Will anyone still buy coffee with bitcoin? Digital currency’s surge impairs its usefulness in real life

Bitcoin’s soaring transaction fees, following the digital currency’s 1,300 per cent surge in value in the past year, have made it practically useless as a token of exchange in Hong Kong.

The fees, which must be paid for a bitcoin transaction to be processed and confirmed by the network, soared from an average of 14 US cents per transaction in early 2016 to a peak of US$37.49 on December 21, before falling to US$16 on January 1. Users must bid to process their transactions first because the network can only process between three to seven deals per second, hence the variable, and rising fees.

The rising fees, and the soaring value of bitcoin, are deterring enthusiasts from using the digital currency as a token for buying goods and services, even as the number of establishments in Hong Kong that accept bitcoin has tripled over the past year.

“A customer wanted to pay for a HK$56 cup of coffee, but since the transaction fee was HK$97, we had to decline,” said Paul Li, manager of the Crescent Moon in Kowloon, one of 30 establishments in Hong Kong that accept the digital currency in lieu of cash. “The transaction fee was only about HK$5 to HK$6 in August. Now there is no incentive for people to actually use bitcoin.”

Bitcoin is the most popular among several cryptocurrencies, or digital tokens that use cryptography to secure and verify their transactions. Its value rallied to a record US$19,783.21 in December, before a sharp sell off caused the value to plunge 30 per cent, closing 2017 at US$13,889.99, based on prices from digital currency exchanges Bitstamp, Coinbase, itBit and Bitfinex compiled by CoinDesk.