Back in July 2012, I pre-ordered a jalapeno from a company called Butterfly Labs. Now a jalapeno was supposed to be a little coffee cup warmer that was powered by USB and that would mine Bitcoin and also warm your cup of coffee that would sit on top of it. And so at the time Bitcoins were worth about $4. I pre-ordered one of these very small units for, I think it was something like 25 Bitcoin. They were supposed to ship in, I believe it was October, and that date slipped and slipped and in November I asked for my money back and they told me they wouldn’t give me my money back. By the time we get to November the price of Bitcoin was up to about, I think it was $14 or $15, so the value of the money that I had spent in Bitcoin had tripled, and so what had been like a $250 purchase was in fact now somewhere more in the range of a $600 purchase. So I was unhappy about that and I tried to get my money back from them. They wouldn’t give me my money back and so I waited another two months and the price of Bitcoin was up another 50% or something like that. And so I finally got them to give me my money back but they would only give me back 11 Bitcoin. So I paid them something like 25 and I got back 11 and I wasn’t going to get the product from them, so I took a loss of 15 Bitcoin. But then, by getting that refund at least I got the 11 back, but still, it’s painful.
It was painful at the time, but I’m glad to be over with it. It was stressing me out. I was like, man I can’t believe I did this because my Bitcoins are tied up; I am never going to get them back. So I get my money back, and at this point they are still saying, oh well we’ll release in four weeks or two weeks, and they kept getting pushed out. And so, I got my money back and I watched over the next six months as the price went up to over $200 and I was like, wow, if I had kept my money in there, this would have been like a $20,000…It was crazy, the amount of money that would be spent on this particular unit, just because I didn’t understand the future value of the money that I was spending at the time that I spent it. It absolutely floored me.
So if there’s one thing you can learn from my experience…. and I was very happy that I had gotten the refund because I wound up earning exponentially more than the Bitcoins were worth at the time that I sold them, so it actually wound up being a positive transaction for me. But a lot of people didn’t have that same sort of luck in getting a refund and so a lot of people were stuck through that, and that’s a terrible thing. So when you are dealing with Bitcoin or any sort of deflationary currency, because I think these are going to be getting more common in the years to come, really make sure that you don’t treat them like normal money because when you treat them like normal money then you want to spend it, and with these things you want to spend them when you can get a really good deal that captures future value. Having a Bitcoin wallet that can track the value of your Bitcoin against all the major currency in real time, like this one, can really help when making these sorts of decisions. Like if someone’s going to give you 30% off for something in Bitcoin relative to something else, then that’s probably a deal I would take, but if someone’s going to give me 5% off for Bitcoin, probably not, I’d rather spend dollars if I have them available to spend. If you are an impulse buyer, you’re going to need a wallet that works on your phone. Check out this breakdown of Bitcoin wallets.