FOX11 GREEN BAY – Any currency is only as good as the value we give it. That’s the way it is for the U.S. dollar, and that’s the way it is for the bitcoin.
In a relatively short time, bitcoin has attracted hundreds of thousands of believers across the globe, and a growing number of businesses and companies willing to accept the bitcoin as cash.
Tom Wilkinson has been in the business of selling promotional items like custom printed t-shirts for 42 years. His wholesale outlet in Howard has always accepted cash and credit cards for merchandise.
But with most of Wilkinson’s sales coming online, seven months ago Mass Appeal Specialties became the first business in the state to accept the virtual currency known as bitcoin.
“Bitcoin gives us more opportunity to sell more merchandise to take care of people who wouldn’t normally buy from us,” said Wilkinson.
Wilkinson has made several sales accepting bitcoins, taking advantage of the growing market that now has an estimated half a million users worldwide.
What is a bitcoin, you might ask? It is a virtual currency born out of the Internet back in 2009. The anonymous founder or founders of bitcoin developed it using a sophisticated computer algorithm that allows users to store and exchange bitcoins directly all over the world. Those transactions are done without going through a central bank or even government control, making bitcoin exchanges virtually untraceable.
“Bitcoin is a digital currency. It’s essentially cash for the Internet,” said Will Pangman, who got involved with bitcoin earlier this year when it was selling for $15 each.
Since then, its popularity around the world has exploded, making its value soar to as high as $1,200 a bitcoin before falling back to around $700.
Online sites allow users to exchange bitcoins for cash.
Pangman formed Bitcoin Milwaukee, a group of bitcoin enthusiasts.
“This group is basically to help speed up the adoption of bitcoin for merchants, for users,” explained Pangman.
Many users at this point admittedly are involved in bitcoin as an investment, with the price for bitcoin escalating 8,000% this year alone.
“The value is trading up too fast to spend one,” said one Bitcoin Milwaukee member.
And even with some setbacks – including the FBI shutting down a website selling illegal drugs for bitcoin, and the Chinese government issuing a warning and possible restrictions about bitcoin – the price is projected to continue to rise.
“Do you see it rising? Is that the expectation?” FOX 11 Investigates reporter Mark Leland asked Pangman.
“That is definitely the expectation. A lot of folks have even predicted higher than that,” said Pangman.
“Doesn’t that make if difficult? I mean, if I have a bitcoin, I don’t want to buy a Subway sandwich with it. I’m going to hold onto it because it could be worth a lot,” questioned Leland.
“Sure, that’s certainly a quandary a lot of new users face,” admitted Pangman.
So to ensure bitcoin doesn’t just become a trading commodity, Bitcoin Milwaukee and similar groups around the globe are working to increase buying and selling using bitcoins.
“I discovered that Amazon and eBay are now fully functional to accept bitcoin through Snapcard with your coin-based account,” said one group member.
All those who attend the Bitcoin Milwaukee weekly group meeting are given a taste of this virtual phenomenon if they haven’t already tested the waters on their own. I was shown how to open a bitcoin account and a member sent me a dollar’s worth from their online bitcoin account.
“Now the network is making sure I have that $1 to give you and that takes about 10 minutes for it to get confirmed. Once confirmed, it’s locked in,” said Mike Gehl about his bitcoin account transfer.
All transactions are person-to-person and they’re final. Once it’s sent you can’t get it back. They don’t go through a bank or clearinghouse, so fees are lower. Bitcoin Milwaukee is planning educational presentations to more businesses to explain how it all works.
One video on the subject explains, “Bitcoins are generated all over the Internet by anybody using a free application called a bitcoin miner. Mining requires a certain amount of work for each block of coins. This amount is automatically adjusted by the network such that bitcoins are always created at a predicted and limited rate.”
Currently there are 12 million bitcoins in existence. The number will cap at 21 million by 2040.
“Who’s insuring my bitcoin is going to be there tomorrow?
“No one. And that’s the problem,” said Marc Schaffer, who teaches Economics 101 at St. Norbert College.
Schaffer warns the economy has seen ventures like this before.
“To me, I see this almost like a dot-com bubble, right?” said Schaffer. “Everybody is buying these because they’re making a lot of money because it’s this cool idea, poised to make a lot of money, except, right now what is the intrinsic value of a bitcoin? This entire thing is propped up by the fact that there’s this sudden demand.”
And demand and participation is what Pangman says will allow bitcoin to succeed.
Virtual currency has worked for companies like Facebook and Microsoft. Amazon just this month jumped onboard. Those companies sell virtual currency called points or coins that allow users to buy apps, games and upgrades on their individual sites. Bitcoin he says takes the application broader.
“For bitcoin as a currency to have some more legs, we need more places to spend it,” said Pangman.
Ryan Bonen co-owns Bad Genie Bar in downtown Milwaukee. He has become a bitcoin believer. Bad Genie has computer software that accepts the bitcoin, then immediately trades it for U.S. dollars at one of those online sites.
“Pretty cool thing. People have to use it to legitimize it. The greenback took a long time to legitimize. The more people get a chance to use and get comfortable, I think it would be a new form of currency,” said Bonen.
While only a handful of businesses in Wisconsin currently accept direct payment of bitcoin, there are online services that can help you use bitcoin to buy just about anything you want.
Pangman is buying Dominos Pizza with his bitcoin through an online company that acts as the middleman. Other online services sell gift cards to major restaurants and retailers.
But keep in mind with bitcoin there is no “buying on credit.” You can only spend what you have in your account. Although unlike other current Internet transactions, Pangman says the buyer using bitcoin is better protected.
“Obviously PayPal was designed for the Internet but credit cards never were,” said Pangman. “Credit cards and PayPal both function like you’re giving your personal information to a merchant and they’re taking the money from your account. Bitcoin is sort of the opposite. You can only send bitcoins, you can only give them up. There is no taking on the merchant’s side.”
Greater acceptance is already leading to increased regulation in order to safeguard and tax bitcoin. The Chinese and U.S. governments are exploring their options.
Bitcoin though has already survived where other virtual currencies have failed, and in that sense Schaffer sees some limited value in it.
“I see it being as a very useful virtual currency for people who work in markets where this makes a lot of sense,” said Schaffer. “But I don’t know if I see it, you know, in local Green Bay, Wisconsin becoming the norm, where we’re going to walk around buying gas with bitcoin here or buy a cup of coffee with bitcoin.”
Is bitcoin the future of currency? Is this going to take over the dollar?
“I don’t know if it will take over the dollar,” said Pangman. “I think it will certainly compete with it. I think it’s already doing that.”
To learn more about bitcoin, check out this educational video.