I went there on the first day, at about 10:00 p.m., after all the hype left, and was checking out the machine when a guy stands behind me, waiting for his turn. I've been reading a lot about BTC lately because of this ATM in my neighbourhood. When it was turned on, BTC was at roughly $215 and I just couldn't justify buying any then - given that it was at $13 in January. Maybe when the bubble pops next time, I'll get in the game. I can see this stuff being around for a while...
Why do you see it being around? This currency has fewer ATMs than my credit union. The most use for this currency until recently has been illegal transactions. It's also working from the faith in a random startup company instead of a tax-levying nation. Bitcoin looks more like Betamax to me. I would like to be proven wrong.
My take is that bitcoin isn't currency, but shares some aspects with it. In the end, it doesn't really matter whether or not bitcoin fits an established definition, or even if it can be well defined. The most important question is whether or not people find it to be useful. As a store of wealth, it very well may be. I have BTC, and no one can take them from me. However, I can transfer them instantly to anyone at a very low cost. That is useful. Also, I know that only 21M BTC will ever exist. That is also useful to me. A new large deposit of bitcoin cannot be discovered. In some ways, BTC looks superior to gold as a proxy of wealth. Gold has some uses, but I believe 40% of its current value is due to its use as a store of wealth. All proxies for wealth employ illusion. These illusions can be dispelled, but certain factors make this difficult. The open question is whether or not bitcoin's illusion can be dispelled. Personally, I think that every day it becomes less likely that it can be. I do think that it will remain to be volatile for some time to come, however. The market cap for bitcoin is currently $3.6B. A rough amount of privately held gold in trading funds somewhere around $100B. If you add gold reserves of countries, it's a couple of orders of magnitudes higher. In short, there's plenty of wealth that could be transferred into bitcoin if it is going to stick around and people really buy into the illusion. On top of that, about 9M more BTC have yet to be mined over the next 17 years or so, and the next halving of the mining reward isn't until 2017.
Whether or not Bitcoin succeeds long-term, it has opened up the discussion about transferring currency over the internet, and that is a huge step in itself. Right now transferring money online is very slow, often 2-5 days for ACH transactions. Additionally, it's expensive. Companies like PayPal and Visa have made huge profits by making the process easier, but it's really something we should be able to figure out and turn into an open-source protocol like all the other protocols the internet is built on. I think your complaint about it not being backed by a large nation is valid - it's very hard to tell how much of the Bitcoin value stems from the bubble and hype and how much is real. A backing nation and a bigger marketplace would really bring it down to Earth. I don't think there's a "random startup company" involved anywhere though. The Bitcoin protocol was released anonymously and is maintained by a community the same way most open-source technology is. There are a variety of small businesses and startups trying to stake their claim, but they're all providing auxiliary services and exchanges. Bitcoins themselves are based on cryptographic trust, not trust in one entity.
We're talking about an ATM spitting out chits in one coffee shop in Vancouver. I will give you that this is a step above getting paid in SecondLife Lindens that cannot be converted to cash. However it's not much of a step up because THIS ISN'T CASH. If the goal is to transfer currency online without the lag of EFT or ACH (which I understand well, as I handed funds transfer investigations at Bank of New York in the 1990s), that isn't clear from the hype of this ATM and the Silk Road bust. If we want to spend or get money online, then we should be able to use normal currency. Otherwise people are converting real money (USD, CAD, EUR, etc) to a highly volatile peg so they can swap the pegs. Meanwhile the pegs are not worth the same on egress as ingress. Right now they're going up way too fast, which suggests they'll crash just as quickly. I also understand not trusting PayPal. While I use it, I know that they aren't as tightly regulated as a real bank (and love playing both sides of that fence -- something I saw when they were my software customer). However I only use them to buy things -- I won't open a credit card with them. Combine these thoughts and I'm even more leery of Bitcoin. If it's just a protocol, there isn't even anyone to sue. There is no accountability. You put in usd5 and get... nothing? Does this protocol even track its value compared to conducted currencies? If not, then this is a rather expensive "dialogue".
I think you're conflating two very independent aspects of the Bitcoin story - the protocol and the exchanges. The protocol itself is responsible for transferring bitcoins from one owner to another. It doesn't need external accountability because it's defined mathematically. It's either secure, or it's not - that can be proven through analysis of the protocol, independent of any government agency. That, in itself, is really uninteresting to the public at large. The real question is how the coins should be valued. That is dependent on a ton of other factors, most notably how bitcoins are used and how they're exchanged for fiat currency. You're pointing out two major issues - the lack of products and services that can be bought with bitcoins (which causes the value to be highly volatile and dominated by speculation) and a lack of trusted exchange agencies (like banks) to provide accountability. If you put in usd5 and get nothing, you absolutely have someone to sue - the company you used during the exchange (for example, the owner of this ATM, or sites like mtgox.com or btcchina.com). But that has nothing to do with the protocol described earlier. For the same reason, the protocol does not track any value. It's responsible for securely transferring bitcoins, period. There are however many exchanges where bitcoin's value in different world currencies is tracked (good resource here: http://bitcoincharts.com/markets/)
But I digress. My understanding of cryptocurrencies is elementary at best. Once people start talking beyond blockchains and get into nonces, I start my usual precipitous fade into some daydream. For me, BTC is something I would buy for pure entertainment value alone. Getting some, I feel, enables me to keep my mind occupied in the goings on of a lot of speculation about a lot of interesting topics. I do think it has value as a working model against fiat systems. And the fact that the US is still using 70's code for ACH transfer is insane - maybe bitcoin could even help initiate that update. I also just think that Bitcoin has a marketable and growing culture surrounding it. Even the word bitcoin is cool. That's probably something you won't hear the tech blogs say, but I'm naive enough to be comfortable with saying it. I mean hey, I'm not a day trader, nor do I have time to stay informed enough to play the market as a means of making money. Owning bitcoin wouldn't be an investment for me, it'd be more like paying for a good story. I have enough to worry about with standard stocks alone, watching my IRA tick up and down, in inverse proportion to my blood pressure. :)It's also working from the faith in a random startup company
Have you ever asked to see the gold that your money represents? Isn't it all faith at some point? There's a great story on Radiolab that I'm reminded of (that I'm sure I'll butcher now) where they talk about an old civilization that mines stone from an island off of their mainland to use as money. They carve the stone into these big heavy coins that can't be moved very easily. The weight is the thing that protects the currency's value. Well one day, the canoe carrying one of these carved stones from the island to the mainland tips and the stone falls to the ocean floor. The king says "It's ok, the coin is still there." And so they go on using a certificate that represents the coin at the bottom of the ocean.
Reminds me of a funny sales slogan my brother and I used to say: "You CAN'T afford to NOT buy this!"