Reporting and editorials fall on both sides of the debate surrounding the Bitcoin, the virtual currency based on a peer-to-peer payment network and digital cryptography, with some for and some against. Proponents state that bitcoin transactions are quick, easy, and virtually devoid of transaction fees and point to the rapid climb in the virtual currency’s value, which has almost quadrupled in a matter of months. Opponents argue that the lack of backing, whether by precious metal or the word of a governmental body is a sure recipe for price instability. Pointing to the December 18th dive in bitcoin value, seemingly driven by the Chinese government’s restriction on lending institutions regarding bitcoin transactions, economists and financial experts warn that the cryptocurrency is teetering on the brink of failure. Outside of the discussion, however, is the increase of the number of places bitcoin holders can spend their money, both online and in person. The bitcoin (BTC) is becoming more and more useful.
Regardless of the philosophy behind the decentralized currency—and apparently regardless of strong opposition to the currency in general—the BTC is gaining momentum. Bitcoins are being accepted by more and more businesses worldwide.
In the Bloomberg Technology article, “Bitcoin Buys Burgers to Beer as Shoppers Go Virtual,” Natasha Doff showcases some of more than 2100 businesses worldwide that are taking bitcoin for payment. One of these businesses, the Lekkerurlaub guest house in Berlin, Germany, has begun to receive customers from around across the globe solely because they accept BTC. Vesna Sic, owner of the Lekkerurlaub, told Doff, “We had one man from Texas who has nowhere at home where he can spend his Bitcoins, so he came to Berlin for a week to spend them.”
From florists in Santa Monica, California, to a burger-van in London, England, customers can now walk-in to businesses and pay their tabs with the digital currency.
Introduced in 2009 by developer Satoshi Nakamoto, bitcoins are mined using special software. The software utilizes the processing power of individual computers to try to crack the encryption surrounding “blocks” of bitcoin. The process takes a significant amount of processing power and time. Despite the market’s innovation with the creation of specialty hardware that greatly reduces the amount of time necessary to find a coin, mining is limited. 25 new bitcoins are born approximately every ten minutes, and that number will go down as more and more BTC are mined—12.5 per block by 2017.
Good or Evil?
Economists tend toward conservatism. A “new” type of currency suddenly hitting the world market without the backing of a physical or oversight of a governmental body trips a menagerie of alarms. The wary acknowledge that transactions of bitcoin currency are taking place with apparent facility. What they are not willing to accept is that the transactions are inherently safe, or reliable.
In the New York Times Opinion Pages, Paul Krugman, in his blog titled “The Conscience of a Liberal,” addresses an even larger question beyond “can the bitcoin work?” He wonders if bitcoin isn’t just plain evil.
In his blog he addresses the fundamental concerns about the BTC. Nothing underpins the money’s value. With gold, in a worst case scenario, if it stops being useful as a currency it can still be fashioned into baubles; and in the case of a paper currency like the U.S. Dollar, there is the promise of the U.S. Federal Reserve to buy them back at some minimum value. Bitcoins have no such assurances or inherent value, argues Krugman. Finally, quoting author Charlie Stross, he writes, “Bitcoin looks like it was designed as a weapon intended to damage central banking and money issuing banks, with a Libertarian political agenda in mind—to damage states ability to collect tax and monitor their citizens financial transactions.”
At this moment there are 2161 venues accepting bitcoin for goods and services as reported by Bitcoin Pulse. That relatively small number is up from 672 venues reported on November 13th. Bitcoin venues have more than tripled in less than two months, and those numbers are still growing.
The “voice of digital currency,” Coin Desk recently reported that Arisebitcoin, a team of “community” activists who promote BTC as a legitimate currency, are placing 40 billboards across the San Francisco area. The purpose? The project titled “Hello San Francisco, Hello Bitcoin,” aims to introduce the Bay Area to bitcoin and give them the tools they need to get started investing.
On their website Arisebitcoin states:
We live by the motto go big or go home and look forward to proving this to not only the current bitcoin community, but to the world. We thoroughly believe in change and the freedom bitcoin allows. The members of arisebitcoin.com are united by this cause. To accomplish this large but obtainable task, we have determined a set of guidelines and projects in hopes of creating a snowball marketing effect on the world.
Bitcoin is only gaining in popularity and this despite the December 18th crash in BTC value by nearly 50%. Speculators buy, or mine, bitcoins hoping to get in at the ground level of a new world currency. Businesses are slowly accepting BTC as payment for goods or services rendered—and now bitcoin holders may get their first ATM in New York City.
This rise in popularity is not quelling nay-sayers. On the contrary, warnings are becoming louder as governments (China and India) make official national statements warning against investment in the digital money. Though these announcements keep the wary vigilant, the adventurous are just looking for other ways to transact business with their BTC.
Will bitcoin crash as is the warning of financial experts, or will this new “revolutionary” money take root and establish itself as a viable international means of trade? Whichever side a reader takes—and that side should be the result of thoughtful and careful consideration—one thing seems clear: the bitcoin, as more and more vendors begin to accept it for payment, is only becoming more useful as the days go by.
By Matt Darjany