Lately Bitcoin seems to have entered a kind of equilibrium. On the one hand, it has mostly purged itself of the potential for major scandals like MtGox to cause another crisis of confidence. At the same time, the amount of Bitcoin being transacted on a daily basis remains at about the same level it was a year ago.
There may be a simple reason for why we the next big breakout has been put on hold: It remains exceedingly difficult to purchase Bitcoin.
Much of this is related to the regulatory difficulties Bitcoin sellers are still encountering. Very few U.S. states allow money transmitting businesses that can sell Bitcoin to operate without a licence. As a result, American prospectors are confined to from the handful of exchanges operating in the U.S., or must take their chances with an overseas exchange.
But not all encumbrances are the result of government restrictions. Simply because of its recent vintage, having a totally secure Bitcoin wallet — one that only you control access to, because remember, you are supposed to not have to use a bank anymore — remains elusive. There continue to be reports of compromised Bitcoin wallets at even the most reputable firms, although not all of these are the firm’s direct fault.
So one’s options for a safe purchase are limited. And attaining that security has created a contradiction for the cryptocurrency: The most trusted sites require you to give up your anonymity, which was supposed to be one of Bitcoin’s principal virtues.
By consensus, the safest option for buying Bitcoin in the U.S. is Coinbase. The firm has put itself through a rigorous security audit to ensure there are no holes in its system, and enjoys some institutional heft (it’s backed by Andreessen Horowitz’s Chris Dixon, among others).
But with Coinbase, you trade security (though even this is not guaranteed) for convenience. First, you must connect your bank account, something that takes two-to-four business days for Coinbase to process. And if you’re looking to use two-step identification for an extra layer of security, you must download a whole separate app that will give you a temporary PIN to key in to make your transaction. Then, buying the Bitcoin itself can take another four days — Coinbase uses the traditional (not to mention antiquated) ACH bank transfer system to collect money from your bank. ACH still uses batch transfers, and each step of making an ACH transfer takes about a day.
Once you are registered, the Coinbase process can get easier — you can buy Bitcoins instantly if you upload your credit card. Coinbase also has a 24-hour live-help-chat feature to help resolve issues that come up during your purchase. But even they admit the whole process takes a long time.
Another service, which comes recommended by mega Bitcoin wallet site Blockchain, is China-based ANX. Here too they seem to provide, but again this comes at the price of ease of use. Here’s the form and all the identification required to purchase Bitcoin there:
This form embodies the anonymity dilemma Bitcoin now faces: Registering to buy Bitcoin now requires about the same amount of effort as it does a regular bank account.
St. Louis Fed Senior Vice President and Director of Research David Andolfatto recently Tweeted that he wanted to experiment with buying Bitcoin — despite having written one of the most cogent breakdowns of the digital currency, he’d yet to actually used it. We asked him how it went. “So far, I’ve managed to download a wallet (easy),” he told us in an email. “I had no Bitcoins at the time and I didn’t really know how to get some. So I went on Twitter and asked people to send me some (I sent [them] right back). That was pretty easy, although in one case the payment took about 2 days to clear.”
He did mention one other way that speeds up the process a bit: ATMs. But even here, you can end up waiting up to five minutes, at least for your initial purchase, for your account to be verified. And there still aren’t that many in the U.S.
Bitcoin was supposed to be the most convenient form of money in the world. But if it wants to keep growing, it will have to start acknowledging that, while it may have other virtues, convenience isn’t necessarily one of them.