So there’s lots of things you can do with Bitcoins already in South Africa, even if the advice from those who seem to know is that the best thing to do is save them. There’s a post all about that over here, as well as an introductory video on the subject. In this, its sequel post, I’m going to suggest a few things you can’t do with them yet, some of which may well tempt you to start looking into the currency a little bit more than you have already.
- Pay your taxes.A lot of critics liken Bitcoin to a Ponzi scheme because the currency is based on machine processing cycles and floats freely against fiat currencies, and is not legal tender anywhere in the world. It’s only value is in what the buyers and sellers on the exchanges think it’s worth, and there’s no way of increasing or limiting the supply of new bitcoins to stabilise it in times of crisis. While it’s only being used by a small number of people, the value will remain volatile and may crash to nothing tomorrow – there’s no central bank to prop it up, you see. The decentralised and anonymous nature of Bitcoin, however, is precisely what’s attractive to so many people about it. If the government can’t see what you’re spending, it can’t tax it in real money either (although it is your responsibility as a citizen to report money made in any currency on your tax return).
- Guarantee your investment. Look, Bitcoin is young and big names like the Economist already take it seriously. But they also caution that while there’s probably a future for a decentralised currency that isn’t based on debt (like the current banking system, which is still in tatters after 2008), it may not be Bitcoin that succeeds and the current value could be a bubble driven up by people looking for somewhere other than sovereign debt to put their money (like gold, whose price exploded after 2008). Temper any excitement you have for the currency with the consideration that it’s not a safe bet by any means, there are more economists who thing it will fail than there are who thing it will succeed. Even those who see a future for it warn that point 1 – governments can’t control Bitcoin production – means there may be a fast and furious reaction from governments that will close it down. As with any investment, don’t spend more money on investing in it than you can afford to lose.
- Use it to buy stuff easily. There’s a lot of people, including the Bitcoin Foundation, looking at ways to make Bitcoin bigger than M-PESA in Africa as a possible solution to the mess that it money on the continent. But they all realise that at the moment, buying, selling and storing Bitcoins is a complicated business that’s not going to take off until you can send them from one feature phone to another as easily as an SMS. Interested in promoting the Bitcoin cause? That’s the killer app that no-0ne has yet developed – get to it.
- Pay etolls. See point one. Also, you can’t use them for the new cashless payment cards for Rea Vaya buses either.
- Pay banking fees. This one is rather the point of Bitcoin – exchanges are made in a peer-to-peer fashion, without transaction costs. That’s why people are looking at it as an alternative to cash in emerging economies – in South Africa, it can cost up to R9 to transfer money via a cellphone company or more via a bank, and that’s too much for many to pay. There are transaction fees at the Bitcoin exchanges, however, who’ll take a cut of any coins bought and sold against real money.