One scene rang particularly true in the recent episode of CBS' The Good Wife about the digital alternative currency Bitcoin.
"We’re not going to do much more with Bitcoin,” a fictional hotel manager says. “I thought it would be cool, but it is a bit of a hassle.”
This character appears to be based, at least in part, on one of Bitcoin’s real-life poster boys: Jefferson Kim, who manages a Howard Johnson Hotel in Fullerton, Calif., and was quoted in an October issue of The New Yorker expressing his fascination with the decentralized, peer-to-peer currency.
If Kim was the inspiration, the courtroom drama's writers really did their homework. I spoke recently with Kim, who told me the only Bitcoin transaction he handled was the one that the New Yorker writer, Joshua Davis, insisted on using to pay for his stay at the Howard Johnson.
And, Kim said, it was a hassle.
Davis first transferred regular cash to one of the Bitcoin exchanges. He then transferred the Bitcoins to Kim, who in turn had to exchange them once more into dollars before he could transfer them to the hotel’s deposit account.
“I don’t even care about Bitcoin anymore,” Kim says. Davis “might as well have given me his credit card information; it would have been way simpler.”
Bitcoin is designed to be an alternative to the bills and coins we use every day. A Bitcoin is an encrypted computer file whose movements from person to person can be tracked publicly but without naming the spender or recipient. Some merchants like the idea because they can receive payments electronically without paying interchange to a bank.
But Kim says he thinks Bitcoin won’t achieve widespread adoption until a consumer-facing company like Facebook Inc. or Google Inc. comes in and makes it simpler to use.
Similarly, Jay Braver, head of Jay Braver Web Development in Athens, Ga., says he’s been offering Bitcoin as a payment option on his site for about a year, but no one has ever offered to pay with it.
“I understand the point behind this is to have an independent currency,” Braver says. “But I have not thought about it since.”
Braver says he’s actually benefitted more by being listed on a Wiki, or collaboratively created website, devoted to the dozens of merchants that say they accept Bitcoin for payment.
“That Bitcoin page with all the merchants on it must get a lot of hits,” Braver says, since his Google ranking has gone way up since he’s been listed on it.
If Bitcoin is not being used to buy things, but it is being traded and held (Bitcoin exchanges trade about 200,000 of them, worth more than $1 million, each day), that means it’s functioning more as a commodity than as a currency — just as it was depicted on the Good Wife episode, entitled “Bitcoin for Dummies.”
Bitcoin is a really cool concept, and it’s captured a popular Zeitgeist that combines rage against banks with love of technology. But don’t we all know what happens to Internet commodities that have values disproportionate to their worth?
To the extent that Bitcoin and others out there create more work for the consumer and the merchant, even if it's just filling out yet another online form, I can't say I'm overly optimistic unless there's a very tangible, obvious gain to be had. Especially if, as Katherine suggests, alternatives already exist. Victoria Finkle, Reporter, American Banker