Said one Minnesota fan of the digital money: “Right now I wouldn’t call it investing, I would call it gambling.”
Bitcoin has shot up and crashed at least twice now.
Exchanges where the fast-rising new digital currency trades have been hacked, and so have individual accounts. It’s been linked to illegal activity in underground cyber haunts such as Silk Road, and sparked a move by the U.S. government to halt unregulated use.
And Bitcoin persists.
Heck, CNBC has a Bitcoin ticker on its website.
In its fourth year of circulation now, the decentralized online-only form of money has evolved from a libertarian-styled geek curiosity to a contender for becoming the first digital currency to go truly mainstream. There are now more than 11 million “coins” created worth more than $1 billion. Lumpy and volatile as it is, the math-based cash is one of the fastest rising alternative currencies in a world filled with them.
Tyler Moore, who studies alternative currencies, said he still isn’t sure why.
“It’s one part luck, one part decentralization and one part this design that carries appeal for people that don’t like inflation,” said Moore, an assistant professor of computer science and engineering at Southern Methodist University in Dallas. “The timing of it was really good.”
Bitcoin slipped onto the scene in 2009, as trust in established banks crumbled and inflation fears rose. It’s not managed by anyone. There’s no central bank. It’s based on open-source encryption technology.
In fact, the digital cash can be created by anyone with the hefty computer power required to solve specified algorithms that secure the network. Bitcoins are rewards for effort. The system takes banks out of the picture completely as individuals pay each other directly. Transactions are private but because there’s a public ledger of them it’s unlikely they are perfectly anonymous.
Currently, about 25 more Bitcoins are introduced about every 10 minutes by people all over the world, pros say. The limit of 21 million Bitcoins will be reached by 2140, as the theory goes, and no more Bitcoins will be created. On Friday one Bitcoin was trading for about $112.
A newly developed Bitcoin “ATM” machine that’s expected to go into production this fall promises to make it easy to turn dollars into Bitcoins, and more and more retailers are accepting Bitcoin for payment. But the bottom line is that there still isn’t a great deal you can do, legally, with the digital money. Gamblers like to use it for online gambling, pros say. Bitcoin is still largely about techies in cyberspace.
Like Brian Goss.
Goss, a 33-year-old radiology resident and father of three in Rochester, created a stash of Bitcoins back when they were traded for pennies. Goss said he forgot about the Bitcoins for about a year and “almost deleted them.” He remembered them in 2011 when prices shot up and sold some to cover some bills.
He sold some more when prices briefly rocketed above $240 in April, and made nearly $30,000. He stuck the dollars in a checking account.
“We did little things,” he said. “I got my wife a membership to the gym … and got a daytime baby sitter a couple times a week to help her out.”
Goss said he’s a fan because he sees Bitcoin as a way for people in less open or stable economies to participate in the global market. Plus he thinks credit card swipes fees are a drag on the economy and likes his privacy. He doesn’t want companies gathering data on him.
Goss said he still has 350 or so Bitcoins left. He thinks Bitcoin will succeed, but considers it a hobby, not a way to make money.