I’m going to pose a simplified question, about which there are multiple sides and none of them is very attractive.
The basic point of the issue is how do you use bitcoin? It’s easy to understand bitcoin as a currency, like any other, and certainly you can safely use it to buy stuff, usually paying in dollars. It’s also easier to understand bitcoin as something you can trade, using software.
But I want to think about how you can use it to spend other things, like food, that aren’t really currency, and which you can’t buy with a credit card. The price depends largely on the ability of the exchange to meet demand; not only can you trade bitcoin for goods and services, you can also try to buy food with bitcoin. Some readers have asked whether it’s reasonable to have bitcoin money at the point of sale. As I see it, there are only two issues: (1) Is the store or restaurant liable for deposits and withdrawals by customers with bitcoin wallets? And (2) Is it possible to hold bitcoin at the point of sale?
Let’s skip to the answer to (2). After all, if you exchange bitcoin to dollars, the owner of the exchange gets the bitcoin. It’s a classic case of money being the transaction and price. So is it reasonable to hold bitcoin at the point of sale? To some extent, yes. Everyone would prefer not to have to exchange it, but if the exchange won’t take it, you could hold it. And you might even get a better price if you wait to the end of the day to trade your dollars for bitcoins. However, there are major trade-offs here, too.
If you’re going to spend bitcoin, you may have to pay for it. Which means you can pay in bitcoin and send a friend an instant Bitcoin note and we won’t exchange anything. But that means that you have to put bitcoins in your wallet. Unless you use cheap, secure hardware called a blockchain wallet, which doesn’t need to be at the exchange, that’s not a very practical solution, and there’s a chance that you’ll have to leave town. If your friend has bitcoin at the exchange, you’ll want to exchange it. There’s also the difficulty of building a connection between someone’s bank account and a public block chain, the part of bitcoin that lets you leave private messages in the network.
That being said, there are other ways to use bitcoin that don’t involve buying goods. If you plan to hold bitcoin, how about holding it for a gift? It’s not impossible, but for example, then you could find yourself unable to exchange bitcoin for cash or high-quality fiat currency. For non-bonuses, bitcoin might be a good way to exchange things — food, art, coffee, whatever.
A final question: if you want to pay for a piece of artwork, how do you know whether the artist will accept bitcoin, or how much you should pay in bitcoins? That’s a tough question, since artists’ not-at-the-point-of-sale accounts would probably be subject to U.S. anti-money-laundering regulations. But perhaps you can find works of art in the public realm where it’s possible to pay in bitcoin and accept payment in paper money. Anyway, that could be an option.