A few weeks ago, CoinTelegraph wrote the article “The 7 Uses of Bitcoin and the Best Ways to Buy It” based on comments I made during a Skype chat. There was a lot of information provide that needs additional context as to why these Top 7 uses are important.
Many people see Bitcoin as this amazing payment system that is faster, cheaper and easier then traditional payment methods like debit cards, credit cards and Paypal, and while this is certainly true, the Bitcoin Blockchain is much more than that. Let’s face it, instant data transfers are not new technology, we all get our emails and text messages within seconds of someone sending them and even money can move instantly from person to person through the bank. What makes Bitcoin payments special is that they ignore “money transmission” laws by cutting out the middlemen that validates the parties involved on both ends. Because of this property, Bitcoin payments are not only final upon hitting the send button, they are also “permissionless”.
So now let’s talk about which use cases is Bitcoin most valuable for because of the properties mentioned above:
1. Donations to Causes Government Does Not Approve Of: This was one of the very first use cases for Bitcoin in 2011 when WikiLeaks was cut off from traditional means of donations like Credit Cards or PayPal. In fact, this use case was delayed based on requests from the Blockchain’s creator Satoshi Nakamoto. A more recent example is the legal defense donation fund for Edward Snowden.
2. Purchasing Goods Government Does Not Approve Of: This another use cases of Bitcoin’s early days and became popular around the same as time as WikiLeaks thanks to Chuck Schumer, the Senator from the State of New York. He went on TV in June 2011 to demonstrate how a new anonymous crypto currency is allowing anyone to buy drugs and have them delivered to their home. The result was a huge increase in traffic to these web sites as well as creating the biggest price bubble Bitcoin has seen to date.
While it is now well know that Bitcoin transactions are not as anonymous as once proclaimed, its use for purchases of good some Governments frown upon remains as strong today as it ever was.
3. Gambling: While this use case has already been around and utilized for a few years, it has not yet reached its full potential. It is clearly useful to allow anyone to place bets from anywhere and not having to deal with jurisdictional local currency transfers, but one day bitcoin will allow instant payouts without even creating accounts. There is always counter-party risk associated with these operations until they are fully legalized and perhaps regulated, but bitcoin allows the possibility of placing a bet that pays out to the same address that sent in the funds once the winning outcome is known.
4. Purchasing Services Government Does Not Approve Of: This Bitcoin use case is fairly new and became popular in the same way as WikiLeaks. Once a popular escort site Backpage got cut off from traditonal means to pay for ads like Credit Cards and PayPal, the incident made national news. It introduced this sector of the economy to Bitcoin and this trend is just getting started. We have also now seen cam sites operate exclusively on bitcoin as well as more established sites using it as a medium of exchange for more anonymity and privacy.
5. Hiding Assets from a Soon to be Spouse: This is one of the these use cases few will be willing to admit publicly because it may lead to serious social and family dynamic issues. With the divorce rate being consistently in the 50% area since the late 1970’s, being able to protect some of your assets is a major concern for the shrinking number of people who are thinking about Marriage. It could be awkward to bring up signing a ‘pre-nup’, but if this use case is to be realized, it could make the party with a larger financial stake more open to the idea of Marriage and improve the all time low rates we are seeing since the 60’s (and that’s the 1860’s)
6. Hiding Assets from the Government: While an obsessive spouse may think they own you, they do not even come close to how the Government that issues your passport owns you. This is another one of those use cases few will be talking about publicly. Everyone should see the signs of how the Governments are stepping up Money Laundering Enforcement, and they are now starting to go after what some used to see as Traditional Tax Havens like Swiss Banks and the Caribbean. The population is already looked upon as Tax Cheats and until we move to a Voluntary Tax System, people with money will always find ways to protect it from those who will waste it. How big of a use case can it be? Here is one estimate:
7. Transferring Value Cross Borders: While Bitcoin might be used as a way to store & hide your wealth, the real power of the Blockchain will come when large economies rise and fall. This has always happened historically and why the world has had so many global reserve currencies with the USD just the latest one already pushing the bounds of time spent in this position. In the past this value transfer has usually been Gold but in the digital age Gold is becoming much less useful. Additionally there is the difficulty of private citizens moving Gold due to technology like Metal Detectors making it an easy mark for confiscation, Bitcoin might just find itself very useful.
While the list above may be questionable from a legal perspective, arguments can be made from a moral standpoint that everything mentioned so far should be globally legal and acceptable. This is also the reason why certain other uses for Bitcoin did not make the list. Things like ransom payments for those who’s computer was cryptolockered or accusations of Bitcoin being an enabler of Deep Web Assassination Markets. These use cases are a clear violation of property rights or are the initiation of force and therefore should NOT be considered as valid use cases.
On a final note, we do need to touch on the classic uses everyone talks about when it comes to daily transactions. Things like purchases of goods from Amazon (currently done through Purse.io) or Starbucks (currently done through gift cards on FoldApp) and all other vendors providing goods and services that have added Bitcoin as a payment option. While Bitcoin can make this transaction safer, cheaper and faster for all parties involved, it does not utilize bitcoins greatest advantages over traditional payments. This is why the traditional style adoptions might take a while because the political risks of using Bitcoin (for the time being) might actually be greater then the rewards for using it. However, in the 7 use cases listed above, the rewards might significantly outweigh the risks.