No, Mom. Bitcoin is not like Venmo

When I talk to people about cryptocurrency, the most common question they ask is “what’s cryptocurrency?”

Surprisingly, “isn’t it like Venmo” comes up a lot, too—mostly from older people who don’t use Venmo. For example, talking to an older relative:

Her: “Mark, you’re into that bitcoin thing? You’re a bitcoiner?

Me: “You could say that.”

Her: “It’s like Venmo, right?”

Me: “Do you use Venmo?”

Her: “No, I think your cousin does.”

Transcript of an actual conversation

(For those who don’t have Venmo, it’s a popular electronic payment app in the U.S., like TransferWise and its ilk.)

Baby boomers: please stop comparing Venmo and bitcoin

I personally like Venmo and use it. Bitcoin is totally different, but I understand the comparison. You can use both to send money to people.

Beyond that, they have nothing in common. It’s like going back to 1990 and saying “email? That’s like a fax machine on your computer, right?” or going back to 1960 and saying “a calculator? That’s like an electronic slide rule, right?”

Yes, kind of . . . but that misses the point.

Venmo is a service, bitcoin is a network.

Venmo offers you a service: you give them your money and in return they’ll let you send it to people. Once you move money into the Venmo app, you no longer control it.

For example, when you take your money back, Venmo makes you wait 3 to 5 days. If you need your money immediately, it charges you a fee. If you want to send more than $2,500 to somebody, it won’t let you.

Bitcoin is a peer-to-peer electronic cash system. You can do whatever you want with your bitcoin.

Many developers have created apps that let you send bitcoin to other people from your mobile phone, with a design similar to Venmo and other payment services. But those apps never touch your bitcoin, they simply make it easy for you to use the bitcoin network.

Venmo can fail, bitcoin can’t

You can send bitcoin to anyone, anywhere, anytime, in any amount, regardless of what app they use. It’s public money, with ownership recorded on the blockchain.

Your bitcoin will always exist in your account even if your bitcoin app fails or its developer goes out of business. If an individual bitcoin wallet gets hacked, there is no way for the hackers to get anybody else’s funds.

If Venmo gets hacked or goes out of business, everybody could lose their money. You’re screwed unless somebody files a class action lawsuit so you can recover some of your losses. Venmo has no FDIC insurance, has admitted lying to customers, and has been sued several times over security breaches and security lapses.

When you give you money to Venmo, you risk never seeing it again.

Venmo reveals your personal information, bitcoin does not

To use Venmo, you have to give them your banking and credit information. If you need to get money from people you don’t know, you have to give out your phone number or email.

Fine for doing business with friends, but would you ever give your Venmo information to a stranger? Would you give out your mobile number to a random person online?

No way.

Here’s one of my bitcoin wallets:

(I post all my preferred crypto wallets on this page: Pay Mark Helfman With Crypto.)

Bitcoin isn’t connected to your bank account and you don’t have to give out any personal information when you use it. You can post your bitcoin information online without worrying about somebody ripping you off.

Bitcoin always works, Venmo does not

For the last decade, scientists, governments, and bitcoin users have had a chance to mess with bitcoin. They’ve all concluded bitcoin works. Its code is public and based on proven math and computer science principles. Its network has never crashed.

Bitcoin always does exactly what you expect it will.

Venmo crashes a few times each year and its app freezes now and then. (Google it.)

While Venmo fixes those problems very quickly, do we really know how strong its systems are? Has anybody audited it? Has Venmo ever let the public inspect the computer code that makes it work?

Venmo and bitcoin have different uses

When pitching in for a family member’s private social event, I once had to send money to a friend of a friend in a different state. I’d never met this person.

If he had a bitcoin wallet, I could’ve scanned his QR and gotten the money to him in an instant. But he didn’t.

Instead of using bitcoin, we used Venmo. I transferred money into the app, added him as contact, and sent the money over.

Not a big deal either way—the difference between 5 seconds and 1 minute.

But what if I didn’t already have Venmo? I would’ve needed to fuss with creating an account, linking my bank, KYC/AML, etc.

What if he needed that money immediately? If Venmo crashed? If I didn’t have a bank account at all?

I have never worried about that with bitcoin.

Keep ’em separated

Venmo is fine for what it does—let you pay your friends. Please stop comparing it to bitcoin.

For now, it’s probably a moot discussion. Way more people use Venmo than bitcoin, and bitcoin has its fair share of problems.

Will that change?

We shall see! Lots of people are trying to fix bitcoin, probably more than there are people trying to fix Venmo.

If they succeed, maybe you’ll hear people ask “Venmo? Isn’t that like bitcoin?”

—

Mark Helfman is a cryptocurrency commentator and author of Consensusland, a Readers’ Favorite 5-star book about a country that runs on cryptocurrency.