LONDON, UNITED KINGDOM – Last month, I set out to buy my dad an avid Before the Bell reader, a non-fungible token, or NFT.
We’d spent a lot of time discussing the various signs of market madness that had emerged over the past year – including the onslaught of NFTs, the digital tokens that sparked a boom in virtual art. My goals were simple: to spend far less than the $ 69 million spent on the first NFT artwork to be sold at a major auction and to make my father laugh.
In the end, it didn’t cost millions to buy him a picture of a cartoon blue cat. But it was a lot more expensive than I expected. Why? Fees. Fees for buying the cryptocurrency ether, transferring it to my crypto wallet, and making a purchase that included an abnormal mining fee due to network congestion.
For my father’s sake, I will remain a mother of how much I ended up spending. I’ll say, given the fees cost more than the NFT itself, it was more than I would normally recommend to peel for a quick laugh.
Since I spend most of my time writing about finances, I also asked myself: between volatility and high transaction costs, do cryptocurrencies really have a future as a widespread means of spending?
PayPal is convinced of it. Last week the online payment system launched a new “Checkout with Crypto” service. Customers with crypto holdings in their PayPal wallets can now convert them to fiat currencies when purchasing. The company promised “no additional transaction fees”.
But even after addressing the additional costs, the massive price hike in popular cryptocurrencies like Bitcoin and Ether can make people reluctant to part with them.
A video shared by PayPal of CEO Dan Schulman who accidentally bought a pair of ostrich boots made this case. Schulman sold Bitcoin for about $ 55,280 to buy a pair of shoes for $ 299. However, on Friday morning, Bitcoin was worth more than $ 59,400. He might wish he’d just used his American Express.
“I don’t think people are looking at it from an expense perspective. People still see it as an investment, ”Eleesa Dadiani, a London-based art dealer and crypto broker, told me.
Dadiani had a simple message for people deciding whether to use Bitcoin to buy items like a Tesla: Don’t do it.
“Why would you want to spend an appreciative asset on a depreciative product? It just doesn’t make sense, ”she said.
Bill Zielke, chief marketing officer at BitPay, who conducts business-to-consumer crypto transactions, agrees that fees remain an obstacle. But there are plenty of innovations that could solve such problems, he said.
“I think the industry is very aware that fees need to be addressed so we can continue to see growth,” said Zielke.
In terms of volatility, Zielke notes that customers can hedge their bets by holding multiple cryptocurrencies or liquidating part of their portfolio at a convenient time.
He acknowledged that there are still plenty of people in the crypto community who want to keep their coins – or HODL – in jargon while they increase in value.
But as bitcoin, ether, and even Dogecoin gain traction, there is growing interest in converting profits into luxury purchases, from boats and watches to houses and airplanes, according to Zielke. That makes him optimistic about the future.
“If consumers continue to rely on HODL and that balance continues to grow, at some point they will … use it and spend it,” he said. “And we want to be there.”
© CNN Business