Bitcoin is the first and by far the most famous of a new breed of “cryptocurrency” – designed to let people operate independently of banks and national governments.
You’ll have heard stories of the fabulous wealth early adopters made – seeing their Bitcoins rise in value from a few pence to thousands of pounds each.
Then there are the stories of people who lost cash – getting in at the wrong time only to see three quarters of their money vanish as Bitcoin’s price plummeted.
But is it something you can actually use as money?
Well, earlier this year cryprocurrency firm CoinCorner decided that – if they wanted – staff could choose to take their salaries in Bitcoins instead of pounds and pence.
Zakk Lakin decided to do just that – and have his entire salary paid in Bitcoin.
Is Bitcoin ‘real’ money then?
The great economist Adam Smith argued that currency had three functions – as a store of value, a medium of exchange and a unit of account.
Using that test, Bitcoin fails.
Last year Bank of England governor Mark Carney pointed out that as a store of value, Bitcoin is too volatile.
A Bitcoin now is worth three times what it was worth in January, twice what it was worth in March and about half what it was worth in late 2017.
“Consider that if you had taken out a £1,000 student loan in Bitcoin in last December  to pay your sterling living costs for next year, you’d be short about £500 right now. If you’d done the same last September, you’d be ahead by £2,000. That’s quite a lottery,” Carney said.
When it comes to acting as a medium of exchange, there are more problems.
“If you use a debit or credit card in the UK, the transaction is completed in seconds and without exchange rate risk. In contrast, Bitcoin users can face queues of hours,” Carney said.
Then there are the fees – which range from £40 to £2 – and that’s if you can find someone willing to accept them.
If not, you need to swap them into standard currencies, which again takes time and costs money.
So how do they fare as units of account? Pretty badly it turns out.
“Given that they are poor stores of value and inefficient and unreliable media of exchange, it is not surprising that there is little evidence of cryptocurrencies being used as units of account,” Carney said.
“Retailers that quote in Bitcoin usually update at very high frequency so as to maintain stable prices in traditional currencies such as US dollars or sterling. The Bank is not aware of any business that accepts Bitcoins in payments that also maintains its accounts in Bitcoin.”
In short, he concluded it’s not real money.
“Cryptocurrencies act as money, at best, only for some people and to a limited extent, and even then only in parallel with the traditional currencies of the users,” the Bank of England governer said.
But to their fans and many investors, cryptocurrencies absolutely are the future – and that was the spirit in which Zakk decided to be paid in them.
‘My lifestyle hasn’t really changed’
After CoinCorner said staff could take some – or all – their pay in cryptocurrency, Zakk leapt straight in, choosing to have 100% of his salary paid in Bitcoin.
And the software developer, who lives on the Isle of Man, said he’s managing fine.
“People always ask how I am coping with living on Bitcoin, but the truth is that my lifestyle hasn’t really changed,” the 24-year-old told Mirror Money.
“Buying things with crypto is easier than people think – there are many online merchants that accept Bitcoin and I use them to buy what I need throughout the month – everything from tech-related items such as Raspberry Pi products or cooking equipment from Amazon (yes, there are ways to buy things from Amazon with crypto!)”
Of course, not everything can be bought with Bitcoin. But that doesn’t put Zakk off.
“At the moment I convert all of my permanent outgoings (such as rent, direct debits etc) to GBP on payday to avoid any issues around the Bitcoin price movements and then the rest is left for disposable income/savings,” he told Mirror Money.
Zakk has the advantage that – working for a coin exchange- he doesn’t have to pay a fee to swap his Bitcoin into pounds and pence.
But even then it takes a few hours to get access to his cash if he needs pounds to spend though.
“Over time I believe we’ll begin to see more retail companies like restaurants and petrol stations introducing Bitcoin payments, and this will mean I can spend less in fiat and more in Bitcoin,” Zakk said.
But for Zakk, it’s about more than just paying for things.
“As a young techie in the Bitcoin industry, I feel it’s important to not only contribute to the network by running my own node, but to actually use Bitcoin for it’s original intention as electronic cash.
“On top of it all, the conversations it creates are always worth it for spreading awareness and educating others about Bitcoin and cryptocurrency.”