Why bitcoin merchants and customers don’t see eye to eye
Nearly a decade after bitcoin’s inception, merchants and consumers still struggle to use the digital currency for retail payments.
There are bitcoin retailers out there, but they’re few and far between — and they’re not easy to pay.
The Montessori Schools in New York City announced in 2017 it would accept Bitcoin as a way for parents to pay tuition. Aswath Damodaran, finance professor at New York University, decided to give them a call to see how plausible it could be.
“They said were are accepting bitcoin but … the bottom line was that I could not pay with bitcoin by the time they put all the conditions they put on it,” he said.
However, bitcoin some retailers have decided to take on the currency, even though their customers may never use it.
One of those is High Violet Salon & Spa in downtown Wisconsin Dells, Wisc. Adam Pankow is the owner’s son and decided to help his mom, Christine, set up bitcoin at her spa.
He used BitPay, a payment platform that transfers the cryptocurrency to cash, to set up bitcoin at High Violet. Pankow began using bitcoin as a hobby since 2013 and when asked why he wanted to set it up, he responded, “Why not?”
Since High Violet Salon and Spa began accepting bitcoin in 2016, no customers have paid using bitcoin.
“I’ll come out and say that she actually hasn’t had anyone come out and use it other than myself when I was testing it, just because in a city as small as Wisconsin Dells, there’s just not a whole lot of bitcoin users in that area,” he said.
People currently see bitcoin as an investment, and not necessarily a currency, Pankow said. But he hasn’t given up.
“I guess I was holding out that somebody with bitcoin would actually come by and want to try it out, which hasn’t happened so far,” he said.
Currencies are meant to be spent, and though bitcoin is promoted as a viable currency, it doesn’t act like one, Damodaran said.
“I’ve never talked to anyone who has actually taken bitcoin in a transaction — to me this is all fiction,” Damodaran said. “Fiction in the sense that you could actually go out there and live a life with just bitcoin.”
The issue may stem from bitcoin’s original intentions. In 2008, bitcoin’s pseudonymous founder Satoshi Nakamoto wrote an essay, “Bitcoin: A Peer-to-Peer Electronic Cash System,” which said cryptographic proof is more trustworthy than a third party. Transactions have to be publicly announced to hold miners accountable and that model then replaces the human need for trust.
Damodaran says this structure implies that bitcoin users and merchants aren’t trustworthy on their own, and this mindset is getting in the way of bitcoin being a valid currency.
“If you want to start creating a digital currency, you’ve got to start trusting somebody,” he said. “But that goes against the grain for the entire philosophy of bitcoin that you need to trust somebody.”