Opinions

Should People Use Bitcoin to Buy Things?

People are investing in Bitcoin across the globe. Several initiatives are being taken by different countries to adopt the digital currency. Greater attention is being given to the things that people can do with the help of Bitcoins.

The digital currency is being used less to buy or sell different things. Last year in September 2017, the number of bitcoin transactions reached up to a total of $411 million, however ever since then, the transactions faced a steady decline, as reported by Bloomberg. In May, they hit as low as $60 million. One reason behind steady decline in the number of transactions is that the price of Bitcoin and other types of cryptocurrencies are volatile. The value of Bitcoin tends to fluctuate consistently.

Initially when Bitcoin was launched, it was used mainly to buy things in the black market like drugs, weapons etc. Bitcoin was extremely cheap during its initial phases but now when people make a comparison, they realize that they have been spending a huge number of dollars on cheap items. The volatility in the price of cryptocurrency makes it impossible for the people to determine whether they are getting a fair shake or not.

Nicholas Weaver, a senior researcher at the International Computer Science Institute, in his email to Bloomberg, stated that digital currency is not a usable currency mainly because “the net cost of a Bitcoin transaction is far more than a credit card transaction”.

Furthermore, Bitcoin tax is another factor that has caused a decrease in buying or selling of things through digital currency. All transactions that an individual makes through Bitcoin, go into the tax return. The Internal Revenue Service (IRS) is the tax collection agency in the U.S. The Internal Revenue Service does not consider bitcoins as a form of currency. In fact it considers it as a property that an individual owns. People who own Bitcoins in U.S. are subjected to capital gains tax, the one that is usually given for a property that is owned by any citizen of the U.S.

So people who are purchasing goods or services with the help of Bitcoin are always making two transactions.

Skarlatos a lawyer who deals in tax issues in the U.S. states:

You’re technically required to list every purchase you made in any given year with bitcoins, outlining the capital gain or loss from selling the digital currency to make the transaction, no matter how small.

Another reason why people are not buying things with Bitcoin is because of a post on Reddit last year, which illustrated that a transaction of $9 is still pending even after two days. The transaction confirmation takes a lot of time.

There are advocates against bitcoin. They believe that people should stop buying bitcoins as it can never replace the traditional form of currency. The Bitcoin transaction process takes up to 10 minutes whereas on the other hand a payment can be made through a credit card within seconds. People who wish to purchase goods from black market are the ones who are making use of cryptocurrency. Normal people, who wish to fulfill their daily needs and requirements with the help of their salary, are not using bitcoins for daily purposes even if they own bitcoins.

Bitcoin is volatile, which means that the price of bitcoin is not stable enough to purchase goods. At one point it can be as high as possible but the level of uncertainty is such that the price levels can drop down to the lowest number possible. People in such uncertainty tend to make wrong decisions at the right time. When Bitcoin prices start decreasing people start selling their bitcoins but as soon as the price starts increasing they start buying it. When in reality it should be the opposite. Thus, it can be said that Bitcoin is an investment till you know how to make use of it at the right time.

Lastly, it is very easy for hackers to hack bitcoin accounts and wallets. As the digital currency is encrypted, no one can ever trace the actual location of where the currency went and who owns it now. The risk factor of losing all your money in one go is extremely high in cryptocurrencies as everything is computerized. The chances of fraud are equally high as well. John McAfee’s Bitfi bitcoin wallet has been hacked. The creator of the wallet challenged the hackers to hack his promoters account for $250,000. Bitfi Bitcoin wallet claimed to be “unhackable” when it was launched in the market. However, the creator and promoter have not issued any statement regarding this act.

Hiram Nadeem

Hiram is a teacher and media sciences graduate with focus over finance news. Contributes to BlockPublisher with fintech news and sometimes, her opinions. Email: editor.news@blockpublisher.com

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