Bitcoin haters have never been hard to find. Here's what some of the best and brightest had to say about the big ฿ over the past few months:

The first wave of cryptoassets, of which Bitcoin is the best known, have so far failed to provide a reliable and attractive means of payment or store of value.

Cryptocurrencies basically have no value. They don't produce anything...It doesn't reproduce, it doesn't deliver, it can't mail you a check, and can't do anything.

I can trade bananas easier as a commodity than I can trade bitcoin. And I can still eat that banana before it goes bad, and get all my potassium for my workouts!

Haters gonna hate but they're not wrong. For everyday purchases, using Bitcoin is more trouble than it's worth. Why go through the pain of buying a coffee with bitcoin when Benjamins are so damn good for buying coffee?

They're missing something though. Bitcoin has unique properties that create new ways to use money. In a small number of cases, for a small number of people, those new ways of using money are worth the pain of using Bitcoin.

Small # of Cases for a Small # of People: Sats > Benjamins

The point is those small number of cases for those small number of people are growing. Here are the number of active Bitcoin addresses over time from 

. The increase shows that either more people are using Bitcoin, using it in more ways, or both.

Bitcoin is open-source software. That's geek-speak meaning anyone can help build it and it's made to be built into other software. What happens as more work goes into Bitcoin and Bitcoin related software? It gets easier to use and there are more ways to use it.

The world is also changing. Let's be real. It's getting weird out there. As it gets weirder, Bitcoin's unique properties could become more useful to more people.

Play these two trends out and eventually even the biggest haters will have to give the big ฿ their respect. Even if we're still using Benjamins to buy coffee!

To make this case, in this post I'll first give a rundown of what Bitcoin is, the unique properties that make it useful, and the costs of using it. If you've already been around the Bitcoin block, feel free to skim or 

In the following posts, I'll dive into the different ways Bitcoin is used and how it could be used in the future, starting with traditional commerce:

: The history of Bitcoin commerce epic fails and false hopes.

Coffee? Where we're going we don't need...coffee

 The new commerce possibilities enabled by Lightning Network micropayments.

): Lightning's potential to create the private and secure internet we were promised.

We'll then work our way into other ways Bitcoin is used as money.

Thousands have tried to answer the question but mostly in a way that doesn't make sense to normal people. Here's a straightforward approach from 

"At its core Bitcoin is a transparent ledger without a central authority."

Also, have you noticed that sometimes ฿ is capitalized other times lowercase? It's not because Bitcoiners are sloppy. 

 refers to the transparent ledger (or network/software) while 

 refers to the unit of money that is accounted for in the transparent ledger. In other words, the coins.

If these statements make your head spin, take no shame in checking out this real talk from Nik Custodio: 

For our purpose of understanding what makes Bitcoin useful, we'll focus on the properties that emerge from 

. The grouping and labeling of these properties are another topic of hot debate in the Bitcoin world (spoiler alert: Bitcoin is one big hot debate). I've adopted my list from 

in the internet. The imaginary lines that humans draw on maps and the rules that people have to follow on different sides of those lines don't matter to Bitcoin. It costs the same and takes the same amount of time to send bitcoin across the room as it does halfway around the world.

: Only 21 million bitcoins will ever exist. The amount of bitcoin created with each block decreases every 4 years in an event called "the halving". Today, 12.5 bitcoins are created with each block. After the next halving in mid-May 2020, that number will half to 6.25 bitcoins.

 and a visual of the creation of those 21 million bitcoins (we've moved a bit further along it since) from Phillip Nunn.

: Bitcoin's smallest unit of transactable value is called a Satoshi or a 

. A single Bitcoin is equal to 100 million sats. As I'm writing this, there are 142 sats in 1 US penny. The point is Bitcoin can be transacted in tiny amounts of money.

: The Bitcoin blockchain is maintained by independent computers (

), known as miners and nodes that add and verify new batches of transactions, called blocks. Once a transaction is added to a block, it can only be reversed if a large percentage of those computers agree to remove the transaction's block and every block that has been mined since. This means it is really expensive to reverse transactions (Jameson Lopp gets into the nuance here if you're interested: 

Bitcoin: The Trust Anchor in a Sea of Blockchains

). For the real world, this means you can't call your Bitcoin exchange to ask them to reverse a transaction like you would call your bank to reverse a credit card payment.

: Unlike the traditional banking system, you don't need an account to interact with Bitcoin. Anyone can run Bitcoin's software and transact bitcoin without anyone's permission. This also means that no one can stop you from using Bitcoin. In other words, Bitcoin is censorship resistant.

: Once you have bitcoin in a wallet, you just need your private key to spend it. There are a bunch of hardware and software solutions to securely store and spend bitcoin. But a Bitcoin wallet can also be accessed by simply memorizing 12 words in a certain order. Once stored on your phone, computer, USB stick, or in your head, you can take your bitcoin and access it anywhere.

: Because Bitcoin is digital, it can be programmed into software. Similar to how Uber sends a car to pick you up with the press of a button, software developers can program bitcoin transactions into their apps in any way they dream up.

: Bitcoins are stored in wallets that are associated with a seemingly random sequence of characters called an address. Anyone can create a wallet and receive bitcoin to their wallet address without giving up their identity. The simplest way to understand this is to generate a 

: All Bitcoin transaction and address activity is publicly displayed on the blockchain. Anyone can search and view blockchain activity in a 

. This transparency makes it easy to track and audit the movement of bitcoins among addresses.

As we'll see in our examples, Bitcoin is most useful when more of these unique properties are used.

The cost of using Bitcoin is all of the extra effort, cost, and risk that come with using it instead of Benjamins.

No need to be a Bitcoin OG to call those out. In a nutshell, if you want to use Bitcoin in any meaningful way you have to:

Find an exchange or person to buy bitcoin from

Send them fiat currency and receive bitcoin from them without getting ripped off or giving up sensitive personal information

Store your bitcoin without losing it or having it stolen from you while being exposed to extreme price fluctuations

Find someone who will accept it as a form of payment for some special something that you want to buy

Send them bitcoin in exchange for that special something at the risk of getting ripped off (again) and triggering a capital gains event

Pay a wildly fluctuating fee to complete the transaction

Wait 10 minutes to 2 hours, constantly refreshing screens, hoping you didn't input the wrong address

Potentially live with purchase regret if bitcoin's price increases 10x after you spend it.

These costs can be summed up in the following categories:

: The risk of losing your money from getting hacked, losing your private keys, sending bitcoin to the wrong address, bitcoin's price tanking, transaction fees, and capital gains tax.

: The time and frustration involved with researching the right hardware and software solutions to use, dealing with terrible user experiences, and waiting for transactions to complete.

: The challenge of finding people and companies to buy bitcoin from and sell bitcoin to.

: The risk of missing out on sick gains if bitcoin's price increases after you spend it.

Given the collosal hassle, it's a miracle that anyone uses Bitcoin at all. They must really love those special somethings. We'll explore the special somethings that are worth the hassle (as well as those that are not) in the following posts.

Bitcoin as Money: A Sats-Benjamins Analysis

, we claimed that Bitcoin is chosen as money when the benefits of using it outweigh the costs. In other words, when it's better to use Sats over Benjamins.

, we identified Bitcoin's unique properties that benefit traditional commerce, like buying a cup of coffee.

And we noted that plug and play merchant services lowered the cost of buying coffee, and other everyday type things, with bitcoin.

But we discovered that most people still only want to buy everyday type things with bitcoin when the price is high and they're ready to cash in on sick gains anyway. During other times, most people prefer to spend Benjamins over Sats.

So, what's it going to take to flip the Sats-Benjamin scale?

Now's the fun part when we look past the bore of the present and into the excitement of the future of the everchanging Bitcoin Universe.

itcoin is a network of computers that follow a set of rules to maintain a transparent ledger. But the Bitcoin Universe is much bigger. It includes all of the software and hardware that runs on top of Bitcoin. 

 visualizes a snapshot of the Bitcoin Universe in his piece, 

A Look at Innovation in Bitcoin’s Technology Stack

. As jaw dropping as it is, Lucas calls out that it wasn't complete at the time of writing and like any universe, it's never exactly the same at two different points in time.

There are some enchanting celestial bodies in this Universe. We hope to explore many over time. But for now, we're going to focus on the galaxy that means the most for Bitcoin commerce: The Lightning Network.

 on how it works but in simple terms, it's a network of person to person payment channels. Bitcoin can be sent within channels 

. Lightning only touches the Bitcoin blockchain when participants open and close these channels.

Lightning's unique properties are a clutch complement to Bitcoin, generally and 

property. A single bitcoin could always technically be divided into 100 million sats but the fees associated with sat-sized transactions were cost prohibitive.

The Lightning Sats-Benjamins Analysis Today

How do the benefits of using Bitcoin for traditional commerce stack up with the addition of Lightning?

Well, most people aren't worried about their 

 payments are a welcomed addition compared to waiting 10 minutes and paying an unpredictable, potentially meaningful fee for a regular Bitcoin transaction.

And how does the addition of Lightning impact the costs of using Bitcoin for traditional commerce? 

Remember that sweet plug and play software that made it easy for merchants to accept bitcoin with minimal 

 progress we made by a bunch of consumers owning bitcoin?

Well, if you want to take advantage of Lightning's 

 payments, you have to moonwalk that progress back. Bitcoin merchant and wallet software does not automatically work with Lightning.

Without Lightning software in the hands of merchants and customers, the costs of using Bitcoin + Lightning actually increase.

What would Bitcoin commerce look like if consumers and merchants were suddenly Lightning-ready?

, a heroic effort to integrate Lightning into local economies of El Salvador, gives us a glimpse. It all started when Michael Peterson received a gracious Bitcoin donation to give the power of the big ₿ to the town of El Zonte.

With 10 plus years of local community experience under his belt, Michael immediately saw the potential. Gang extortion and a lack of banking services in the country make fiat bad for business and increase the value of Bitcoin’s 

 property. Also, by rewarding community work with bitcoin, the program helps focus youth attention on stacking sats rather than a life of crime.

 costs of using Bitcoin the hard way -- by putting a Lightning wallet the hands of individuals and teaching them how to use it. As a result, they've managed to create a circular economy for food, household items, and even haircuts, all on the Lightning Network.

Michael tells me that over 500 people in El Zonte, Punta Mango, and El Espino have Lightning wallets. About 3 bitcoins are distributed throughout the community each month and an estimated 3 to 6 bitcoins are circulating the local economies at any given time.

With Bitcoin Beach running point, Lightning has a chance of becoming the go-to payment method in these towns and beyond.

To learn more about how Bitcoin Beach accomplished this feat and their future ambitions, check out 

On The Coast Of El Salvador, Bitcoin Is Becoming The Standard

What about the rest of us who don't have a Michael Peterson in our town? Fortunately, some companies are working to bring Lightning's traditional commerce benefits to the masses.

 make it easy to buy gift cards with bitcoin which is cool for a couple reasons. 

: Gift cards are not tied to customer personal info and no personal info is needed to spend bitcoin (remember, 

: Bitrefill, Fold, and their merchant partners avoid credit card fees and chargebacks with bitcoin purchased gift cards (

, yo!). Being the good stewards they are, they throw some of those savings back to customers.

It turns out, these companies save even more when customers buy gift cards with Lightning. So, what do the savvy Bitrefill and Fold peeps do to reward Lightning payments? They throw even more savings back to customers.

Lightning transactions are simply less expensive for Bitrefill and for our customers that use Bitcoin frequently.

First, people have to want to use it. Fortunately, there's a primordial soup of mega-smart people grinding to discover new Lightning-enabled opportunities.

Whereas Bitcoin development is criticized for moving slowly in the interest of security, the relatively low consequences of breaking things on Lightning gives developers the freedom to be a bit, dare I say...

. This means we should expect wild experimentation on Lightning. Given the network's unique properties, it's likely only a matter of time before the primordial soup gives birth to life.

Micropayments have been well incubated as a concept and may be ready for life on Lightning. Micropayment possibilities have permeated the dreams of hungry minds for years and Lightning's 

transactions make them practical for the first time. Once it's basically free to transact in tiny amounts of money, entirely new types of things can be bought and sold.

 is going after this opportunity with their marketplace for selling 

 through Lightning. What's being sold for tiny amounts of money on Paid.co?

They tell me Lightning's low friction attracts some creators to sell small physical items, like stickers, that wouldn't be worth the cost of business on traditional ecommerce marketplaces.

The concept gets really interesting when considering the new types of commerce that are enabled by Lightning micropayments. According to Paid.co, the selling of digital files like printable templates and art works are most popular but also varies to less expected services, like unlocking of PDF and ZIP files. 

 leans into the marketplace for services idea. Stack sats for anything from downloading an app to opening a channel with someone's node. The services center around the Lightning community for now but you can imagine the possibilities if and when Lightning is adopted by a broader audience.

 is a playground of Lightning consumer applications. Several share the previously impractical theme of paying for engagement, such as social likes, survey responses, and answers to questions. In the spirit of due diligence, I'm testing their services to boost the Tweet ♡  for this blog post. 

What? You thought 50+ people really liked this post? Nah.

You can also pay or get paid for one-off access to wifi hotspots and paywalled digital content. And of course, what would a Lightning playground be without playing games for sats? Lightning video gaming is a category with enough activity to warrant its own post. Stay tuned for that one, folks. 

 users pay sats to display pixels of digital artwork. It's a new way for artists to make money from their art and turn otherwise static work into a group effort that evolves over time. By throwing down a few hundred sats, I unlock pixels for the community, pay the artist directly for their work, and feel a sense of artistic contribution.

: How many Sparkshot sats do I have to spend to add "artist" to my Tinder profile? 

For example, now that I've been hustling on this 

 piece for the past couple weeks, I'm incentivized to shill you on it so I can see what other Bitcoin memes lay below that dark surface.

These are just a few of the apps out there attracting users to Lightning through microtransactions. In many ways they look like toys but according to a16z's Chris Dixon, that's often 

While many eyes are on microtransactions, we haven't even begun to consider the less obvious Lightning-enabled consumer apps. And many major dudes will tell you, the biggest breakthroughs often come where you least expect them.

Once people want to use Lightning, they need software to store and transact their sats. Strong efforts are in motion to create the gold-standard of Lightning wallets.

Lightning's technical setup poses new challenges to wallet builders. Some wallets require users to 

which are sadly, complete deal-breakers for average Joe. Others offer easier experiences at the sacrifice of taking control of users' bitcoin (shout out to 

After testing a few wallets, I can only vouch for one hitting the sweet spot of these tradeoffs.

 is a mobile wallet that's accessible to anyone, node runner or otherwise. They figure out the inbound liquidity thing for you, it's non-custodial (users maintain control of their bitcoin), and to top things off, their customer service people are super responsive and patient with Lightning newbs 

Bitcoin as Money: Coffee? Where we're going we don't need...coffee.

And that Bitcoin's benefits depend on the unique properties that are used. Bitcoin is most useful when more of its unique properties are used.

While Bitcoin's costs are all the hassle of using it instead of the alternative, good ol' Benjamins.

We also pointed out that nothing stays the same. Especially not in the world of Bitcoin where a hive of mega-smart developers are constantly working to improve it. As the hive hustles, we should expect Bitcoin's unique properties to improve and the hassle of using Bitcoin to go down.

In this post we're going to break down how Bitcoin's benefits and costs have stacked up for buying everyday type things. And since those benefits and costs are constantly changing, we'll start from back in the day.

The first known example of Bitcoin commerce was the infamous pizza purchase. In May 2010, a guy named Laszlo had some spare bitcoin (10,000) lying around and got the munchies for pizza. To satisfy his craving, he went to a Bitcoin forum with 

Lucky for Laszlo (or notso), a forum viewer saw the post and offered to purchase the desired pies with Benjamins and deliver them to Laszlo in exchange for his bitcoins.

This transaction process has already achieved a high mark on the hassle spectrum, but to add insult to injury, those 10,000 bitcoins he exchanged for 2 large pizzas in 2010 are now worth $95 million in Benjamins.

It's fair to say that Laszlo experienced all the costs Bitcoin has to offer. His 

was subject to major volatility while he went through a ton of 

If you're feeling bad for our friend Laszlo, you can throw him some sats. Judging from 

I hope it was a tasty pizza. But even if it was the best tasting pizza of all time, what was the benefit of using Bitcoin to purchase it? To answer that, let's look at the unique Bitcoin properties Laszlo took advantage of in his pizza purchase:

That's a giant goose egg because nothing about Bitcoin benefited Laszlo's pizza purchase.

He did not save on international payment fees (

). He did not benefit from Bitcoin's capped supply (

). He did not transact tiny amounts of bitcoin (

). No one involved was concerned with the transaction being reversed (

). He did not need to circumvent the banking system (

). No one especially benefited from custoding the bitcoin (

). No special software was used in the transaction (

). Laszlo exposed his identity in the transaction (

). And there was no particular need to audit the transaction (

There's no question. The Bitcoin pizza purchase would have been cheaper, easier, faster, and safer with Benjamins. While a monumental milestone in Bitcoin history, it's clear that Bitcoin is far from traditional commerce utility in 2010.

Despite Laszlo's pizza not taking advantage, Bitcoin's unique properties have always offered alluring appeal to merchants.

: Bitcoin transactions avoid credit card companies which charge up to 3% per swipe. 

: Bitcoin transactions avoid the extra cost and time associated with international fiat payments.

: Bitcoin transactions are permanent which saves merchants on potential chargeback costs made with credit and debit cards.

But these benefits alone were not enough to tip the Sats-Benjamin scale for traditional commerce.

It wasn't until 2013 that mainstream brands, like Wordpress, OkCupid, Baidu, and Overstock started accepting bitcoin. Why? The world and Bitcoin changed.

 happened. Like a bad hangover, Cyprus never recovered from the 2008 global financial crisis and had major debts to pay. Since they were on the Euro, they didn't have the liberty of making their money printer go brrrrrr and resorted to taking money out of people's bank accounts to help pay the debt. 

This gave the people of Cyprus a real reason to keep money in Bitcoin, outside the reach of greasy government hands (shout out to 

). It also gave the rest of the world reason to speculate on the future of Bitcoin.

The Bitcoin world was ready to embrace the speculation with open arms. Bitcoin exchanges like Coinbase started taking the pain out of buying bitcoin. By February 2013, 

Coinbase was selling $1 million in bitcoin per month

There’s an incredible amount of demand for people who want to buy Bitcoins now.

The combo of greater demand and easier access to supply sent the bitcoin price on a wild ride that accelerated throughout the year.

 only attracted more attention to Bitcoin and all of sudden there were more people in the world who had bitcoin to spend i.e., 

Coinbase wasn't only focused on shilling bitcoin to speculators, they and Bitpay launched plug and play merchant services, and in a competitive race to win the future of Bitcoin commerce, spent sweet VC Benjamins to sell them aggressively. 

2013: The Year Merchants Learned to Love Bitcoin

, this gave merchants "no-lose" solutions to accept bitcoin and even allowed them to automatically convert bitcoin to their local currency. As a cherry on top, accepting bitcoin made for splashy publicity that gave often boring merchants an innovation glamour muscle to flex.

We have seen tremendous growth. We are averaging over 400 new merchant requests a day.

-Stephanie Wargo, VP of marketing at payment processing firm BitPay

The ecosystem upgrade brought down the cost of Bitcoin payments by making it easy to pay with and accept bitcoin (

), creating new ways to spend bitcoin (more 

), and lowering merchants' exposure to bitcoin volatility (

Now that merchants accepted bitcoin and customers had bitcoin to spend, one question remains. Were they willing to spend it?

, late 2013 activity indicated they absolutely were.

BitDazzle, an e-commerce marketplace where merchants could (

) sell their goods for Bitcoin experienced over 100% month over month growth through the end of 2013 peaking at 400% growth on Cyber Monday.

more than 100,000 merchants accepted Bitcoin globally

 indicates customers were all about spending their sats on regular, everyday type things.

(Y-axis edited to be in terms of Bitcoin volume)

Does that chart look familiar? If you were a bitcoin hodler through 2017-2018, I bet it does.

Here's bitcoin's price over the same time period:

You don't need a p-value to know the correlation is strong. The chance to cash in on sick gains acts like a thumb on the Sats side of the Sats-Benjamins scale. Recall the Bitcoin commerce enthusiasm of 2013 was also timed with a price runup.

How have our innovative bitcoin merchants responded since? Not well.

Headlines have been full of brands pulling back on Bitcoin payment channels:

According to BitPay Chief Marketing Officer Bill Zielke, the payment processor facilitated $1 billion worth of cryptocurrency transactions in 2019, with bitcoin leading the pack. Likewise, a Coinbase spokesperson said Coinbase Commerce processed $135 million worth of cryptocurrency payments for thousands of merchants in 2019, which represents a 600 percent increase in the number of unique transactions via Coinbase Commerce since 2018.

She goes on to note that these numbers are dwarfed by credit card volume which in 2018 amount to $3.7 trillion according to a 2019 

 from the U.S. Bureau of Consumer Financial Protection.

The progress fits our narrative that time is on the side of Bitcoin adoption, but we're a long way from Bitcoin commerce hitting the mainstream.

So, what's it going to take to get there? Sadly, my bet is coffee is the last thing we buy with bitcoin. But we're going to explore the potential path and the (more!) exciting stops along the way in our next piece.

Coffee? Where we're going we don't need...coffee.

Bitcoin as Money: Coffee for Dessert

Shortly after losing my job in the midst of this crazy COVID mess, I was given the opportunity to build 

, a transparent marketplace where buyers benefit from dynamic pricing and customer revenue sharing (yup! We do lotteries that put bitcoin back into our buyers' wallets). Building Scarce City was my gateway drug into Bitcoin and an opportunity to learn some new technologies.

In the two months since the beginning of this project, I built an e-commerce website that accepts Bitcoin and Bitcoin Lightning with the ability to store transactions permanently on Arweave's blockchain. I'm proud to be a part of the Scarce City team and excited to share it with all of you.

Here are some of the technologies that build Scarce City.

. This sped up development as application deployment (both backend and frontend) was taken care of by linking Vercel to my GitHub repository. With every file mapping to a route, I was quickly able to add new API routes to my application.

The transaction data lives in a Postgres database on AWS RDS. The database was very simple to set up and add to Prisma. I was even able to use the AWS free tier for the development database.

The invoicing and payment processing is handled by 

, an open-source bitcoin payment processor. I instantly fell in love with this project; it's simply a beautiful piece of software. It was easy to set up once the bitcoin node was synced. Set up included adding our wallet and pairing with the Scarce City backend code. This server is deployed to AWS EC2 using Docker.

 powers our Bitcoin Lightning payments. As usual, btcpayserver made it extremely easy to get onto the Lightning Network. An instance of 

, a fully functioning web app that wraps the LND (or C-Lightning) CLI, is included with btcpayserver. This made opening up incoming and outgoing channels super easy.

Since content (such as blog posts, product copy, product pictures, etc.) needs to be managed by my non-developer colleague, I decided a CMS was important. I heard nothing but good things about 

 and decided to try it out. I am beyond impressed by the ease of manipulating the data schema and adding new features to the CMS. Additionally, creating content on the CMS is super easy. After editing or creating a new document, Sanity allows me to call a Vercel web hook which rebuilds the entire app (incremental builds can't come soon enough!).