The country-less virtual currency bitcoin has soared in value in recent weeks. But lost in all the talk of a bitcoin bubble is whether the digital denomination is useful for more than just a novelty investment. What can you actually use it for? To prove the new currency has practical value a group of online retailers and bitcoin are offering Black Friday deals.

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The group created an online deal site, BitcoinBlackFriday, to help consumers spend their bitcoin. The site first went live last year with just 74 merchants, but this year the site already has over 200 participating retailers, and is targeting a total 500 this year. “Most merchants sign up the day before Black Friday and on Black Friday itself,” says John Holmquist, founder of Bitcoin Black Friday. The site will offer discounts on everything from dating site OkCupid and CheapAir.com to handmade American rugs and Christmas trees. One retailer – the family-run Bees Brothers – is luring customers with a 20% discount on honey.

Bitcoin is a peer-to-peer currency that doesn’t require a bank or Treasury Department. Its value has risen to around $808 from below $50 in March and $10.50 two years ago. MtGox.com (short for Magic the Gathering Online Exchange), the main exchange for users swapping Bitcoins, handles around 80% of all Bitcoin trade and charges 0.25% to 0.60% for its brokerage services, depending on the size of the trade. There are around 12 million Bitcoins in circulation, according to BitcoinCharts.com.

Last week, bitcoin investors were encouraged by comments from some senior U.S. law-enforcement and regulatory officials who said they saw benefits in digital currency. In testimony before the Senate Homeland Security and Governmental Affairs Committee, Mythili Raman, acting assistant attorney general for the department’s criminal division, said: “The Department of Justice recognizes that many virtual currency systems offer legitimate financial services and have the potential to promote more efficient global commerce.”

Even so, experts say the biggest risk for bitcoin remains political. “There’s a chance that Congress could pass legislation that makes it much less useful,” says Holmes Wilson, co-founder of Internet activist group Fight for the Future and participant in Bitcoin Black Friday. “The response to that challenge is to make bitcoin as popular as we can as fast as we can.” (Consumers can buy bitcoin from CoinBase.com in the U.S. Before CoinBase, Holmquist says it was “technical nightmare” to buy bitcoin.)

There is already a brisk — if narrow — trade in bitcoin. Justin O’Connell, CEO of GoldSilverBitcoin.com, says he conducts approximately $15,000 in bitcoin trades a day. “A lot of people who got into the bitcoin market earlier are switching them into silver and gold,” he says. “They are taking advantage of the high bitcoin prices and low silver and gold prices.” The recent slump in the silver and gold prices has created opportunities for bitcoinites. “We accept bitcoins for metals and metals for bitcoins,” he says.

Bitcoin: Is the Currency Becoming More Real?

Some venues are also offering Bitcoin Black Friday deals. EVR bar and lounge in New York recently started accepting bitcoin for drinks and food. On Black Friday, it will offer a “buy one drink and get one free” deal and half-price bottles of beer at EVR if they pay with bitcoin, says Charlie Shrem, a partner at the venue. Shrem is also CEO of BitInstant, a company that facilitates the retail purchase of Bitcoins at over 700,000 locations throughout the U.S. and co-chairman of The Bitcoin Foundation, which aims to standardize, protect and promote Bitcoin. “It’s a nonpolitical online money backed exclusively by code and it’s only as good as its cryptography and math.”

E-commerce sites were among the first to accept the currency. The publishing software company WordPress accepts bitcoin for features that are dependent on credit-card and PayPal payment systems; PayPal, it says, blocks access to certain countries. The social network Reddit accepts them for its premium service, as do Web-hosting company BTCWebHost.com, SurvivalCampingStore.com and online gaming site Minethings.com. Consumers can spend a fraction of a bitcoin too: It’s divisible to the eighth decimal place. It’s also possible to purchase clothing, cigars, and various goods and services with bitcoin. See a complete list of merchants.

Bitcoins could flourish in underground economies, among individuals hoping to avoid taxes or buy illegal drugs, says Jim Harper, director of information policy studies at the Cato Institute, a nonprofit think tank in Washington, D.C. “The more likely adoption path is not through the wealthy West but through economies where banking systems are weak, seizure of wealth is common and political systems are more unstable,” he says. Because people can use just a fraction of a Bitcoin for payment, however, he says they are also ideal for micropayments. “Want to listen to a song online?” he says. “Pay 3 cents to do it.”

Founded in 2009 by a developer (or group) called Satoshi Nakamoto, it’s still early days for the virtual currency. “It’s a very, very high level experiment,” says Ari Zoldan, CEO of technology and media company Quantum Networks in New York. For people purchasing goods and services online, however, he says it could potentially change the entire currency landscape and “be to regular currency what Skype was to the telephone industry.” Instead of trusting central banks or governments to safe keep your money, he says, “it shifts that responsibility to individuals.” Built-in limitations to the bitcoin protocol states that there will never be more than 21 million bitcoin by 2140. “The bitcoin protocol is like a card game,” Holmquist says, “but you don’t have access to every single card in the deck.”

Given the currency’s meteoric rise, some critics have expressed concerns about a bitcoin bubble. And, despite the rhetoric at the congressional hearing on virtual currencies last week, the government has thus far given them as much recognition as it does to Monopoly money: Not much. And most brick-and-mortar companies on Main Street still prefer plastic or dollars. Despite his own foray into bitcoin, Shrem doesn’t expect other businesses to follow his lead — yet. “Brick and mortar companies are going to be the last one to accept bitcoin,” he says, “especially the mom and pop stores.”

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