Matt Tuzzolo, who used to split restaurant bills by sending money via PayPal, now wields his iPhone to pay his fellow diners -- in Bitcoins.
“It’s more convenient than PayPal,” said Tuzzolo, a software developer in Portland, Oregon, who uses the Gliph mobile application to transfer digital money on the go. “It’s as easy as sending a text.”
Gliph Inc., which has more than 25,000 users, has raised more than $350,000 from venture capitalists including Tim Draper, who has backed such companies as Skype and Tesla Motors Inc. It’s one of hundreds of Bitcoin-related programs available from Google Inc. (GOOG) and Apple Inc. (AAPL) app stores.
The mini-boom in Bitcoin software for smartphones is making it easier for consumers to use the virtual currency in place of cash for quick transactions, such as paying for food or splitting a bill. The widening appeal of the digital money is also fueling a rally that has lifted Bitcoins to record levels, surpassing $1,000 apiece last week.
“Bitcoin’s success hinges on how well it’s adopted and configured for mobile,” said Richard Crone, chief executive officer of payment-researcher Crone Consulting LLC. “They are very dependent on mobile actually scaling.”
Since Bitcoins exist as software, apps on wireless devices are an efficient way to transfer money. While physical coins representing Bitcoins are in circulation, they either store software or are used as a proxy for a digital transaction.
The emerging category of mobile Bitcoin apps is aimed at making it easier for people to employ the programs for everyday tasks, such as storing digital money in virtual wallets, paying other people and stores for goods and services, and exchanging Bitcoins for dollars and other currencies.
“It has to be there, in person, when you have to spend it,” Rob Banagale, Gliph’s CEO, said in an interview.
While mobile apps are fostering wider use of Bitcoins, other challenges include security, regulation and app-store approvals.
Related: China's Bitcoin Ban
China’s central bank today barred financial institutions from handling Bitcoin transactions. The People’s Bank of China said Bitcoin isn’t a currency with “real meaning” and doesn’t have the same legal status. The public is free to participate in Internet transactions provided they take on the risk themselves, the central bank said.
The virtual currency dropped more than 20 percent to below $1,000 on the Bitstamp online exchange. Bitcoin has since bounced back to $1,022 at 1:30 p.m. in New York.
Virtual currencies and mobile payments are two areas regulators will scrutinize for potential legal violations. The Consumer Financial Protection Bureau is monitoring the growing mobile-payments industry as part of its brief to police retail financial markets.
Former Federal Reserve Chairman Alan Greenspan said yesterday that Bitcoin prices were unsustainably high. “It’s a bubble,” Greenspan said in a Bloomberg Television interview. “You have to really stretch your imagination to infer what the intrinsic value of Bitcoin is.”
To provide some security, Asedik Inc., a San Francisco-based Bitcoin payment service, limits customers to three transactions a month.
“We want to make sure mobile-phone users are protected,” Asedik CEO Matthew Martin said in an interview. “We never want to get into a scenario where someone stole your phone and made purchases.” Asedik’s user base is growing at 40 percent every month, he said, declining to disclose total user numbers.
Bitcoin’s shift to mobile is happening even though Apple has rejected many Bitcoin payment apps, especially those that exchange Bitcoins for dollars and other currencies, developers said. Rejected developers are instead flocking to Android-based devices, according to Pavel Nikitenko, developer of an app called BitcoinViewer that lets users track how many Bitcoins they have left in their wallet.
Apple and Google prohibit apps involved in any illegal activities, according to their software-developer policies. Natalie Kerris, a spokeswoman for Apple, didn’t respond to a request for comment. Christopher Katsaros, a spokesman for Google, declined to comment.
There are about 250 applications in the Google Play store offering services ranging from Bitcoin money transfers to exchange tracking. On Apple’s iTunes, there are almost 100 apps offering everything from mining monitoring -- a way to see how fast your computers are generating Bitcoins -- to virtual mobile courses on Bitcoin.
Bitcoins emerged in 2008, designed by a programmer or group of programmers going under the name of Satoshi Nakamoto, whose real identity remains unknown. The currency isn’t regulated by any government or central bank. New Bitcoins can only be created by solving complex problems embedded in the currency, keeping total growth limited.
While Bitcoins could be used for nefarious purposes, they can also be a “legal means of exchange,” and policies need to be crafted to regulate their use, the U.S. Justice Department said at a U.S. Senate committee hearing last month.
The growth in mobile Bitcoin apps is also being driven by the spreading ubiquity of mobile devices. Global shipments of mobile phones and tablets will exceed personal-computer shipments this year by more than six times, according to researcher Gartner Inc.
“That’s going to be the big game, on mobile,” Nicolas Cary, CEO of mobile Bitcoin app provider Blockchain.info, said in an interview.
The market for mobile payments is projected to be $235.4 billion in total transaction value in 2013, up 44 percent from the prior year, according to Gartner. Because Bitcoins can lower or eliminate money-transfer and other banking fees, the digital currency could potentially compete with EBay Inc. (EBAY)’s PayPal, Visa Inc., Google and others offering mobile payments.
Jennifer Hakes, a spokeswoman for PayPal, didn’t respond to a request for comment.
About a third of people who own Bitcoins are initiating transactions from a mobile device, according to Crone. “In three years, it could easily double,” he said.
Makers of mobile apps report rapid growth. Bitcoin Wallet, used to store and pay Bitcoins, is adding more than 5,000 users a day, up from about 500 at the beginning of the year, according to its developer, Andreas Schildbach.
“We are definitely seeing an uptick, we doubled our volume of transactions from August to October, and it looks like we could double it again before Christmas,” BitPay Inc. CEO Tony Gallippi said in an interview. BitPay lets some 2,000 brick-and-mortar merchants complete Bitcoin transactions in stores via mobile devices.
“As the Bitcoin economy grows, I believe we will need an easy way to spend them,” Draper said in an e-mail.
An increasing number of physical merchants accepting Bitcoins are also driving mobile-app adoption. Thousands of physical and online stores worldwide accept Bitcoins. Madison’s Grill, a restaurant in Portland, began accepting Bitcoins six months ago.
“When we first started, there might have been 20 transactions in the first month, and now we are getting two-three a day,” Steve Brown, owner of Madison’s, said in an interview. “It’s opened our particular restaurant up to a new market. It’s helped me increase my business.”
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