For the average crypto user and layperson alike, bitcoin has two compelling use cases. First and foremost, the meteoric rise of the cryptocurrency has spurred an investment atmosphere. Many first-time bitcoin buyers are driven by legendary stories of a $500 investment turning into millions overnight.
More experienced users are likely to use bitcoin as a vehicle for purchasing alternative coins, as very few alternatives to bitcoin currently feature fiat-to-crypto pairs.
Both use cases are divorced from Satoshi Nakamoto's original vision of a bank-less global currency based on mutual trust and given both value and security by the blockchain itself.1
Returning bitcoin to its original function - a real, working currency - will take both time and effort. Fortunately, work toward that goal is ongoing.
All Dressed Up
One of the core problems with bitcoin - and most other cryptocurrencies - is its instability. Banks and other long-term institutions are afraid to store value in it due to its tendency to jump by multiple percentage points over the course of a day or week.
More relevant to adoption, however, is the widespread belief that bitcoin will gain in value. This is a virtual certainty as the blockchain develops and, ironically, as adoption becomes more widespread.
To put it bluntly, many casual users are afraid to spend a coin that might well skyrocket in value. The urban legend of the million-dollar pizza is still floating in the ether. There are a few unverified examples of spending too soon, as well. A user on one internet forum reported his brother's suicide in 2017 after he lost about 15,000 bitcoins - partly due to a hack and partly due to spending them at a less-than-attractive value.2
It makes sense, on its face. bitcoin's current price of $8,900 is substantially down from its peak around the $20,000 mark.3 If a holder of bitcoin were to spend now, they might miss out on a return to that all-time high. No one would spend a $10 bill if they expected it to be worth more than twice as much at some indeterminate point in the future. In fact, this is the very same logic that underlies the U.S. bond market. The key difference there being, of course, that no one can say with any uncertainty when bitcoin's price might top out.
Nowhere to Go
Outside of exchanges where bitcoin serves as a benchmark and a conversion utility for alternative coins, there just aren't many big outlets for spending the coin itself.
There are some, for sure - Expedia, Microsoft, and Overstock being the most outstanding household names.4 But for the most part, a business that accepts bitcoin is more likely to fall into the gimmick category - a microbrewery or a specialist tech shop, for instance.
The internet juggernaut of online buying remains Amazon, and it is hasn't yet made a move to accept bitcoin. In fact, it hasn't yet made a move in the direction of any cryptocurrency, largely due to transaction rates. At 600 transactions per second, Amazon couldn't implement bitcoin (about seven transactions per second) without seriously disrupting its customer experience. Not yet, anyway.5
So, if someone is in the mind to sell their hard-mined bitcoins, options remain frighteningly limited in the big-retailer sphere. This is a problem and an opportunity. The e-commerce marketplace is expected to grow to $4.1 trillion by 2020. As of 2018, bitcoin's market cap is just under $152 billion.6
Both of these factors are likely to change as bitcoin becomes less of a techno-geek affair and more of an everyday fact of life. Past technological trends support this. In 2010, about 20 percent of the U.S. population owned a smartphone. That figure is about 70 percent today.7 The age-old story of supply and demand went to work. Greater demand for a phone that could take photos and surf the web, along with ever-improving technology, brought the price down for the masses. Early adoption served as its own marketing campaign, pushing adoption up and up in a self-reinforcing cycle.
There's no reason to believe that bitcoin won't experience the same market cycle. Once casual interest in the cryptocurrency market picks up, perhaps on the back of an adoption by a major company, further adoptions will follow, followed in turn by greater consumer acceptance.
The volatility in the market should likewise settle as bitcoin's user base spreads. With more liquidity in the market and less speculative money flowing in, bitcoin should settle into a price range stable enough for menus to be printed in bitcoin-friendly restaurants and other such use cases.8
The more bitcoin that is being actively spent instead of lounging around on exchanges, the more stable that price will ultimately be.
Bitcoin and cryptocurrency adoption in general have suffered some hard knocks lately. Perhaps most damning was the January news that a bitcoin conference could no longer accept bitcoin for last-minute registrations, due to high blockchain fees.9
These kinds of stories will always triumph over adoption stories due to their dramatic nature - and due to bitcoin's perceived novelty.
Real-world adoption, however, is taking place in a variety of arenas.10
Some musicians are rejecting the anti-technology stance that's been in place since the days of Napster and LimeWire and have begun to accept bitcoins as payment for their music. Many of the acts are upcoming, but some big names include Bjork and Imogen Heep.
Legal and financial firms, particularly in big cities, are also warming up to bitcoin, as they are already fairly familiar with complex financial instruments.
Several websites exist to locate brick-and-mortar bitcoin accepters around your physical location.11 While still in a "gimmick" phase, like bitcoin for pizza, the sheer number of these new accepters is sure to drive future adoption. After all, it wasn't very long ago that paying for goods and services via a smartphone tap was viewed as gimmicky. In fact, the concept of paying online at all went through several doubt phases before it became the new de facto standard. Imagine an internet where online payments were still viewed with suspicion, and it took a telephone call or a real, live card swipe to make a purchase. Such an internet is nigh unthinkable today. If past technological trends hold, and there's no reason to think they won't, an environment where bitcoin is a legitimate part of the marketplace is almost certain.
The Long Game
Ultimately, bitcoin has to overcome its structural instability and relatively low adoption rate before true adoption can skyrocket. Luckily, this is taking place every day at chains big and small across the world. Adoption will likely have a snowball effect, as more and more users in the space drive demand for adoption, which will then spur more users, and so on and so forth.
One thing is certain. Nakamoto's original vision for bitcoin is still valid and still evolving. At its heart, the concept of a truly global and middleman-less currency is essential to the continued development of the internet and society in general. The bumps bitcoin has experienced along the way in no way spell doom for this new paradigm. They are better likened to growing pains - brief, baffling, and ultimately a signal that the market is maturing.
1) Nakamoto, Satoshi. "Bitcoin: A Peer-to-Peer Electronic Cash System." Oct. 2008
2) JustCryptoNews. "Depressing: The Story Of A Man Who Killed Himself After Losing 15,000 Bitcoin."
3) Live Coin Watch https://www.livecoinwatch.com/
4) Moreau, Elise. "These Popular Websites Let You Pay for Stuff with Bitcoins." Lifewire
5) Crypto. "Amazon Is the Biggest Threat to Bitcoin Right Now – Hacker Noon." Hacker Noon. 12 Dec. 2017. https://hackernoon.com/amazon-is-the-biggest-threat-to-bitcoin-right-now-62a56d8435e4
6) Townsend, Richard. "What's the Value of Ecommerce?" Campaign: Marketing, Advertising and Media News & Analysis, https://www.campaignlive.co.uk/article/whats-value-ecommerce/1438041
7) "Smartphone Penetration in the US (Share of Population) 2010-2021 | Statistic."
8) Wang, and Joseph Chen-Yu. "A Simple Macroeconomic Model of Bitcoin." By Joseph Chen-Yu Wang: SSRN, 12 Feb. 2014. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2394024
9) CNBC. Bitcoin conference has stopped taking bitcoin payments because they don't work well enough.
10) CoinDesk. "What Can You Buy with Bitcoins?" CoinDesk, CoinDesk, 26 Jan. 2018.
11) Musicians that accept bitcoin in United States