5 reasons Why someone would use Bitcoin
It has now been eight years since Satoshi Nakamoto released his peer-to-peer digital cash system to the world, and the debate over whether or not the payment network and currency have any real, long-term value is still undecided. Having said that, some real-world use cases have emerged. Bitcoin transaction volume continues to grow year-to-year, which means someone, somewhere finds Bitcoin to be the proper way to transfer value online.
Although there are many different reasons as to why someone would become interested in Bitcoin, there are five that stand out from the rest.
1. Digital Gold
Nathaniel Popper picked the perfect title for his book, Digital Gold, which details the history of Bitcoin. Bitcoin has many features similar to gold, and it’s superior in more ways than one (more divisible, portable, durable, etc.). The only area where the digital currency cannot compete with physical gold is fungibility, but that’s an issue that may be solved in the future via privacy improvements to the system.
The various use cases of the Bitcoin blockchain are what drive Bitcoin’s value as a digital gold. Much as gold’s underlying value lies in its use in jewelry or electronics, Bitcoin’s underlying value lies in the fact that one must have some bitcoins to interact with the Bitcoin censorship-resistant ledger.
2. Trading and Speculation
The vast majority of Bitcoin transactions happen off-blockchain, and most of those transactions are on the various Bitcoin exchanges around the world. According to Bitcoinity, the all-time record for trading volume in a single day was broken on Christmas Day 2015. The record was then broken again on the 14th of January, 2016.
While some prefer to buy and hold, there are still plenty of speculators in the market who think they can time the bear and bull runs perfectly. There is also still plenty of activity in the altcoin market, which some view as nothing more than a casino. According to CoinCap.io, the entire altcoin market cap is roughly 15 percent the size of Bitcoin’s market cap.
3. Discount Shopping
Purse.io and Foldapp are two startups bringing discounts to Bitcoin users who shop at Amazon, Starbucks and Target. The backends of both of these applications rely on inefficiencies in the secondary gift card market for these particular stores. Users of Foldapp are able to get 20 percent off at Starbucks and 8 percent off at Target, while Amazon shoppers can get 25 percent or more off of their purchases when they use Purse.io.
Some Bitcoin services, such as Circle, offer USD balances, which allow users to avoid the price volatility associated with Bitcoin while still gaining access to the discounts provided by these Bitcoin-powered applications.
4. Darknet Marketplaces and Ransomware
Some Bitcoin users don’t like to talk about it, but illegal transactions and criminal activity are still part of the Bitcoin network. Censorship-resistant transactions were the first major use case of Bitcoin (illustrated by Silk Road and Wikileaks), and the payment network’s usefulness in these kinds of financial activities is what underpins its value in the real world.
Although the original Silk Road was taken down back in late 2013, there are still plenty of uncensored marketplaces accessible via the Tor Browser. Hackers have also had a field day with ransomware, which encrypts data on infected computers and demands bitcoins in exchange for the decryption key. There was recently a high-profile ransomware case in Los Angeles in which a hospital was forced to pay a 40 bitcoins (roughly $17,000) ransom in exchange for the ability to regain access to their patients’ data.
5. Online Gambling
For some, the gamble of holding bitcoins is not enough. Satoshi Dice accounted for more than half of all Bitcoin transactions in June 2013, and the cryptocurrency-powered gambling industry is still thriving in 2016. Bet King, a bitcoin gambling website with a crowdfunded bankroll, claims to have had users wager more than 150,000 BTC with them over the course of 2015, while Primedice says their site has processed over 1 million BTC in wagers since 2013. Key players in the traditional online gambling industry, such as BetOnline and 5dimes, have also integrated Bitcoin for deposits and withdrawals.
6. Sales of Digital Goods
This use case ties in with the use of Purse.io and Foldapp because it involves the sale of digital goods, which are usually irreversible trades. In addition to gift card codes, game items and currencies are also often traded online. An example of Bitcoin’s usefulness on a marketplace for digital goods that can be used in digital gaming environments is OPSkins. This platform allows users to buy and sell game items available in CS:GO, Dota 2, and Team Fortress 2. BitPay claims the marketplace is currently processing nearly $40,000 in Bitcoin payouts per day.
Honorable Mentions
International money transfers and micropayments are two uses cases of Bitcoin that have not seen widespread adoption up to this point, but they could see more activity in 2016.
TheProtocol.tv is likely the best example of micropayments in action up to this point. This content platform is powered by PopChest, and it’s mainly used as an illustration of how Bitcoin-powered micropayments can benefit content creators. NurdRage, a popular YouTube channel with more than 600,000 subscribers, is currently testing out the PopChest platform.
Brave is a new browser currently in development that will allow users to skip advertisements via micropayments to content creators. JavaScript Inventor and Mozilla Co-Founder Brendan Eich is the CEO of the company behind the browser.
The Lightning Network is also expected to be functional in 2016, which should offer improvements in the areas of micropayments and scalability in Bitcoin.
Freemit, Align Commerce and Abra are three startups using Bitcoin to lower the costs of international money transfers. Bitwage and Rebit have already found some success in assisting companies and individuals in this area.
Source: Nasdaq
