While many of you are still mourning the removal of the penny from circulation, a new kind of dirty money is fast gaining popularity. If you haven’t heard of the Bitcoin, you’re not alone, as a recent survey in U.S. found 60 per cent of people didn’t know what Bitcoin was. It’s a virtual “crypto currency”, almost untraceable, unregulated, decentralized and tradable with minimal fees. It was formerly the domain of geeks and criminals, but is now garnering more attention from mainstream users as a legitimate way to buy and sell goods from a coffee to a Lamborghini. Everyone from adult entertainers to internet gangsters, Wikileaks and online drug portal SilkRoad led to an increase in Bitcoin’s notoriety and value.
The somewhat confusing yet technologically revolutionary currency, created by a computer programmer who goes by the pseudonym of Satoshi Nakamoto, will by design inflate in value due to the increasing difficulty in mining them. Similar to gold, the first Bitcoins to be “mined” were low-hanging fruit. The last ones will be extremely difficult to reach and will require very powerful cooperating computer networks. However Bitcoin with its built-in inflation means it will probably never take off until the value stabilizes.
Why buy something with Bitcoin today, when that currency might be worth more tomorrow? Bitcoins started out at less than 1 cent but now they are worth about $900 per coin. Bitcoins are mathematically generated (or “mined”) by a cooperating computers searching for special sequences. You can even try your luck mining a Bitcoin on your iPhone or Mac using apps like Mobile Miner and Asteroid which use your phone or computer’s CPU to chew through complex calculations while hunting for a valid coin.
In October, a Vancouver company started the world’s first Bitcoin automatic teller machine (ATM), where users can “cash in” their Bitcoins. The ATM traded over $100,000 in the first month. Other Bitcoin ATMs appeared in Finland this month also.
Other crypto currencies such as Litecoin also exist. Other providers, including a few “banksters”, are scrambling to create, patent and legitimize their own types of crypto currency. However the likes of Apple and governments of China and Norway are doing their best to stifle the adoption of Bitcoin and protect consumers from the non-regulated currency that could end up being a ponzi scheme. China’s banning of Bitcoin last week caused a drop in its value overnight from $1,200 to $650.
Bitcoin startups are popping up in Vancouver and Bitcoin Brains in Calgary offers Bitcoin trading services to consumers. Whether the currency ever really becomes viable is a coin toss, as the bubble may pop as quickly as it has inflated with some predicting implosion of the “collective hallucination” in 2015.
With recent news coverage about Bitcoin and its phenomenal growth one PhD student in Norway, remembered he had purchased $27 worth of the new Bitcoin currency while studying encryption at university. He was able to sell those coins for $886,000 just four years later. Some early trading geeks also bought a now infamous $25 pizza for just a few hundred Bitcoins which in today’s terms is an expensive, yet tasty, $11 million pizza.
Rob Orchiston is a software programmer who lives in Invermere and stays on top of the latest trends in technology.