Your Money and careers writer for the NZ Herald

Diana Clement: I fancy a bit of Bitcoin

Bitcoin has a value because people are willing to exchange it. Photo / Christine Cornege
Bitcoin has a value because people are willing to exchange it. Photo / Christine Cornege

Can you imagine going on holiday and buying your local currency for a few cents commission?

This could well be the reality with Bitcoins in the not too distant future.

Most Kiwis have no idea what a Bitcoin is. Think of it as simply another currency, such as dollars or Euros, that are exchanged peer to peer, bypassing the banks.

Like all money, Bitcoin has a value because people are willing to exchange it.

The value goes up and down according to supply and demand in the same way as paper money does. It's just stored electronically.

The New Zealand dollar/Bitcoin exchange rate is even listed on foreign exchange website XE.com. If that doesn't make sense, check out my 2014 article here.

My interest in this currency was sparked again when I stumbled upon young tech whizz Martin Stellnberger at the Finnotech conference in Auckland last November.

Stellnberger was offering to sell $10 (US$7.96) worth of Bitcoin to a somewhat doubtful looking conference goer.

"I'll buy it," I interjected and five minutes later I had downloaded a Bitcoin wallet app onto my phone and done the deal. On Monday, that US$7.96 "investment" was worth US$15.15.

Stellnberger's motivation was to educate others about the potential uses of Bitcoin.

In the ensuing conversation I had a eureka moment when he explained how Filipino migrant workers in the US were sending their earnings home electronically via Bitcoin.

Their relatives convert the Bitcoin into local currency for about 1 per cent commission instead of large bank or money exchange fees.

I send money to Uganda once a year for the school fees of one child (no, it's not a scam).

Every time I do that a good chunk of the money is swallowed by Western Union in commission and fees.

So this was terribly exciting.

The possibility of sending that money virtually commission-free is a real one once Bitcoin exchange mechanisms mature.

The exchange mechanisms are a bit Wild West-ish as well as being clunky - like the internet was back in the 1990s.

In 2014 when I wrote my first article, Bitcoin's real-life uses were mostly limited to large-scale drug dealing and a spot of money laundering.

You can buy other real-world things with Bitcoin now, including books, computer parts and services.

There is definitely a gap in the market here for a Coinbase equivalent.

One Herald reader, who didn't want to be named, transfers Bitcoin to his sister in the US.

"If I want to help for pay for some air travel, I send the money and she uses cheapair.com, which started accepting Bitcoin in 2013. Why would I do that? She gets the money within 10 minutes, it costs me around 40 cents to send and she also gets a discount for using Bitcoin."

Stellnberger uses Bitcoin as a way of converting his New Zealand dollars into Euros when he goes back to his native Austria on holiday.

This only really works, he says, in countries that have well-developed Bitcoin markets.

I couldn't exchange my Bitcoin into Uruguayan Pesos or Thai baht unless I was willing to meet local dealers. That might not be safe, and there are more interesting things to do with your time.

In future, I am sure it will be possible to change Bitcoin or other electronic currencies such as Ethereum into local currency at the airport or from cashpoint machines.

Or retailers and even market stalls may eventually start accepting payment directly in Bitcoin.

Restaurants in some countries are already taking it as payment.

I like the idea of pulling out my smartphone, scanning the restaurant's QR code and paying directly in Bitcoin instead of local currency or Visa/Mastercard.

The real advantage would be avoiding those offshore margins and unfavourable conversion rates offered by banks and credit card companies.

The problem is we're a bit backward here in New Zealand and buying Bitcoin is difficult and expensive.

Localbitcoins.com is probably the best known exchange where Kiwis buy Bitcoin. A staggering $300,000 of Bitcoin exchange is taking place on Localbitcoins.com here each week.

The graph can be viewed at coin.dance/volume/localbitcoin.

There is also myBitcoinsaver.com, which allows Kiwis to set up a direct debit to save Bitcoin into their personal wallets. But the fees are quite high and the marketing that includes the words "set forget and watch it grow" fails to mention that currencies can fall just as easily.

The real problem with both is charges.

Traders selling through Localbitcoins.com take quite a high margin and myBitcoinsaver charges 2.5 per cent commission plus a "delivery fee", which partially defeats the purpose of Bitcoin exchange being cheap.

In the US and Europe it's possible to link your bank account to your Coinbase or other digital wallet and shift between $US or Euro and Bitcoin easily with no or minimal fees.

There is definitely a gap in the market here for a Coinbase equivalent, which I'm sure will happen eventually.

- Herald on Sunday

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Your Money and careers writer for the NZ Herald

Diana Clement is a freelance journalist who writes about personal finance and careers. She has worked as a journalist for more than 25 years in both New Zealand and the UK. Diana has contributed to a large number of local and international publications. Her pet topic is the secrets of saving money.

Read more by Diana Clement

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