’Splainin’: Mixed Currency Bitcoin Wallet Exposed

Unlike real currencies, the Bitcoin has no currency area of its own, an economically meaningful group of entities that conduct most of their daily transactions in Bitcoins. Unlike real commodities, the Bitcoin has no practical use other than its role as an embodiment of value derived from its scarcity. Given the massive volatility that these two conditions generate, I do not see how the Bitcoin can ever have any meaningful role in our economic life unless it already had one, which it doesn’t. But this article on the Tech in Asia website purports to have identified a business model that manages to get around the volatility problem though mixed currency wallets anchored by the Bitcoin.

Leaving aside the mumbo-jumbo in the article and the vacuous sound bites including the word “egalitarian” in the Bitreserve promotion video that it links to, the writer of the article buys 1 Bitcoin (BTC), then exchanges 1/3rd each of that amount for US Dollars (USD) and Euros (EUR) at the going rate, ending up with 0.3398 BTC, 115 USD, and 90 EUR minus the 0.45% and 0.95% exchange fees for the conversion to the USD and EUR respectively. When the writer wants to buy a merchandise priced in Bitcoins, Bitserve buys the requisite Bitcoin at the going rate with the USD, presumably charging a 0.45% fee on the transaction and uses that Bitcoin to execute the transaction. It is clear from the text that any other conversion back from USD and/or EUR to BTC will be executed at the going rate, not the original conversion rate. So I guess my question is: Why not buy 0.3398 BTC and 90 EUR (or 115 USD if your money is in EUR), and convert your USD into BTC when you make the purchase, saving yourself the initial transaction fee? Or better, buy the merchandise with your USD if the vendor also accepts USD, which should be the case unless you have encountered the rare vendor who is willing to run horrible “currency” risks, and save yourself, unless you are entering into a small international transaction where the handling fee savings may justify a BITCOIN transaction?

Of course, the high that you get from executing a Bitcoin transaction may be worth the extra, (to me) meaningless cost. But what kind of a person are you that gets a high from that? Perhaps a head of product at a Bitcoin startup?