At halftime at the Bitcoin Bowl, before either college football team’s marching band came out, an official from the city of St. Petersburg, Fla., took the microphone and addressed the crowd.
“I’d like to present a key to the city,” he said, “to the chair of Bitcoin, Tony Gallippi!”
The moment wasn’t televised. ESPN had moved on to commercials and halftime commentators, and I wondered if anyone else at Tropicana Field—the indoor stadium where baseball’s Tampa Bay Rays play—even caught the mistake. (To be fair, ESPN and CBS Sports have said the same thing.)
To anyone with even a passing familiarity with the world’s original, dominant online cryptocurrency, the gaffe was painfully obvious. Bitcoin has no formal leadership. No one even knows the identity of whoever wrote its code. It’s completely decentralized. There’s no country, company, or person in charge of Bitcoin. That’s what makes it so promising and potentially problematic.
Gallippi is the chair of Bitpay, one of the world’s leading Bitcoin-centric companies and, as of 2014, the lead sponsor of the city of St. Petersburg’s annual bowl game. Gallippi and his team had spent more than a month preparing the city for the big game between North Carolina State and the University of Central Florida on Dec. 27, reportedly outfitting dozens of local businesses with its services. Apparently not everyone got the memo.
For Bitcoin, which tends to make national headlines for all the wrong reasons, the bowl game provided a rare PR opportunity for its advocates to further distance the currency from its more unsavory connotations and to introduce the concept to mainstream America.
College football is a $7 billion a year industry, and there’s no postseason in the history of sports in America—or probably anywhere else—as intrinsically tied to branding and capitalism as college football bowl games. Since the first Rose Bowl in 1902, the bowl system has swollen to the point where nearly every team in the Football Bowl Subdivision that wins half their games gets to attend one. Including the four-team “playoff” that started this year, there were 49 bowl games.
Bitcoin is nothing if not resilient.
From personal experience, I assure you that when your favorite team plays in even an obscure bowl game, you become keenly aware of its sponsor. In 2011, my beloved hometown Marshall Thundering Herd, coming off a weak 6-6 regular season, eked into the same St. Petersburg bowl game, then sponsored by Beef ‘O’Brady’s. I hadn’t heard of the restaurant chain before then. But once Marshall won the game, Beef ‘O’Brady’s was permanently imprinted on me. The next time I was in Florida, where you’ll find most of the Beef ‘O’Brady’s restaurants, I insisted on finding one.
The restaurant itself was terrible, and I’ll never eat at one again. But that’s not the point: After my team played in the bowl game, I at least had to try it.
Could the same hold true for Bitcoin?
The third era of Bitcoin
The Bitcoin Bowl served as the perfect metaphor for where Bitcoin is right now: somewhere middling, neither obscure nor prominent, fighting for relevance and a clear identity.
Bitcoin is nothing if not resilient. It was brought into the world in 2009 by a mysterious cryptographer calling himself Satoshi Nakamoto. Years later, no one’s conclusively proven if Satoshi is a real name, a pseudonym, or even a group of people, though he’s been falsely identified over and over again.
Actual bitcoins are held in programs called “wallets,” identified by what’s called a public key and a private key. Think of those as your public email address and the private password you use to log in. Rather than being overseen by any one person or program, all bitcoin transactions are automatically recorded on what’s known as the blockchain, which is a public ledger maintained by the combined connections of users. That makes every single transaction a matter of public record.
Over the years, Bitcoin’s survived three major bubbles and volatile growth cycles that saw its value skyrocket from $3 in January 2012 to more than $1,000 two years later, establishing itself as the dominant cryptocurrency in the process. According to Coin Market Cap, all the Internet’s bitcoins are currently worth around $3.8 billion, or about four times the amount of every other kind of Internet money combined.
While Bitcoin’s rapid acceleration may be over, and its value hasn’t reached $500 since the summer, trading is still consistent with all-time highs. There are roughly 80,000 Bitcoin transactions a day. Even still, it’s becoming clear that, in contrast to how it was touted in its earliest days, Bitcoin isn’t posed to rival the U.S. dollar or Chinese yuan anytime soon.
But to think of Bitcoin only as a currency, a commodity to speculate on and hold—the gold of the 21st century—is to miss out on its greater potential as a means to transmit money.
As Jeremy Liew, a partner at the influential venture capital firm Lightspeed Venture Partners, has argued, we’re in the early stages of the third era of Bitcoin. The first was purely ideological, promoted by cryptography enthusiasts and libertarians eager for a decentralized currency that couldn’t be manipulated by a single country’s government. The second wave of early adopters latched onto its pseudonymous nature roughly two years ago, turning Bitcoin into the default currency of the infamous online black market Silk Road and other sites like it.
Now, Liew says, retailers are waking up to Bitcoin’s promise as a payments mechanism, one that could drastically reduce the common 3 percent transaction fees typically charged by credit card companies and wire transfer services, especially for smaller retailers.
“The market size of everyone who could use it as a payment mechanism is virtually everyone who uses money,” Liew said at SXSW 2014.
That’s where Bitpay comes in.
Tailgating in St. Petersburg
There’s a common misconception about retailers that accept Bitcoin payments: The companies aren’t actually using or doling out bitcoins, effortlessly switching between two kinds of currencies like a child who grew up bilingual switches languages. They’re predominantly using Bitpay to do it for them.
Think back to the most recent story you read about a store finally accepting Bitcoin payments. Was it Microsoft? Overstock.com? Tickets to a Sacramento Kings game? A Tesla dealer? Lamborghini Dealer? Greenpeace donations? The Georgia Institute of Technology? Newegg? In all of those scenarios, they’re all just agreeing to use the Bitpay app.
Here’s how it works: Let’s say a customer has a Bitcoin app on his smartphone, connected to his Bitcoin wallet, and a retailer has Bitpay’s payment app on her store iPad. The retailer simply types in the cost of the items and tax, and her app automatically creates a QR code for her customer to scan with his phone. He does so, and the appropriate amount of bitcoins are transferred from his wallet to Bitpay, which pays the credits, converted to cash, to that retailer.
To think of Bitcoin only as a currency—the gold of the 21st century—is to miss out on its greater potential as a means to transmit money.
BitPay doesn’t currently make any money on actual transactions. Small retailers get BitPay’s services for free or, according to company spokesperson Julia Patterson, they can pay $300 a month for additional services, like phone support. The vast majority of the company’s earnings come from its big clients, like Microsoft, that pay an “al la carte” fee for the special attention bought with its Enterprise Plan.
“Right now we’re not necessarily in the green,” Patterson said. “We’re focusing on acquiring larger merchants that can produce products that incentivize them to pay for services. Maybe 2-3 years down the line we’ll start extending our services. Right now, our larger partners pay us very well for [the enterprise plan].”
“For the merchants, the value proposition is pretty clear,” Gallippi told me, referring to the fact that Bitpay transactions cost less than credit cards do for small companies.
He also likes to tout there haven’t been any hacks of Bitcoin transactions (all the major Bitcoin hacks so far have been on wallets, which are held by transaction services), whereas major online retailers, like Target and Home Depot, have had their credit cards leaked by hackers.
“It’s gonna be a lot lower risk than credit cards,” he said. “They really have nothing to lose by taking it.”
Small business owners in downtown St. Petersburg largely seemed to agree.
“[A currency that’s] not tied to any company’s politics? That’s a game-changer,” said Jackie Williams, who coowns Furnish Me Vintage, a retro furniture store, with her husband. “It was as easy as signing up for Netflix.”
Nearby, at the knickknacks store Plane Jane, a middle-aged gentleman, who ran the place with his wife, said that he was excited to use a new technology that’s “as easy as using your Starbucks app to pay.” A few blocks down, Sara Stonecipher, who owns the women’s clothing store Misred, said she’d at least gotten publicity from Bitcoin. “I’ve gotten lots of calls from the media for being on a directory of stores that take it,” she recalled.
Bitpay claimed that more than 100 merchants in the St. Petersburg area had signed up to accept Bitcoin through Bitpay, a figure repeated by local news and Bitcoin blogs alike. As proof, a Bitpay employee pointed me to the Airbitz app, which functions as an interactive map to find nearby places that take Bitcoin, like Murad Thackur, a dentist’s office in Orlando.
When I poked at it a little, however, the numbers seemed to unravel. Both Airbitz and the online directory at the bowl’s official website only showed me a few dozen. I only counted more when I expanded my search to include merchants in cities a few hours away, like Murad Thackur, a dentist’s office in Orlando.
More importantly, none of the store owners I spoke with were reeling in Bitcoin sales. Plane Jane had completed precisely two Bitcoin purchases: stationary a few weeks ago, and Christmas ornaments that day. Misred hadn’t had any, and neither had Furnish Me Vintage.
Williams wasn’t worried. After all, she said, “Who comes to a football game and buys a couch?”
One possible reason there had been so few Bitcoin sales in St. Petersburg—and why mainstream adoption is lagging—is because it’s still not easy to acquire bitcoins. Mining them with your own computer, the original way to acquire them, is still out of reach for most people, and the hardware needed to do so is getting prohibitively expensive and advanced. And Bitcoin transaction companies, like Coinbase, require you to prove your identity with, say, a scanned utility bill, and often require you to sign up with your bank account, which can make people drawn to the currency’s pseudonymity uncomfortable.
The Bitcoin Bowl website touted that the company Truecoin, a minor sponsor of the event, would provide five Bitcoin ATMs throughout the city, each of which would allow individuals to quickly get bitcoins with no hassle, like a foreign money changer at an international airport.
Bitcoin is nothing if not resilient.
But there was no indication of where the machines might be. I tried online instead. With Trucoin, you’re supposed to be able to buy bitcoins online with a major credit card, but when I tried to create an account, it asked for a copy of my utility bill—not something I, or most tourists, thought to put in my carryon luggage when I packed for Florida.
Finally, after walking a few blocks, I found a Bitcoin ATM right before the game started. It was on Central Ave, under a tent in a part of downtown St. Petersburg that had been blocked off for pregame partying. The buzz of the area was palpable, the sun was shining, and I walked right up to the machine and put in $40.
The ATM promptly ate it.
Before I had a moment to register my outrage, a man appeared behind me, opening his wallet. “Can you try that again? Exactly how you just did it?” he asked, looking keenly at the screen. He was young, with long black hair, a baby face, and he was sweating through his suit like he certainly wasn’t used to wearing one for this sort of occasion. He looked the exact part of a young Web entrepreneur. It turned out to be Chris Brunner, Trucoin’s president.
I was the first person to use this machine, he explained, handing me two $20 bills. I tried it again, typing in my phone number, then holding up my phone to scan my Bitcoin wallet address, then stuffing the two bills into the slot to my right. This time, it worked. Brunner smiled quickly, then hurried on to another task.
A few feet away, an older NC State fan asked another Trucoin employee if he could buy a T-shirt it had for sale. “I’m sorry,” she said. “We don’t take credit cards.”
He offered her cash. “I don’t have any place to put it,” she countered. “But you can pay in Bitcoin!”
The old man turned away wordlessly.
Illustration and GIF by J. Longo