Bitcoins 'R' Us: Cyber-Money Arrives
Virtual currency captures Austin's attention
For the casual tech news consumer, playing word association with "Bitcoin" and its buzzwords probably looks a lot like this: virtual currency = geeks. Silk Road = illegal. Mt. Gox = hackers. Cryptocurrency = wait, what? However, for the growing Austin Bitcoin-user community, "Bitcoin" is increasingly synonymous with "potential."
Despite some general skepticism about what Bitcoin-evangelists have hailed as the "rogue currency," the virtual coins – rogue or not – have captured Austin's attention. Hackers and Bitcoin lovers flocked to Circuit of the Americas last week for the annual Texas Bitcoin Conference. Businesses from Central Texas Gun Works to bright pink Little Lucy's Mini Donuts food truck have come to accept Bitcoin as valid payment. SXSW promises Bitcoin meet-ups, workshops, and appearances from major mining companies. And on Feb. 20, the first U.S. Bitcoin ATM was unveiled at the HandleBar Downtown. Another quickly followed suit, at Dominican Joe's on Wednesday, March 5.
At its simplest, Bitcoin is a currency system, not unlike dollars or pesos. But two key differences set Bitcoin apart from U.S. dollars: It is independent from control or regulation by specific countries, and it is completely digital. Instead of jangling in change purses or being folded into back pockets, Bitcoins are stored in online wallets.
Bitcoins are also "mined" – but not in the way you're thinking. With the right high-tech software and server space, a person can find Bitcoins through an automated trial-and-error process, by generating an unclaimed code of numbers and letters that has been pre-determined as a valid Bitcoin ID by Bitcoin creator Satoshi Nakamoto (himself the subject of much media speculation). To deter mass claiming of Bitcoin and to control inflation, the mining process was created to become more difficult – requiring more equipment and technology – as more Bitcoins are discovered. Those without the necessary techpower or wealth to mine their own Bitcoins can buy them from current owners. At the time this article was written, one Bitcoin was worth about $620 USD.
Bitcoin is not the first of its kind, though it is the most successful. Internet junkies and government skeptics alike have romanced the idea of a purely digital manifestation of wealth for almost 20 years. Its appeal comes not only from the possibility of eliminating bothersome transaction fees between banks and international currencies, but also from the anonymity it promises. Currencies like Bitcoin have been called "cryptocurrencies" because of the anonymous nature of the transactions: Even though Bitcoin is stored online, information is intricately encoded to allow for what have been called some of the most secure transactions on the market.
Understandably, this promise of anonymity has appealed to a wide range of people with an equally wide range of intentions. Bitcoin has been scrutinized for its appeal to the black market, and made headlines when the infamous Bitcoin-driven online drug empire, Silk Road, was shut down. (See "Feds Take Wind Out of Dread Pirate Roberts' Sails," Oct. 11, 2013) More Bitcoin criticism erupted when the largest Bitcoin exchange, Mt. Gox, was apparently hacked and forced to declare bankruptcy. Nor was Mt. Gox the only online exchange to draw hackers' attentions: Flexcoin and Poloniex followed, suggesting Mt. Gox's downfall was not a fluke.
Nevertheless, the Austin ATMs, created by Robocoin and operated by Bitcoin agents Mike and Reza Piri, can be used to buy, sell, and essentially liquidate Bitcoin – an attractive alternative for those who are looking to invest in Bitcoin but do not want to go through an exchange service like Mt. Gox, or wait for the multiday user-authentication process required for purchasing online.
After completing a three-step verification process – a government ID scan, palm scan, and facial recognition match – a user who buys Bitcoin can either store the currency online in a virtual wallet or print out a receipt. This receipt contains a code that can then be used to buy items at businesses accepting Bitcoin. Robocoin growth manager Sam Glaser said this physical manifestation of the virtual currency is one of the main reasons for creating ATMs.
"Robocoins are tangible and high-tech 750-pound steel machines," Glaser said. "It's really good for the digital currency to have real-life touch points." Reza Piri said the machines have already had a positive impact on the local Bitcoin community. "You want to have it in areas where you have early adopters," Piri said. "The community that is around it has been using [the ATM] every night – they've had a Bitcoin mascot in here dancing with the go-go girls and everything."
Local Bitcoin user Brandon Wiley was initially a skeptic, but said he began to see the currency's potential when more businesses began accepting it as payment. "All of the major news lately about Bitcoin has been about companies who hold on to people's Bitcoins going under," Wiley said. "The thing with Bitcoin is you don't need that. You can keep all of your coins on your computer. ... I think [Bitcoin's future] is just going to be a matter of being accepted in more places. I think that's going to be the shift."