The topic of spending Bitcoin to spur on adoption is becoming a hot topic lately. There have already been a few threads here on Stacker News urging people to spend and replace their Bitcoin rather than simply HODL it, so we thought it would be a fun discussion to talk about the pros and cons of spending Bitcoin.

On the one hand, the growing "spend and replace" movement believes that by nudging people to spend their Bitcoin and replace them with new coins, the Bitcoin ecosystem will benefit in a few ways:

  • More merchants could begin accepting Bitcoin
  • Coins could be more widely distributed among more people
  • Spending could help some people perceive Bitcoin as a more useful form of money
  • A vibrant market of P2P spenders and earners could limit the effectiveness of any future exchange regulations or crackdowns

On the other hand, there are a number of drawbacks to spending Bitcoin:

  • In most countries, spending Bitcoin creates a taxable event
  • Spending local fiat currencies is typically a better payment experience (NFC-enabled cards, phone/watch taps)
  • Price volatility and currency conversions create friction for both consumers and merchants

To kick off the discussion, here are a few thought-starter questions:

  • Is spending your Bitcoin an effective way to create Bitcoin adoption?
  • What are the social risks to the Bitcoin community of vilifying the idea of HODLing?
  • How important is it that Bitcoiners help distribute coins among more people around the world?
  • What signals or metrics are most important in convincing merchants to accept Bitcoin?
  • How often do you spend your Bitcoin?
  • Have you ever convinced a merchant to accept Bitcoin? How did you do it?
699 sats \ 5 replies \ @jk_14 23 Apr

In most countries, spending Bitcoin creates a taxable event

If on Stacker News I'm spending Bitcoin and I'm paying here to someone for the service named: providing a good reply to read - does it create a taxable event?

in other words: "Don't comment on SN because if it is good - it will be a taxable event." ;) let's not be slaves... (we aren't already, it seems... :)

If you're tipping on SN then the person posting was not paid for a service, they originally put it up for free for the world to read. You are just giving them a gift afterwards.

  1. there are many replies that because of context - are addressed personally to me (and free for the world only by the way)

  2. anyway, in most countries, giving a gift to a stranger creates a taxable event :))

That was an odd one. Isn't half the point of Bitcoin a protest against taxation?

Inflation is an indirect tax.

I'm happy to take the tax hit on using my BTC to promote services like Fountain and Stacker. However I find it difficult to use it on large goods/more costly items because the hodl mentality kicks in and makes me think of my buying power in the future so I'm more inclined to use dirty fiat 🙂

I don't know if you're similar, but I'm happy to tip here and boost on fountain, because I also earn those sats there. For some reason, using the sats where I earned them feels a little different than sending sats somewhere else.

I know it's completely irrational, but it's also worth noting how people's psychology plays into Bitcoin usage.

If you live on a Bitcoin standard, you already do this naturally because you need to live. I'm aware there's gaps, but you can get pretty far just using Bitrefill/Fold/Bitcoin Company.

I'm glad those companies exist, but I think what we'd all like to see is the next step. Getting merchants to accept sats directly.

I believe that before a money becomes a medium of exchange, it must be an established store of value in the eyes of the masses. I also believe the adoption of a new money take a long time. Bitcoin is still going through its monetization and early adoption phase. Bitcoin’s current volatility make it not suitable as a medium of exchange for people. Imagine someone earning 100k sats only to have its purchasing power cut in half in a few days. That simply does not work for someone trying to use it to pay rent and buy food (even if they find landlord and vendors that accept bitcoin).

Don’t get me wrong, I believe Bitcoin is the best savings technology ever invented; in other words, the best store of value ever. But not everyone believe that; as a result, we have a lot of speculation and volatility. It is simply the phase we must endure while bitcoin is being adopted and being monetized. More hodling actually stabilizes bitcoin’s purchasing power and will help cement bitcoin’s position as the best store of value.

We need much greater adoption and more stable purchasing power in bitcoin before the masses will use it as a medium of exchange. Until that day comes, I see nothing wrong with hodling and hodling should not be demonized. After all, bitcoin is freedom money, and anyone should be able to use their coins as they see fit; be it spend and replace or hodl or degen trade or even trade 1 sat for 1 million sats.

I say do whatever you feel will help adoption while making sure your actions align with your values, while remembering that you are responsible for your actions. Personally, I’m just going to keep stacking, keep hodling, keep working and keep it real.

569 sats \ 1 replies \ @quark 23 Apr

I would prefer spend bitcoin and earn bitcoin, rather than replace by converting fiat into bitcoin to spend bitcoin again. Also, most merchants that accept bitcoin probably convert it right away to fiat when they receive the bitcoin. So we only convert fiat to bitcoin, spend it and convert it back to fiat instead of creating a bitcoin only circular economy. It only cost more fees and taxes than spending fiat directly.

I think that's a good point if you know you're dealing with merchants who immediately convert back to fiat.

However, if you don't know what they do after the transaction, this seems like a really organic way to grow the Bitcoin ecosystem. You're spending the same amount either way (minus the transaction costs of converting to Bitcoin), but now the merchant is potentially more integrated into the Bitcoin economy.

Creating a circular economy is essential for Bitcoin. Regardless of the drawbacks you just described.

1151 sats \ 0 replies \ @Ridolfo 23 Apr

onboarding is difficult. work at a marketplace that only sells stuff in crypto, my parents have talked about buying stuff from it for about a year now, and still haven't. The friction is quite high.

Countries that would absolutely benefit today by - Argentina and Afghanistan - inflation & cut-off from outside banking sector.

Is spending your Bitcoin an effective way to create Bitcoin adoption?

Yes. If nobody spends their bitcoin, how are bitcoin businesses supposed to survive? If there are no bitcoin businesses/services, what use does bitcoin have outside hoarding?

Merchants offering a slight discount for their goods or services when paid via Bitcoin seems to be the biggest driver in adoption. We just need a way to expand that into more mainstream places, so that it's not simply a novel once-a-year purchase with Bitcoin, but rather a more frequent use of the network for more people. Gift cards for grocery shops is a great way to encourage spend and replacing, but we need to work on having these shops and chains accept Bitcoin directly.

For bitcoin to be be viewed as money by the public at large, it will eventually have to be commonly used in transactions between individuals. It must also be so obvious that it is a good store of value that the commentary from other media suggesting that all crypto (with is still including BTC in a lot of people's mind) is looked at as ridiculous. For now, developments such as merchants offering discounts to be paid in bitcoin and continuing to grow circular communities that exchange in bitcoin intentionally seem to have a lot of potential in increasing future adoption.

I took the time to convince several merchants in my vicinity to accept btc.

Now, I spend btc every day. My goal is "zero fiat", but I regularly purchase cash (using btc) for buying items where btc is not an option

I do have some credit in a bank, it feels dirty, and I know it's unsafe, but card payments are still necessary for some of my payment obligations.

i confirm that spend and replace is a better model then just HODL

I literally live using Bitcoin as money from 2018. I do not accept anymore fiat and closed my bank accounts. How? Simple:

  • create a bitcoin circular economy around you, helping more merchants and people to use Bitcoin. For the last years I onboarded and helped a lot. I have grocery shop owner that literally beg me to order anything I want from his shop.
  • reject to use any form of fiat money, don't feed the beast anymore.

Here some more details:

If you care about a "taxable event" you need to be smarter.

I don’t know if it was Carl Menger or someone else who pointed out the four steps to becoming “money” but I believe Bitcoin will need to follow this path on its way to becoming a widely accepted currency. That is it will need to be 1) collectible, then 2) a store of value, 3) a medium of exchange, and finally 4) a unit of account.

So the sentiment among our forum here that Bitcoiners will need to move onward from 2) HODLing to 3) exchanging would seem to be correct.

Those of us who are having this discussion are the ones to light the path ahead. But we need to be aware and understand that this progression–like all social movements–cannot be forced.

Bitcoin will become money as water finds its way down from the mountains. Use it, share it with others, respect it. But in general, just get out of its fucking way.

0 sats \ 8 replies \ @kr 23 Apr

i’m not a fan of the spend and replace idea, it seems like a way to superficially force adoption - and one that could create a rift between bitcoin spenders and holders.

i think tools that help people earn bitcoin will light the path to bitcoin adoption, and i think it will be easier to get new earners to spend than holders.

Well, spend and replace is only superficial if there is no reason to spend in the first place. The 'replace' part is only relevant to a person who has income in non-Bitcoin and also has some reason they prefer to spend in Bitcoin.

For myself, I find several reasons to prefer spending in Bitcoin where possible - mostly related to security and not revealing personal information, but increasingly, the broken nature of the traditional finance system plays in too.

I think the right critique of spend and replace is simply that the friction and costs of buying Bitcoin can be a real pain, so minimizing the number of times you do it is desirable. Debatable point though.

Agree with this. Most of my online purchases are in bitcoin for privacy and security reasons.

There's also the potential cost of cleaning coins (or paying the nokyc premium)

0 sats \ 0 replies \ @kr 23 Apr

good points

Everyone who holds Bitcoin has the incentive to spread its adoption, so I would not say it's superficial to spend in Bitcoin when you have the chance, but it is up to each individual how much they value increased adoption vs the extra hassle of spending and replacing.

0 sats \ 3 replies \ @kr 23 Apr

yeah, my only worry with trying to pressure people to spend bitcoin is that it’s a short-term attempt to improve the optics of bitcoin usage, without an attempt to understand or improve people’s actual desire or willingness to spend.

Interesting, I see it as the opposite of short-term. It seems like the point is to start changing our habits to be more in line with what the long-term will be like.

0 sats \ 1 replies \ @kr 24 Apr

imagine you were trying to change your habits in another domain, let’s say fitness.

coming up with a fun new activity that you truly enjoy doing every day will be a far more effective method of improving your fitness than any form of social pressure.

i see the spend and replace movement as social pressure, while i think we should be focused on finding new use cases that people naturally want to spend their bitcoin on.

I guess don't do it then, but it just seems like a suggestion for people to try, to me. That makes it more like "a fun new activity that you truly enjoy doing every day" than social pressure.

It also is another use case for those of us still in the habit of spending fiat.

However, you're right that more (less gimmicky) use cases will have more impact.

I think merchants wanting to acquire Bitcoin because they want to have more Bitcoin is a good organic way for adoption to spread, but that will be driven by increased awareness that there are people out there willing to spend their Bitcoin.

That and tools for merchants to accept Bitcoin payments on the scale they currently accept fiat becoming easier to set up and use.

A bitcoin circular economy is crucial for the project's success.

However, merchant adoption usually means that they'll reluctantly accept bitcoin and then immediately convert it to fiat.

The solution is, we have to become the merchants.

Produce everything under the sun and accept bitcoin for it.

That's it. I solved it.

How is it that you get taxed paying with bitcoin? For example, let's say I bought 1 BTC (even if it's KYC) but then secretly spend 0.5 BTC on something. If I say I haven't touched my BTC, then in theory I could delay paying taxes until forever, or you're supposed to pay taxes yearly even if you don't sell?

Tell me how bitcoin has a limited number of transactions? Is it all about time? 600 seconds?