

I Spent A Coin (And I Liked It) — How I Bought Lunch in Manhattan with Bitcoins - sas
http://starburst.hackerfriendly.com/?p=1530
Some people claim that Bitcoin isn’t a “real currency,” that it is “imaginary,” or a Ponzi scheme — for a number of reasons, but perhaps mostly because there’s no obvious way to use them in most people’s daily lives. I have a different perspective because last week I paid for lunch with Bitcoins. Here’s how it happened.
======
ars
The most important by far rule for currency is stability. With stability comes
acceptance of the currency.

You don't have that - the owner first looked up the exchange rate to US
dollars.

What you have is a medium of exchange, but you don't have a currency.

A medium of exchange is useful, and can eventually become a currency. But
bitcoins are not yet a currency.

Perhaps someone can make a bank, where you store US dollars. Using that bank
you can send and receive bitcoins. Only the bank can create bitcoins, but once
created anyone can trade them without input from the bank.

If you are familiar with history this is how paper currency actually got
started - goldsmiths would store gold and give chits of paper. Those chits
started getting exchanged, and a currency was born.

~~~
shazow
How do you distinguish between currency and a medium of exchange?

From the sound of it, you defined currency as "a stable medium of exchange"
which by definition prevents any unstable currency from being a currency.

Is there a definitive reason why a less stable medium of exchange cannot be a
substitute for a stable one? Especially with today's technology when
increasingly many things are being done in "real time".

I'm not an expert on currency and I'd appreciate further education. To me, it
seems that knowing (and potentially being able to predict) the variable forces
that are affecting the volatility of a medium of exchange is, in the long run,
more valuable to its users than artificial relative stability provided by a
governing body.

~~~
baddox
ars obviously wasn't thinking critically in that comment. You're absolutely
right: his proposed definition of "currency" isn't useful at all, because it
would preclude talking about "the stability of a currency."

A currency is simply a medium of exchange that is widely recognized, where
"widely" is subjective. Most modern currency also is notable because it has no
intrinsic value (gold coins, for example, have intrinsic value). I think
bitcoin certainly qualifies as a currency, albeit an unstable one.

~~~
mmatants
Gold coins have no intrinsic value, either. Gold is just another divisible and
non-perishable carrier of human-assigned value.

~~~
baddox
Your definition of "intrinsic value" is clearly different than mine. If no
human-assigned value is intrinsic, then _nothing_ has intrinsic value, and
your definition becomes non-functional.

When I said that gold coins have intrinsic value (the same is true for copper
coins, etc.), I mean that regardless of what nation minted the coin and what
value appears on its face, it will always be worth _at least_ its weight in
gold.

------
FeelsGoodMan
It should be noted that the only reason Meze Grill is accepting bitcoins is
because Bruce Wagner, host of the 24/7 Bitcoin show
(<http://onlyonetv.com/?page_id=178>), loves the restaurant and convinced the
owner to accept bitcoins. The owner himself (on Bruce's show) has admitted
it's basically a cute little gimmick and doesn't actually any real volume
using bitcoins at his shop.

Yes, the above is as ridiculous as it sounds.

~~~
sgornick
Quick question for you. Who was the second astronaut to set foot on the moon?

~~~
FeelsGoodMan
What's the analogy you're trying to make?

~~~
sgornick
There's an old cliché, nobody remembers the second man to walk on the moon.

So my point was, there is value in being the first restaurant in the world to
accept bitcoins. And to be the first coffee shop. or the first plumber to do
so, etc.

But, of course, I got schooled by lwat who poked a hole in my argument ...
Buzz Aldrin is very well known.

Incidentally, the second restaurant to announce that they accept bitcoins also
is in NYC ... <http://twitter.com/ocrepes>

------
csomar
I really wander what if a country legalizes bitcoins. A small/poor country
with less than 1 million inhabitants. Bitcoin supporters will found a great
base where to make transactions legally and build bitcoin related start-ups
without fear. All transactions take place in that country banks and then
forward to the bank of choice of the company/person/start-up.

Think of that country as a legal bridge to using/trading bitcoin. They can
charge a small fee for doing it (say 3%). If the economy of bitcoins grows at
a multi-national scale making around 1 billion USD in daily transactions, this
will bring a $10.5bn income for that country, assuming the number of its
inhabitants to 1 million, that's $10K per capita. It could save it from
poverty and may be in the future makes it one of the richest.

Just few thoughts...

~~~
gvsteve
Everything is legal until it is made illegal. Bartering for goods and services
is not illegal, at least in the US, and Bitcoin falls under that legal realm.

There is no law hindering any company's ability to accept Bitcoin as payment
besides the requirement to pay taxes on the fair market value of the Bitcoins.

~~~
sukuriant
Just out of curiosity, are you a tax lawyer/whatever-lawyer-is-entitled-to-
make-this-claim?

~~~
rprasad
His statement is legally accurate.

When you engage in a trade transaction (as opposed to cash), the "income" from
the transaction is the fair market value of the items/assets/property
exchanged, at the time of the exchange.

The problem is that taxes aren't due until the end of the quarter (for
businesses) or year (for individuals). Even if the value of the bitcoins has
dropped, you owe taxes on the value when received. On the other hand, if the
value has gone up, you don't owe any additional taxes until you use the
appreciated bitcoins in another transaction.

~~~
pessimizer
That sounds super complicated and like an opening for somebody to write some
software.

------
kbd
Excellent article. My favorite quote:

> Apart from whether there is a central bank somewhere to bid against George
> Soros, doesn’t the difference between a real currency and an imaginary
> currency lie in some sense in the composure with which a customer can ask if
> the currency is accepted here and in the composure with which a merchant can
> say yes?

Every currency is valuable only because other people consider it to have
value.

~~~
dexen
_> Every currency is valuable only because other people consider it to have
value._

Two counterarguments:

\- the idea of `legal tender' [1]. Usually the physical manifestation (coins
and banknotes) of official currency in a given country/region/whatever is also
codified by law as legal tender. Which means, when used for settling a debt,
the creditor is obliged to accept it. Contrast that with gold, for example:
it's considered valuable, but creditors are not required to accept it. Value
of legal tender stems from both recognition and the legal framework of it
being legal tender.

\- taxes. Country's/region's law dictates the currency persons and
organizations have to use for settling taxes and other dealings with
administration. A currency that people don't trust or use for any other
reasons could still have well-understood value in relation to settling taxes.

That having been said, I firmly believe Bitcoin has great potential. Even if
this particular implementation fails at some point, other ones will follow.

\----

[1] <http://en.wikipedia.org/wiki/Legal_tender>

~~~
mike_esspe
> _the idea of `legal tender'_

This idea doesn't work in the country with hyperinflation :) As long as people
don't consider that the currency is valuable, no legal force can convince
them.

------
guelo
If bitcoin was a currency the meal would have been denominated in bitcoins not
dollars. Bitcoin is an asset like gold or a stock certificate, not a currency.

~~~
jalada
No, only because Bitcoin isn't stable enough right now to know what the price
should've been in BTC.

~~~
ars
You mean yes, not no. It's precisely because bitcoins are not stable that
bitcoins are not a currency.

~~~
tftfmacedo
You should try living a country with high inflation. People lookup exchange
rates every single day.

~~~
ars
And those people do not willingly use that currency - they are forced to by
their government.

Whatever currency it is that they are comparing to is the currency they really
want to use, and probably do on the black market. I'm also confident that that
is the currency they keep (or try to keep) their savings in.

------
pieter
Sounds like there really is a need for a standardized way to integrate bitcoin
addresses into DNS. For example, just adding the address as a TXT field and
using DNSSEC to sign it would make the whole experience a bit nicer already.

~~~
ghshephard
The added advantage of that solution is that (with a bit of backend work on
your nameserver) you could rotate your Bitcoin address for every lookup,
resulting in a unique address per transaction to preserve anonymity.

------
mcantelon
>It appears that their orders cost BTC 0.75 and his own meal cost BTC 0.7 and
nobody has bought anything with Bitcoins at the Meze Grill since then.

Or the grill owner periodically generates a new address with which to receive
coins.

~~~
sgornick
Probably has multiple laminated QR codes. That's not really the right way, or
the best way. But it is a way that works.

With only one code, the restaurant can't know for sure who the payment was
from. Though at these low volumes, the amount and/or the time would probably
be adequate.

Even with a little more volume this method should still work fine, even if you
get a second or third QR code to use.

------
c4urself
There's a lot to like about BitCoin. They "just" need to solve the following:

1\. Technical issues (make it more secure) 2\. Economic issues (deflation) 3\.
"Competitor" issues (governments, banks, the powerful status quo)

~~~
ars
> Economic issues (deflation)

This is actually a pretty serious problem.

The value of bitcoins always settles such that the cost of the electricity to
make them is approximately their value.

But because the difficulty is adjusted such that a fixed number of bitcoins
are generated per time (meaning faster or more efficient computers don't
help), and that the number generated per unit time is constantly shrinking, it
will cost more and more electricity over time to make bitcoins.

Deflation is built into it. And I bet the creator of bitcoins never realized
that the scarce resource bitcoins track is electricity.

If you want to make a ton of money, buy bitcoins just before they switch from
50 per block to 25. I'm betting the value will double.

~~~
jasonzemos
I don't see how this is a problem. There will only be 21 coins in existence
and their cost per generation (hence their intrinsic value) will rise up until
that last coin is generated. At that point coins will just be subdivided many
more times -- nobody will wield around an entire coin on a day to day basis
the same way most people don't carry around a roll of $100 bills. Remember
coins can be divided down to the 8th decimal place.

~~~
ars
Look up deflation, and in particular Deflationary spiral.

------
tedunangst
Just because something works does not automatically means it's not a ponzi
scheme. The original Ponzi was buying and selling real stamps. He didn't
necessarily set out to defraud people. I personally don't think bitcoins are a
ponzi scheme, but the fact that somebody once paid for lunch with them is not
much evidence of that.

------
retube
It seems that bank accounts are public:
[https://blockexplorer.com/address/1MTbKpYWnzqmsLvCjdTtwrvuX8...](https://blockexplorer.com/address/1MTbKpYWnzqmsLvCjdTtwrvuX81g3HCgC)

Why is this?

~~~
stuhood
This is why people say Bitcoin is pseudonymous: the entire transaction history
of every Bitcoin is public knowledge.

To achieve actual anonymity, receivers need to use a one-time-address for each
sender, and senders need to not leak information about which addresses they
own.

<https://en.bitcoin.it/wiki/Anonymity>

~~~
ralfd
Imagine all the money exchange and circulation of the world economy. 7 billion
people. If hypothetically Bitcoin would be the "world currency" how much data
(which is never deleted) would that generate per day? What data will amassed
in 10 years?

I wonder how that will hard limit the system...? I have no clue about Bitcoin
but a quick google search seems to imply that the global history of all
transactions is locally saved in the client as "blk0001.dat". Already this
database seems to be a few hundred Megabytes big?

~~~
gwern
<https://en.bitcoin.it/wiki/Scalability>

~~~
sorbus
So Bitcoin's scalability relies on a mixture of writing new software when it's
needed ("The core BitCoin network can scale to very high transaction rates
assuming a distributed version of the node software is built. This would not
be very complicated.") and in future switching to a two-tiered structure with
"supernodes" transmitting data between themselves at a rate of >1GB/s. While I
suppose that it's good that someone is thinking about this, it does not
inspire confidence in bitcoin's ability to scale - the fact that it's
theoretically possibly to write software allowing it to scale is very
different from someone going off, writing this software, and demonstrating
that it does scale.

~~~
gwern
The supernode architecture is mentally straightforward and has been the
solution used by a number of previous P2P networks - eDonkey, Gnutella, and
Skype come to mind as using supernodes or variants thereof. If you want to
seriously criticize Bitcoin, one ought to have more than FUD and 'you haven't
proven the opposite!'

------
patio11
So I get that Bitcoin by design keeps a global public record of every
transaction. Does that have to be the HN front page?

------
dacoinminster
If you want to buy some bitcoins, I recommend <http://www.TradeHill.com>,
which has lower fees and than MtGox, and seems more professional to me. I have
a code that will get you 10% off your fees there if anybody wants to buy or
sell bitcoins on TradeHill.com: TH-R1168

------
jussij
> me he wanted 0.52 Bitcoins for my lunch

With the Bitcoin currently valued at about $0.02 (down from $17.00), I suspect
the restaurant won't be accepting to many more Bitcoin orders.

~~~
bdr
Where are you seeing bitcoins for $0.02? They're about $16 on TradeHill and
Mt. Gox.

~~~
swishercutter
He must be thinking of the flash crash...it recovered in minutes.

------
benmmurphy
the big problem with using bitcoins for real life transactions is it takes ~10
minutes to confirm the transaction. this makes it useless for buying a lot of
things like fast food, stuff from the store, etc. you would need to layer a
trusted third party like a credit card on top of bitcoin to use it for normal
transactions.

~~~
niklas_a
I wouldn't call this a big problem. It is a minor issue at worst. In the
Bitcoin forums there has already been several discussion on how to solve this
issue by paying a third party to facilitate the transaction while preserving
anonymity.

------
ignifero
Bitcoin is a commodity. Nobody issues it, it is mined and has a predictable,
limited supply. People aspire to use bitcoin as fiat money, but that's
impossible, there is no one to provide liquidity when the market runs out and
there's no underlying economy it will be based upon. Commodities like gold,
silver, petrol have been used or tied to money for centuries, but at some
point their use was deprecated by the needs of the people. Adopting bitcoin as
currency is like going back to the 19th century. It's an interesting idea for
geeks, and maybe it will be used in special applications, but it's not an
advancement for the economy, its a step back.

He might as well have paid with (numbered) paperclips if there was an MtGox
for paperclips, does that mean that paperclips are the future?

~~~
niklas_a
You are building a straw man. There are plenty of reasons why paperclips are
unsuitable as money. They are easy to forge and there is no guarantee of how
many will ever be in existence to name a few.

Trading oil or gold directly is obviously impractical. But Bitcoins are not.
You can store an unlimited amount of Bitcoins on your smartphone or USB stick
and you can securely and anonymously transfer them to someone else within a
few seconds.

~~~
ignifero
How is it different from ordinary coins? (Obviously, in a hypothetical gold-
coin economy credit cards would be in gold, too).

Btw, practicality was not the reason the world abandoned the gold standard,
political and economical needs obviated it.

P.s. obviously, paperclips are not a good figurative example. The central
banks might just give you a list of banknote numbers to exchange (and an API
to verify their uniqueness)

~~~
niklas_a
Giving someone coins is similar to Bitcoin. Still, Bitcoin is more practical
than carrying around a bag of coins.

You can send them instantly across the globe without fees and keep as many as
you want in your pockets to name a few.

~~~
flatulent1
"Giving someone coins is similar to Bitcoin." It is quite a stretch to compare
bitcoin to gold or other useful metals. Gold has significant inherent value,
bitcoin is inherently worthless. The value of gold can't fall to very low
levels since it is scarce and is valuable for industrial uses (excellent
conductor that doesn't corrode, etc.). It is unlikely that there could be much
of a change in the scarcity of gold. (This hasn't taken into account the
demand for gold for jewelry)

Since Bitcoin has no inherent value, those initially creating and trading it
for something of value would seem to have gotten something for nothing, or
nearly so.

I was thinking about issuing pellets as a currency. It takes work units
(gathering/mining and processing food) to create them. Much of the work is
carried out by an organic machine called a rabbit. The currency has more
inherent value than bitcoin since it has inherent value as a fertilizer. The
maximum amount of currency is finite since it biodegrades and the Earth can
only support a finite number of rabbits. As with all physical currency, it is
wise to wash your hands after handling it.

Various units are possible for convenience. The smallest are individual
pellets. They can be compressed rolled and cut into "sheet" currency, and made
into bricks. For still higher value currency the rabbit may be replaced with a
bull. Some bull-sheet currency should be available soon.

~~~
niklas_a
Value is ultimately determined by what people are willing to trade for - by
supply and demand.

Obviously, Bitcoin is not worhtless to thousands of people. They are being
traded at $14 at Mt Gox right now.

Why is gold valued at $50/gram today and was valued at $30 in 2007? Is it
because we are creating more jewellery and need more for industrial
applications and the supply cannot match the demand? It´s not - the value is
increasing because people see gold as safe way to store money. To quote
Wikipedia: "the price of gold is mainly affected by changes in sentiment"
<http://en.wikipedia.org/wiki/Gold_as_an_investment>

You might also want to read:
<http://en.wikipedia.org/wiki/Subjective_theory_of_value>

------
michaelochurch
Bitcoin isn't a scam because it's "imaginary" (i.e. fiat) but because of how
the currency is distributed: a proof-of-work system that is skewed heavily in
favor of early adopters.

There are a lot of good ideas in Bitcoin, but the truth is that its raison
d'etre is to enrich early adopters-- the definition of a pyramid scheme. (It's
not a Ponzi scheme; that has a technical definition and Bitcoin doesn't
qualify.)

~~~
gvsteve
Then the stock of any company ever made is a scam because it is run with the
intention to profit shareholders, of which early adopters will profit the
most.

~~~
jellicle
A scam as a currency, yes.

If FooCorp started trying to convince people to do all their buying and
selling using FooCorp shares - of which the FooCorp owners naturally have a
great many - then yes, obviously, it would be a scam intended primarily to
enrich the FooCorp owners.

As a stock, FooCorp might be a perfectly fine investment.

Remind me again what the fundamentals for bitcoins are? What are their same
store sales for last quarter?

~~~
gvsteve
The purpose of my comment was to establish that 'enriches early adopters' is
not enough to classify something as a scam.

And I don't think anyone is really trying to convince people to do _all_ their
buying and selling using Bitcoin. However it may be useful to do some of your
buying and selling with Bitcoin.

If FooCorp's stock was stable and easily transferrable enough to use as a
currency, why would it be a scam to advocate its use as currency? If your
answer is only 'because holders profit' then I guess I'll agree to disagree.

------
maeon3
Bitcoins is going to be killed one way or another, the Federal Reserve is
looting our USD, and will not allow any technology to hinder that ability to
dilute the USD.

The question is not IF bitcoin will fail, but how this takedown will be
accomplished.

Anyone who sets up a "Bitcoin bank" is entering the dragons lair. You may
disappear in the night, as people who oppose the IRS in legal battles, you get
your assets seized and you disappear without a blip on the media narrative.

~~~
jamesgagan
I think your claim that people who oppose the IRS "may disappear in the night"
could use some evidence to back it up.

~~~
uptown
Maybe Wesley Snipes? First as Blade ... then by the IRS for tax evasion.

