When Lilly Hanscom bought dietary supplements from a website overseas recently, she didn't reach for her credit card, but dipped into her Bitcoin wallet.

Courtesy of Connie Hanscom

"I nearly forgot I had any left," she says. During a frenzy in Bitcoin trading last week, Hanscom, a tech publicist in Oakland, Calif., checked her wallet and discovered that "what was probably just a couple of dollars six months ago was $300," she says. "It was a nice chunk of change to discover by accident."

Lots of people are discovering windfalls in their Bitcoin accounts these days as prices have skyrocketed 1,500% this year. But using it to buy things has been a struggle.

Paying with Bitcoin is becoming increasingly expensive as limits to the original software have created a bottleneck on the Bitcoin blockchain. More people want to make transactions, but the software can only handle a few at a time. Nowadays, people have to pay up - often $10 or more per transaction - if they want the miners who keep track of the Bitcoin ledger to let their transactions through.

The blockchain can process only about 7 to 10 transactions a second, about 0.01% the volume of Visa's (V) network. Only three of the top 500 global online commerce sites take Bitcoin, down from five last year, a Morgan Stanley report noted. Online gaming site Steam stopped allowing Bitcoin payments this month because of the "high fees [as much as $20] and volatility."

"These fees result in unreasonably high costs for purchasing games when paying with Bitcoin," the company said.

It's one reason that Bitcoin-focused businesses wanted to increase the "block size" earlier this year, so that more transactions could be processed. That effort fell apart amid discord among powerful players in the Bitcoin world. Instead, some enthusiasts think a Bitcoin spinoff called Bitcoin Cash, which can process more transactions, will become the "currency" that its founder had envisioned.

"Since Bitcoin Core is no longer usable as a currency, we should no longer consider it to be a crypto currency," Roger Ver, an early Bitcoin investor who is now a Bitcoin Cash proponent, wrote on Twitter this week.

Bitcoin's price volatility also makes it less attractive as a means of payment.

"It doesn't make sense as a currency now to make transactions - it's too volatile," says Brit Morgan, a tech strategist in San Francisco who keeps her bitcoin holdings in cold storage. "Why use it as an asset when it might rise 30% in value overnight?"

That's not to say that Bitcoin has become totally useless as a currency. Stephen Pair, the CEO of leading crypto-payments processor Bitpay, notes that the value of transactions on the platform has quadrupled in the past year. BitPay is on track to process $2 billion worth of transactions this year, mostly in the U.S., Europe, and South America. More than 4,400 merchants have accepted at least one Bitcoin payment this year through December 11, up from over 4,100 last year.

"We're seeing explosive growth in the use of the platform for payments," Pair tells Barron's. There are, however, some caveats. High-dollar payments are on the rise. "We're selling a few houses a week now," Pair says.

Bitcoin can also be useful for business-to-business transactions, particularly cross-border deals, he says. But lower-value transactions are flat year over year.

"Bitcoin has gotten very expensive to use," he says. "A typical transaction might cost $5 or $10. If you're making a $100 purchase on an e-commerce website, that $5 or $10 is a huge percentage of that transaction."

Still, people who own Bitcoin often want to buy things with it directly, instead of going through the cumbersome process to exchange it for fiat currency. Many want to diversify their assets, given Bitcoin's meteoric rise, Pair notes.

Others are having fun with their newfound bounty, and spreading the wealth.

For more than four years, since she bought five bitcoin for $100, Veronica Mendoza regarded it as a long-term investment, held in Coinbase. Yet with more frequency , she gifts it in small amounts of $20 or so to friends. "It's my play money," says Mendoza, an insurance broker in Santa Rosa, Calif.

Margaux Avedisian, an entrepreneur and self-described "crypto-nerd" in New York, has traveled to Europe on the currency, booking flights through online travel agency CheapAir.com and paying for a stay at Lekkerurlaub, a hotel in Berlin. She's raising a fund for pre-ICOs and crypto.

Aaron Hanson, a software engineer from Chicago, uses it to buy food at an empanada restaurant, and for incidentals during a trip to Africa this year.

Geo Summers, managing partner at Auryn Capital in San Francisco, buys health food and drinks from "new-age" superfood supply shops in Northern California with Bitcoin.

Toni Lane Casserly spends it routinely in Japan, where the currency is widely accepted, and sometimes uses Bitcoin debit cards overseas to purchase food and gifts when she doesn't have access to cash via a bank ATM.

They remain outliers. For many Americans, the digital currency is still taboo. While more than three-fourths (78.5%) are familiar with the cryptocurrency, nearly half (48%) aren't sure it's legal, according to a survey of 1,000 Americans by LendEDU, a personal finance comparison site.

Still, 40% are open to using Bitcoin in the future. Will that next group of Bitcoin fans use it to buy empanadas and plane tickets too? That will likely depend on whether Bitcoin's code changes enough to make payments much speedier.

For more on Bitcoin, see Barron's recent cover story, Bitcoin Storms Wall Street.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.