Even as some of the world’s most influential investors denounce bitcoin, the digital currency has steadily moved from the “dark web” into the real world and demonstrated where it may be most practical: big payments.
CNBC spoke with individuals and businesses who have paid or received thousands of dollars in bitcoin in recent weeks. They said the digital currency lets them complete transactions far more swiftly than by traditional, government-backed means.
Mark Hanna, an associate at family law firm Hanna & Vlahakis in New York, took bitcoin instead of dollars in payment after a client walked into his office wearing a bitcoin T-shirt. Because Hanna didn’t have to wait for the check to clear, he said he could help his client that day.
“I already owned some,” Hanna said. “It’s just sort of a handy way to transfer money, really. It’s faster than a check.”
An October letter from the law office to the client posted on Reddit shows Hanna was paid $5,085 in bitcoin. Hanna said they transferred bitcoin directly using the Mycelium app, and he created a separate wallet just for the law firm, whose partners are his parents.
If it’s “worth something in 10 years, then it’s worth something. If not, then we did that service for free,” he said.
Bitcoin is a digital currency that uses encryption technology to allow parties to send money quickly, securely and semi-anonymously. Users are identified only by a mix of numbers and letters, or an “address.” Bitcoin also doesn’t require a third-party institution and isn’t tied to a government as currencies such as the U.S. dollar are.
However, bitcoin has struggled to gain widespread adoption as a currency for daily transactions, including international money transfers.
Bernstein Senior Research Analyst Lisa D. Ellis concluded in a Nov. 10 report that ordinary consumer payment systems are so efficient that bitcoin doesn’t add much benefit. Ellis’ test also found that cross-border bitcoin transactions, with a roughly 4 percent payment cost, were nearly 10 times more expensive than fintech start-up TransferWise’s 0.5 percent. Using the digital currency was also slightly slower than TransferWise.
Instead, bitcoin has become the focus of investor speculation as its price has multiplied more than eight times this year to $8,000. The world’s largest futures exchange, CME, plans to launch bitcoin futures in December, a move enthusiasts say will attract even more buyers.
But bitcoin has worked out as a practical form of payment for Montessori Schools in New York’s Flatiron and SoHo districts. The schools don’t accept credit cards, which can be costly and slow, for tuition payments.
This school year, the private schools began accepting bitcoin instead.
Bitcoin has been “actually really easy” to use, said Marco Ciocca, co-founder and chairman of the two Manhattan schools. He predicts more parents — and possibly even more schools — will embrace the technology.
But unlike bitcoin investors, who have watched their holdings multiply over the years, the schools immediately convert the digital currency to cash using an option available through Coinbase.
“I don’t want to speculate on the bitcoin with the school’s funds,” Ciocca said. “We convert it instantly so we mitigate any issues.”
As other industries arrive at similar conclusions about using bitcoin, or at least embrace the novelty of it, sellers of other big-ticket items are announcing they accept the cryptocurrency. Some art galleries, real estate purveyors and even yacht sellers are increasingly enthusiastic about taking bitcoin.
The owners of 18th-century palace Palacio Bardaji in Ibiza, Spain, will only accept bitcoin in payment “because of its easiness of use,” a representative said in an emailed statement. The roughly 9,000-square-foot palace is going for 1,850 bitcoin, about $14.8 million at Friday’s record high or $10.2 million at bitcoin’s lows against the dollar last Sunday.
The online currency’s remarkable ascendance — from a near-worthless entity in 2009 to a financial product that’s gained Wall Street’s attention — has bifurcated the bitcoin world into naysayers and true believers.
Larry Fink, CEO of BlackRock, the world’s largest asset manager, called bitcoin in October an “index of money laundering.” Critics also say the price surge has resulted in mania-like behavior. For example, a family in the Netherlands is selling much of what they own for bitcoin and living on a campsite while they wait for the digital currency to take off.
Some enthusiasts, like entrepreneur Peter Saddington, want to “prove to people that you can actually transact with bitcoin.”
When Saddington began researching bitcoin in 2011, he soon decided the digital currency would probably bring about the next big change in the way the internet affects society. That November, Saddington said he bought his first bitcoins at $2.52 apiece.
He said that investment paid off so handsomely that by 2017, his $115 worth of bitcoins from 2011 had appreciated enough for him to buy a Lamborghini Huracan — the Lamborghini’s “entry-level” supercar that retails for about $200,000, according to Car and Driver.
Saddington said he specifically wanted to challenge online criticism about how using bitcoin to buy almost always results in a loss for the buyer. For example, a man in Florida experimented with bitcoin purchases in 2010 by offering 10,000 coins in exchange for two pizzas. Those bitcoins today are now worth tens of millions of dollars.
“There’s always been this meme that you never buy a Lamborghini with bitcoin, because it’s going to end up being a $20 million lambo,” Saddington said. He has no regrets about spending his bitcoin on a car. “It’s been great.”