Wanted on Craigslist: bitcoins

The cyber-currency has skyrocketed in value, but is it a sign of a new paradigm or speculative bubble? The Post’s Anthony Faiola fills us in from London. (The Fold/The Washington Post)

Loc Tran is selling an iPhone, but not for cash. On Saturday, the 22-year-old George Mason University student posted a brief ad to Craigslist: Brand new, unopened iPhone 5 for three Bitcoins. Not $390, the cash equivalent — three Bitcoins only.

“I saw an investment there,” Tran said. “If there’s more demand for bitcoins, the value will go up. So I could gain more value than the phone is actually worth.”

Tran is one of hundreds of Internet users in Washington and further afield who are quietly undermining one of the most common criticisms of the virtual currency called bitcoin: namely, the cyber-money can’t buy actual stuff.

On Craiglist and more niche Internet marketplaces, consumers trade bitcoins for second-hand gadgets and games. The line “Bitcoins accepted” has crept into some eBay ads. And on Reddit, some enterprising strippers are even trading semi-nude photos for bitcoin tips, which bitcoin boosters like Tran say could balloon to many times their original value as demand increases.

In Washington alone, bitcoins will buy iPhones, video games and a range of bike and kayak gear on Craigslist. In digitally savvy cities where bitcoins are more popular, Craigslist sellers accept the currency for such real items as laptops in New York, Lakers tickets in Los Angeles, coffee makers in Portland — even fertile chicken eggs in Austin.

“Remember: Hatching eggs are a gamble,” reads the egg listing — a warning that could, ironically, also apply to bitcoin itself.

Despite the claims of its enthusiasts, the virtual currency is hardly a sure bet. Because bitcoins are unregulated and nongovernmental, there’s no insurance against theft, hacking or error. And several economists and financial commentators, including Reuters finance blogger Felix Salmon, have forecast an imminent burst of the bitcoin bubble — the point when bitcoin enthusiasm wanes and its arguably inflated value begins to plummet.

Critics have also noted that bitcoin, which has yet to catch on widely among mainstream investors and consumers, can’t be exchanged for much real-world stuff. A few Web sites, such as BitcoinStore, offer bitcoin trades for gadgets and home products. But as tech writer Timothy Lee points out at Forbes, they’re moving very little product relative to bitcoin’s rising value.

That leaves peer-to-peer marketplaces, such as Craigslist, and small businesses with an anti-establishment bent.

“There’s a real question about how useful bitcoin actually is,” Lee said. “Usage of bitcoin probably needs to grow rapidly just to justify the current valuation. If its growth fails to match speculators’ high expectations, the currency’s value is likely to fall even as the ‘real’ bitcoin economy continues to grow.”

But Tran, who has 1.3 bitcoins — at current rates, roughly $290 — in his account, doesn’t see it that way. He imagines a future where bitcoins are a mainstream currency, accepted at D.C. area stores and businesses and withdrawn from standard ATMs. He’s even thinking of dropping $1,300 (“a hefty investment for a college student”) on the computer parts that would help him “mine” the coins himself.

“I hope to see it become a universal currency, “ Tran said. “That’s really what I see.”

So far, Tran has gotten several bites for his brand new iPhone 5 — and all of them offer cold, hard, underwhelming cash.

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Caitlin Dewey runs The Intersect blog, writing about digital and Internet culture. Before joining the Post, she was an associate online editor at Kiplinger’s Personal Finance.
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