Lightning Fast, Dirt Cheap: Bitcoin Shows What Banking Could Be

BitInstant's existing service is the easiest way I know of to acquire bitcoins, which is to say it's the only way that's worked for me. First I placed an order for $60 worth on BitInstant's website and printed out a sheet of paper instructing me to take my cash to a Bank of America branch in the ZIP code I'd provided. The teller looked mighty confused when I read her the script ("I am making a deposit into the account detailed on the invoice"). But after a few minutes she figured out I needed to fill out a deposit slip with an account number for TrustCash, an Atlanta outfit that serves as BitInstant's go-between with the bank. I didn't have to give my name, much less show ID, throughout the whole process. TrustCash knew which order to fill because it sets a unique deposit amount for each order at each branch. Mine was $61.20 including fees.

All of that extra 2% went to TrustCash, by the way – the price of anonymity, perhaps. BitInstant would take another $3.99 plus 1% off my $60. Sounds steep, but the service speeded the process of acquiring bitcoins, which could take a week when dealing directly with one of the exchanges.

Normally, bitcoins would have shown up in my online wallet within 30 minutes of the bank deposit, except I'd goofed. When I placed the order, I'd pasted the wrong character string in the field where my Bitcoin receiving address was supposed to go. (There's a lot of copying and pasting involved in Bitcoin, unless you want to memorize phrases like "1PFgAJWLJZGSaVDg2rX3XDfTcyd6CpXXXX.")

It took me another business day to sort things out with BitInstant. It may have helped that the three guys in the company's New York office knew me. (And they are all guys. According to research by Heather Schlegel of Swift's innovation team, 95% of Bitcoin users are male, which sounds about right given the makeup of the earnest crowds at two Bitcoin-themed Meetups I attended this month, including one hosted by BitInstant.)

Dave Birch, the director of Consult Hyperion in Surrey, England, says Bitcoin "is really interesting because it informs other debates, not necessarily because of what it is itself." It's likely that Bitcoin's "technology and techniques will be part of some future means of exchange," particularly the use of cryptography to protect user privacy, Birch says.

Part of? Bitcoin's most rabid fans would beg to differ. "Bitcoin is the virtual currency of the future and will take over," one enthusiast tweeted to me this week.

It's a tantalizing thought. But I think Bitcoin can coexist with the established forms of money and payment. Competition doesn't have to mean winner-take-all.

I can envision a future where people will sometimes charge purchases to Visa to rack up rewards points and earn special offers tailored to their spending history, enjoying the fraud protection of chargebacks, and sometimes use Bitcoin (or something like it or something that evolves from it) for transactions they don't want tracked, incurring the same risks as they do with physical cash today.

Transacting off the grid should remain an option even after we phase out paper bills and metal coins. Just because the world's going digital doesn't mean we have to fulfill Orwell's prophecy of the telescreen.