Buying with Bitcoin – everything you need to know
The purpose of Bitcoin, we are often told, is to be the future of money. However, it hasn’t always looked like it. Investors in the cryptocurrency are treating it like an asset and counting on profits as its value increases. But suppose you want to use it to buy things – what are your options?
First of all, if you need to know how to get Bitcoin so that you can buy things, then read our comprehensive guide here.
There are two things to remember: first, use of cryptocurrencies is not that widespread yet, so you can’t assume that a retailer or service will accept Bitcoin – most still don’t. Second, the low use of Bitcoin as a currency means that services occasionally stop accepting it, so although the information below is correct at the time of writing, it could change at any time.
Spending your Bitcoin
Online retailer Overstock was an early adopter of Bitcoin and remains one of the most high profile companies to accept cryptocurrency. Some sellers on Etsy, the online craft website, will accept Bitcoin for their products.
Travel website Expedia has been accepting Bitcoin as payment for hotel room bookings since 2014, though users have reported that this works only for customers in the US. Meanwhile, CheapAir accepts Bitcoin – and other cryptocurrencies – for both flights and hotels, though the company recently said it had been having difficulties with this because; “our travel supplier partners (airlines and hotels) just aren’t there yet”.
Microsoft’s app stores accept Bitcoin, allowing you to buy digital goods such as games, apps and films. However, the company briefly stopped accepting Bitcoin for payments in January 2018 following the rapid decline of the currency’s value. This is another reminder of how the volatility of Bitcoin can affect usage.
Some musicians, including Imogen Heap and Bjork, accept Bitcoin as payment for music downloads. Other more surprising uses for Bitcoin include courses at the Lucerne University of Applied Sciences and Arts in Switzerland and the law firm Copple, Rockey, McKeever & Schlecht, in Nebraska, USA.
Finding these businesses can be tricky if you don’t know where to look, so it’s helpful that you can check websites such as CoinMap, which will help you find places near you where you can spend Bitcoin, and SpendBitcoins, which lets you search by product type.
Perhaps the simplest solution to finding somewhere to spend your Bitcoin is to buy giftcards. Websites like Gyft will allow you to buy giftcards from a range of companies, from Starbucks to Dominos and Walmart to Nike. However, Gyft is only available to buyers in the United States. A similar service is offered by eGifter, but that too is available only in the US at present.
Buying a house with Bitcoin
Although it can sometimes be difficult to find somewhere to spend your Bitcoin, you’d be surprised at what you can buy when you look hard enough. One common story when Bitcoin first began to reach dramatically high valuations was that people were using Bitcoin to buy houses. And it’s true.
The first Bitcoin real estate sale probably occurred in 2014 when an anonymous buyer used Bitcoin to purchase a villa in Bali. Later that year, another sale occurred, this time of a home in Kansas City, in the USA.
In late 2017, a £17 million mansion in Notting Hill, London, became the first property offered for sale in Britain by a seller who would only accept Bitcoin. In December 2017, the Telegraph reported that property developer Go Homes had sold two properties for Bitcoin – one a £350,000 house in Colchester and the other a £595,000 four-bedroom property in Hertfordshire. Both sold to unnamed buyers who had made their money in Bitcoin mining.
The lawyer for the property developers told the paper: “We had to do a lot of due diligence to verify where the Bitcoin had come from, and we had the buyer and seller and their legal representatives together for a round-table meeting.”
Of course, the idea is that at some point ‘middlemen’ such as the lawyer will be unnecessary in this process. Property sales are one of the areas where the blockchain could be used to satisfy the various questions that need to be answered before a sale – does the seller really own the property? Does the buyer really have the money? And so on. For now though, with the concept being so new, it makes sense that adding cryptocurrency to the process would make things a little more complex.
One risk for both sides is the volatility of Bitcoin. Between the initial offer and the completion of the sale, the value of Bitcoin could potentially have changed enough that the buyer can no longer afford the house. Likewise, the seller might find that not long after selling, the coins they have received have decreased in value significantly. That said, the opposite is also true – a seller might find they have made significantly more than expected if the value of Bitcoin increases after the sale.
Bitcoin success stories
Who are these people who can buy houses with Bitcoin? The value of the cryptocurrency reached such highs in late 2017 that many investors assumed it was simply too late to join in. Only time will tell whether that is right or wrong, but it is certainly true that many of the biggest Bitcoin success stories are those of people who got in very early.
For example, Kristoffer Koch, an electrical engineer from Norway, spent $27 on 5,000 Bitcoin in 2009 after writing a thesis about cryptocurrency. Given that the white paper for Bitcoin was only published in 2009, Mr Koch really did get in on the ground floor. His investment was so small that he forgot about it until 2013, by which time his investment was worth almost $900,000. He spent 1,000 BTC on a new apartment. As of mid-2018, his remaining 4,000 BTC would be worth nearly $27 million.
Someone who got in relatively late is pole dancing instructor Dee Heath, from Sydney, Australia. She tripled her investment and said that, despite her love of pole dancing, she had discovered a passion for Bitcoin and even considered becoming a full-time investor.
Not all stories are success stories, however. James Howells, from Wales, started investing in Bitcoin in 2009 but threw away his hard drive, forgetting that 7,500 coins were stored on it. The hard drive is somewhere in the local landfill and the local council has not granted him permission to look for it. Given the amount of trash that has been piled on top of it since 2013 when Mr Howells threw the hard drive away, any attempt to find the hard drive would be expensive and time-consuming.
Mr Howells is hopeful that one day he will be allowed to search, though, because the value of the coins on the drive will be so high. As of mid-2018, the hard drive is worth $50 million – that only counts the Bitcoin, not the other cryptocurrencies that Mr Howells had stored on the drive. He continues to invest in cryptocurrency.
Stories like these are enough to make anyone consider how much they can afford to sink into Bitcoin but Simona Vaitkune, the CEO of Fast Invest, warns investors to be cautious. In a blog post, she said: “Trying to pick winners can be a bit like chasing a rabbit down a hole. No one can confidently say they know which coins will succeed. Some crypto analysts and enthusiasts who follow the industry news very closely and are truly immersed in crypto investing, are often able to identify the most promising coins, but even they can’t say for sure that the investments will yield substantial returns.”
Uncertainty is a part of any investing, and success stories can give people unrealistic expectations; who hasn’t daydreamed about what they would spend millions on after they’ve bought a lottery ticket? Investors always give the same advice, though: do your research, only invest what you are willing to lose and be patient. Oh, and don’t throw your hard drive away by mistake.