd on their Bitcoin start-up. The presenters were Jason Melo from itBit, Peter Seed from TradeFor, Max from BitDeliver, and Aaron Zirker from The Crypto-Currency Analytics Company. Afterward, the presenters and attendees stuck around to network and debate ideas, but mostly to discuss Bitcoin with a fervor and passion that was absolutely captivating.
Without boring you to death, I’ll give you a quick synopsis of the presenters:
ItBit: A Global currency exchange to buy and sell Bitcoin.
TradeFor: A social Bitcoin trading game, one can buy and trade daily deals—such as discounted movie tickets.
BitDeliver: A place to buy and sell Bitcoin with cash globally, headquartered in the Dominican Republic.
The Crypto-Currency Analytics Company: A site dedicated to buying and selling Bitcoin on the various Bitcoin exchanges.
Unless you are one of the 129 people in the room who are as passionate about Bitcoin (I made the attendance 130) as this group is, all of the above may be over your head and you are simply left with the questions like Why and Who cares?
Dorothy Chang says Bitcoin is really not about buying a slice of pizza in Brooklyn, even if that’s what normal people do day to day, but it’s about “wiping away borders for a totally free market.” She says that the end goal for Bitcoin is to allow for “global transactions, real-time, anywhere in the world.”
She believes Bitcoin is the “step towards creating a global economy.”
Okay, whoa, so it’s really not just about pizza.
She believes the best use of Bitcoin is for Remittance, the process by which funds are transferred internationally by a person back to their home country, usually to support family members.
Chang says remittance is a $500 billion dollar industry each year. This amount accounts for the fees for transferring money each year from the U.S. to their home country, or country where they have family. She explains that currently money transfers through Western Union can have high fees and through Bitcoin those fees would be very nominal, saving people lots of money a year.
She also states really simply that the benefit of using Bitcoin for everyday people, who may not be sending large sums of money abroad, is that they don’t have to worry about bank accounts, credit cards, or wallets being stolen.
She’s back on my terms now, I get that.
She ends with the first thing she told me when I entered the meeting, “It’s like the Internet in 1993.”
By this she means the Bitcoin world is still developing, emerging, and there is opportunity for growth. “This is something that’s resilient, that’s going to last”, she states with vigor and confidence.
After the meeting, the banter and challenging of ideas continued at EVR, a midtown bar where Max from BitDeliver is a partner. EVR has become a hub of Bitcoin discussion in the city and, not shockingly, accepts Bitcoin! It was an open bar, however, so no Bitcoin was exchanged.
Martin Koppelmann, just in from Berlin, said he was here to discuss his new start-up, a website which allows you to bet on future events with Bitcoin. If someone wants to bet that Germany will win the World Cup and they find an opponent who wants Brazil to win, they both place bets in Bitcoin- winner takes all, except for a percentage that Koppelmann’s company will keep. Gotta’ make money or (Bitcoin?)!
But is Bitcoin actually real money?
On August 6, 2013 a federal Judge of the East District Court of Texas ruled that “Bitcoin is a currency or form of money.”
This ruling came about because the Securities and Exchange Commission challenged Trendon Shavers for defrauding investors in his company, Bitcoin Savings and Trust. Bitcoin Savings and Trust was in the business of selling Bitcoin to local people and was being investigated for running a ponzi scheme. When challenged, he said Bitcoin wasn’t actually currency so he could not be held liable. Oops.
Okay so Bitcoin is actual Money. But I thought it wasn’t regulated by the U.S. government?
What a timely question! I forgot how smart you were.
On Monday, November 18, the U.S. Senate Committee on Homeland Security and Governmental Affairs will hold a hearing to discuss the regulatory and security challenges associated with Bitcoin.
The hearing, “Beyond Silk Road: Potential Risks, Threats, and Promises of Virtual Currencies,” “will invite witnesses to testify about the challenges facing law enforcement and regulatory agencies, and include views from non-governmental entities who can discuss the promises of virtual currency for the American and global economies.”
Depending on what comes out of the Senate hearing on Monday, it could possibly be a monumental day for the future of Bitcoin.
Silk Road? Why are we talking about the historical trade route between Europe and Asia?
No, no, not that Silk Road.
The Silk Road was an online black market website that sold drugs, firearms, and assassins for hire, in exchange for Bitcoin.
The site was seized by the FBI at the beginning of October.
So does Bitcoin encourage the buying and selling of illegal items and activities?
To some people, yes, because it is not tracked or backed by the government as a form of currency.
To Bitcoin backers such as Dorothy Chang the answer is a firm “no.” She believes “Bitcoin is actually more track-able than cash.” She explains that every transaction is published in some kind of digital public ledger.
Regardless of opinion, the currency is not backed or regulated by any authority or government so there are inherent issues.
There are recent reports that a Chinese Bitcoin trading platform, Global Bond Limited, worth up to $5 million, suddenly disappeared and users were unable to login, their money vanishing along with it.
This a snapshot of the inherent risk in a currency with no physical value and no government regulation. That’s probably part of what the Senate would like to discuss at the hearing on Monday.
I feel like I’m starting to get it, are there any other risks associated with Bitcoin?
Besides the fact that it is not regulated or backed by the U.S. Government leading to some security and stability issues, it is a very volatile currency. Meaning that the value of Bitcoin fluctuates quite rapidly. With large ups and downs, it can be difficult to see if it can serve as a valuable and consistent long term currency and investment.
Okay, so how do I get my hands on some Bitcoin?
You can exchange them for another currency or goods with someone in your area: https://localbitcoins.com
You can earn bitcoins by mining: http://startbitcoin.com
You can be paid in bitcoins for goods or services: https://coinbase.com
Wow, this is a lot to take in! Any advice?
If all else fails go to Dizzy’s Diner in Brooklyn- they only accept cash!
Oh and by the way, 1 BTC just went up to $418.50, a growth of $5 in three hours.