Bitcoin increasingly popular but requires trust

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This article was published 22/01/2014 (4282 days ago), so information in it may no longer be current.

David Keam has seen the future and wants his furniture chain to be a part of it.

The president of Winnipeg-based Best Sleep Centre started accepting Bitcoin at its seven locations last week. He said the popularity of the global digital currency is growing by the minute and as long as people on both sides of transactions believe in it, he’s in.

“All currency is based on trust. It has no value whatsoever except if I offer it to you and you take it. It’s just another form of payment,” he said.

Bitcoins can be downloaded to a digital wallet or a mobile phone and the phone can be used to send and receive them. There’s no Bitcoin terminal or point-of-sale system at any of his outlets, so if a customer wants to buy a futon or mattress with Bitcoin, his staff will give them a cellphone number and email address.

“They’ll call me and arrange to do a Bitcoin transaction immediately. You bring in your wallet and your key, link them up to mine and your cellphone sends me money through the Internet. Then I take that Bitcoin to an exchange house in Vancouver and they hand me Canadian or U.S. dollars,” he said.

Confused? You aren’t alone. Merchants and consumers can learn more about Bitcoin on Feb. 15 at CoinFest Winnipeg 2014. The multi-city international event will feature guest speakers, a panel discussion and a question-and-answer session and will be held at Santa Lucia Pizza’s St. Mary’s Road location from 1 p.m. to 5 p.m.

The afternoon’s highlight will be the unveiling of Winnipeg’s first Bitcoin ATM machine by local startup company BitTeller.

All about Bitcoin

What is it?

It’s a digital currency, electronic cash. It’s a little bit like PayPal in that users send and receive payments from one Bitcoin address to another using software or apps. That happens almost instantly, like sending an email, and allows people to bypass the costly bureaucracy of international money transfers. As Wired magazine says, Bitcoin is “a re-imagining of international finance, something that breaks down barriers between countries and frees currency from the control of federal governments.”

Are there actual coins?

Yes, but they are mostly gimmicky — traditional coins with the online codes and passwords embossed on them. Bitcoin is predominantly an online currency spent by clicking your mouse.

What’s it worth?

It has fluctuated a bit in recent months after spiking late last year. Right now, one bitcoin is worth about $960. There are 12.2 million bitcoins in circulation now.

What can I buy with it?

Most uses of Bitcoin involve online games and gambling sites, website design, file sharing and other Internet services. Many online stores also accept Bitcoin. But an increasing number of “real-world” places are accepting Bitcoin. Two Las Vegas casinos announced this week they would accept Bitcoin, for example.

How do I get some bitcoins?

This is the tricky part. There are some websites such as VirtEx that allow you to buy bitcoins by linking to your traditional bank account. In Vancouver, Toronto and Ottawa there are local Bitcoin exchanges that work much like ATMs that link to a mobile app on a user’s smartphone. Or, you can arrange to meet sellers in person through online exchanges such as LocalBitcoins.

What do governments say about an alternate currency?

Unlike all other currency, Bitcoin is not linked to a government or a central bank like the Federal Reserve. China has already cracked down on some Bitcoin exchanges but so far the U.S. government has taken a hands-off approach with no plans to regulate. That’s despite a well-publicized bust of the Silk Road website last year, where users bought and sold illegal drugs using Bitcoin.

“Getting an ATM in Winnipeg is a game-changer,” said Josh Nekrep, founder of Bitcoin Winnipeg, a group of local enthusiasts for the digital currency. He said one of its benefits is the ability to send money to anybody in the world essentially for free. (Some transactions are free, some can cost up to six cents, he said, a fraction of the cost of an international bank transfer.)

“We’re using financial technologies that were built in the 1950s and shoehorning them into international commerce. It doesn’t work very well and it creates opportunity for fraud. Bitcoin is built for the world we live in,” Nekrep said.

Count Colin Hamlin as one of the early adopters. The owner of Plato & Company has been accepting Bitcoin at his St. Boniface bookstore for two years.

It only represents a “tiny fraction” of his total sales but he said the process, which includes an exchange of identification numbers, the sending out of a complicated security algorithm and verification in 60 seconds, is virtually impossible to hack.

The same can’t be said for credit and debit cards, he said.

“(Bitcoin) is pretty wild. Immediately, I can see your transaction history. If I trust you, there’s no problem. If I don’t, I can wait for security verification. The longer you wait, the more secure it is. It’s a one-in-a-billion chance that you’ve been hacked,” he said.

geoff.kirbyson@freepress.mb.ca

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