Bitcoin – a digital form of currency – is trying to turn your smartphone into your new wallet, and a growing number of San Diego small businesses are embracing the online payment form.
For its users, Bitcoin works much like cash. One bitcoin is worth about 450 USD, and once you buy one online, you can use it to pay for a wide variety of services or products directly over the internet without going through a bank or credit card company.
“It's lower rates because it's not charging as high as 3 percent, which you would with Visa and Mastercard,” said Ping Wang with Pangea Bakery. “It's less than 1 percent usually. Also there's not a lot of coins and change you have to deal with and count, so it's actually time saving."
In the San Diego community, you can currently rent office space, pay for a dentist visit and even buy a pastry with bitcoins.
Wang believes they are safer than credit cards because the online account does not link back to your personal records, which prevents identity fraud like in the Target credit data breach.
But it does come with a few risks. The value fluctuates wildly; it fell about 7.5 percent in the last 24 hours after the IRS ruled it as a taxable property, not a currency.
"The biggest reason why it’s volatile is it's so young, and even though it's fairly volatile right now, when you look back in history when it didn't have much adoption, it was even more volatile, so over the course of time, we're actually just getting more stable," said Paul Puey, a North Park resident who created an app called Airbitz that helps users find business that accept bitcoins nearby.
Another downside: Bitcoins are susceptible to hacking. Last month, a big exchange called Mount Gox filed for bankruptcy after hackers stole half a billion dollars’ worth of the digital coins.
Additionally, an IRS notice last week will force users to keep a thorough record of every purchase they make with the bitcoins and then account for their changing value.
Despite the risks, many more businesses are joining the digital revolution.
In less than a year, Puey said 50 or 60 more merchants have adopted the online currency – with more coming on board every month.
“I foresee in a few years, there won’t be a person in San Diego that hasn’t heard of Bitcoin,” Puey said.