Shelby: Eight bucks for a couple of sodas in New York City’s trendy EVR Lounge is not unheard of. But when the bill comes, 23-year-old Jonathan Mohan pulls out his phone, not his wallet.
Jonathan: That is going to come out to .0561.
Shelby: Point zero five six one bitcoins, that is. A type of virtual currency that is starting to make quite a name for itself in the real world.
Jonathan Mohan: I think that bitcoin will never replace the dollar, just as, you know, other cellphones are never going to replace the iPhone. But I think that there is a market out there for people who don’t want to use the dollar.
Shelby: What started out as an open-source software program back in 2009, has now become a way for people to anonymously purchase, save, spend, or even create their own money without any federal regulations.
EVR Lounge is one of the few places in New York City that accepts bitcoin right now, and it actually saves money by doing so. That is because purchases made with the virtual currency bitcoin are not subject to the same fees as purchases made with credit cards. And unlike the dollar, there are no central banks or governments controlling the currency.
Jonathan: There’s a joke in bitcoin called “in cryptography we trust,” and what that means is we’re not trusting in a person, we’re not trusting in an institution, we are trusting in math.
Shelby: You are trusting in a code?
Shelby: And you would rather trust that than a bank?
Jonathan: Yes. I’d rather trust that two plus two will always equal four than I will that a politician doesn’t have an ulterior motive.
Shelby: But there are risks associated with using bitcoin. The first being its value. That is because, unlike dollar bills, which can be printed and added to circulation over time, there will never be more than 21 million bitcoins. And they are created in a process called mining. Anybody can mine bitcoins. All it takes is a computer which is programmed to solve a complicated mathematical formula. But depending on the processing speed of your computer, it could take days, weeks, even years before you successfully mine even a single bitcoin. And once you get that one bitcoin, there is no guarantee that it will even be worth much money because the prices of bitcoins are so volatile. In April, the price fell from over $260 per coin to just over $50 in a two-day span.
Grinseberg: Imagine if you are a buyer or seller and you make a deal with someone and then a few hours later, or a day later, the price fluctuates wildly. You know, depending which side of that transaction you’re on, you are going to have a big incentive to try to cancel the transaction.
Shelby: Many people like Jonathan see that as a perfect investment opportunity.
Jonathan: I got in a little late when it was at $72 and I bought about $3,000 then. So, that got me about 42 bitcoins. And the price has gone up about double since then, so I am pretty happy right now.
Shelby: So, you have doubled your money?
Shelby: In how many weeks? How long has it taken?
Jonathan: It was about three-and-a-half or four.
Shelby: So, that was fast.
Jonathan: Yeah, I am very happy with that investment.
Shelby: But investing in bitcoins can also bring big risks because purchases are untraceable, they have been used to buy illegal substances and firearms anonymously. And security remains a major concern.
Grinseberg: It’s really, really difficult to hold a bitcoin securely. So, you have the option of holding it on your own computer where it’s like holding cash under your mattress, and that is obviously a bad idea. Or you can hold it with these third party e-wallet providers, but these are nothing like banks because they themselves can be hacked or you don’t have any assurance that they won’t just take your money and run.
Shelby: Regardless of the risks, the popularity of the bitcoin has exploded over the past few months. But Jonathan believes it is more than just a short-lived trend.
Shelby: You don’t think it will go out of style?
Jonathan: I think everything goes out of style eventually, but I don’t see that day happening in the near future for bitcoin.
Shelby: Shelby Holliday, Channel One News.
- How would you describe bitcoin to someone who had never heard of it before?
- What are the ups and downsides to using bitcoin?