The amount of confidence people have in a currency determines how it is used. The same is true for a digital currency like Bitcoin. Given that the cryptocurrency is currently enjoying rapid growth, set to be followed by what advocates believe will be sustained stability, the question arises whether it will one day take its place as a form of payment for normal everyday items.

Bitcoin only gained public attention in 2013, making it a very young currency. But it has nevertheless suffered some of the growing pains that affect fiat currencies, like a disastrous crash with the collapse of one of the biggest Bitcoin exchanges, Mt Gox. And yet, its recovery since then has been nothing short of phenomenal, with one Bitcoin currently valued at just over R100,445,01. But therein lies the problem. The digital currency is known for wild fluctuations by up to a few percentage points on a daily basis. Stable currencies like the US Dollar, in comparison, may take a month or longer to exhibit the same change in value. Experts argue that this makes the digital currency more suited as an asset which can be bought and sold with the aim of making a *fiat currency profit.

* A Fiat currency is legal tender whose value is backed by the government that issued it.

Transcending borders

That’s not to say that Bitcoin will never reach a status equal to fiat currency, since it does have a few unique advantages. Perhaps the most notable advantage is that, as a decentralised currency, there is no one entity that has authority over it. This makes it a true global currency, free from geographical constraints, bringing potential retailers and customers closer together.In theory, at least. One of the drawbacks of paying for goods or services in Bitcoin is that a transaction may take longer to complete, since it has to be processed by a distributed ledger system called the blockchain.Then again, whether or not that is a real drawback may depend on the context in which Bitcoin is used. In 2015, Greece faced the possibility of being forced to abandon the euro, which resulted in capital controls being imposed to limit the amount of money that can be taken out of the country. This move left many Greeks travelling abroad unable to access their funds and, in a word, destitute.The value of Bitcoin rose almost immediately after the controls were imposed; the digital currency was being used by ordinary Greeks to move their assets abroad, rather than keep them in at-risk banks.

Paying with Bitcoin

That having been said, there are those who are using Bitcoin as a currency to buy and sell goods and services. In the United Kingdom, CEX stores, a few select restaurants and some pubs all accept the cryptocurrency as a form of payment. At present there are 87 Bitcoin ATMs in the United Kindom where Bitcoin can be bought or exchanged for cash. The anonymity once associated with the currency is rapidly disappearing, most Bitcoin service providers are now implementing KYC/AML, or ‘know your customers’/anti-money laundering, requiring proof of identity and residence. In the long run it might be better to ask whether our definition of what a currency can and should be able to do needs an overhaul. While the digital currency faces a number of very real obstacles which may keep it from gaining the confidence needed to be seen as a viable substitute to fiat currency, it has to be kept in mind that continued interest and the subsequent availability of more processing power to facilitate speedy transactions will inevitably work in its favour.