Special Report: The Bitcoin Goes Mainstream

Special Report: The Bitcoin Goes Mainstream

Anum Valliani

NewsWest 9

DALLAS - A lot of you may have heard of the bitcoin, but chances are, you don't know exactly what it's about.

The new form of currency is all digital and users say pretty powerful. They say it's digital cash without the government stepping in to mediate. Users compare it to the .Com Era when it was all the techies fiddling with a new idea. Just like the Internet survived that crash, they expect Bitcoin will do the same and that it will become something we can't imagine living without.

But of course these things start in big cities where there are hubs of trailblazers. That's why NewsWest 9 went to Dallas to meet up with a Bitcoin User Group Meetup. 

"It was a very new idea, so as soon as I heard about it, it seemed like a different type of money than anything I had seen before," Will Fayer, the Dallas Bitcoin User Meetup Organizer, said.

Fayer remembers how elusive the coin was to get and said that just made him want it more.

"I was kind of frantically running around because at that time the price was skyrocketing and I had to try to wire money, all these shady places," he said.

According to Lisa Waters, who founded her own community empowerment company, says, "It's just you and I having a financial transaction and that's powerful."

Although she feels that way now, she wasn't sold right away.

"A lot of people have this story, they start looking at it again the second time. Looking at it again a second time, I became enthralled," she said. 

Meanwhile, many others rode the coin off right away based on the reputation it quickly garnered. When the Bitcoin came out five years ago, some believed it was used solely for illegal activity like money laundering or to buy drugs. Just last year, the United States FBI shut down a popular online black market that accepted Bitcoins. Feds seized the Silk Road website and 144,000 coins worth nearly $30 million. When the site came back up, there was a transaction bug and all of the Bitcoins in people's accounts were reported stolen- almost another $3 million.  

In fact, Fayer said that when he mentions Bitcoin to someone, a lot of times that's the first thing they've heard of.

"That's something the Bitcoin community needs to own up to and I think that's a very small part of it. There are plenty of crimes committed in other currencies," he said. 

"People don't understand it yet so they're trying to reach out for something they can understand and they can understand, 'Oh yeah, people do bad things with and buy drugs," Tom Mitsoff, Co-Author of Best-Selling Novel "Bitcoin Decoded", said.

That's part of the reason countries like China and then Russia have banned the Bitcoin. According to TechCrunch, the alleged use of Bitcoin for crimes was enough to take it away but they probably won't be able to enforce it permanently.

"What's going to happen is that people are going to try to come up with an offshoot," Mitsoff said. 

But users argue that the difficulty in tracing Bitcoin transactions is what makes it safe and at times even more secure than credit cards. Apps, like Block Chain, further help by allowing bitcoiners to keep a ledger of all their transactions and have people worldwide confirm them.

Joe Roberts, who's a Spanish teacher at Garland ISD and an avid Bitcoin user, said third party sites add an extra layer of security where you actually have to have your cell phone and a number that pops up on your cell phone in order to make the transaction. He said most of the thefts and hackings happen to those who choose not to use those added security measures. But then, there are people like 21-year-old Joseph Richder who invested $60 into Bitcoin in 2012, lost his password  and hired someone off of Reddit to hack into his account.

"It was a last resort and it did work. After 130 million guesses, he found the password. The unknown part of it was simply 'JD', which is my nickname," Roberts said. 

He ended up paying the man 20 percent of what is now worth $2,200.

The "digital cash" uses a open source software where people are always in the know about how much Bitcoin is in circulation at once and so they know its value. The idea conceived by Sitoshi Nakamoro called for a way for people to come to a consensus through a distributed network - meaning there's no central authority and people can voluntarily enter into the network.

"So when you enter into that market, you know all the rules and there's a hard cap. Right now, we're at about 12 million. The rate at which new ones are created is public to everyone. There's no secrets, there no secret meetings to determine the rate of new Bitcoins. So when I own one, I know what the future dilution of the ones I own are and I can price that in accordingly. So in that way you're in control of your own destiny, you know what you're owning," Fayer said.

Before it was mainly computer minded, people mined Bitcoins on their own. But then third party companies started popping up as exchanges. Now there are companies like Coin Base where you can buy coins or Bit Pay that accept Bitcoin on behalf of a company.

Then there's the business route. Tav Walraven is a shopowner in Dallas who "wanted to roll the dice."

"I figure if you can buy a Tesla S with Bitcoins, you can buy antiques," he said.  

So nearly two months ago, he put up a sign on his door. His first sell was a $40 small box.

"He brought it up to the counter and a minute later, transaction complete," Walraven said.

Although he acknowledged he wouldn't sell all his inventory using Bitcoin, users couldn't be happier with the support, suggesting participation from local and national businesses is what will keep the "Bitcoin Bubble" from bursting. And "Bitheads" don't want to threaten Bitheads autonomy. 

Roberts said one of the things that alarmed him was when last year banks in Cypress were threatening to close everyone's accounts and skim off the top to pay off some of their national debts.

"Now of course nothing like that has happened in the U.S. But if a bank can say we're holding your money hostage, my opinion is that we need some alternatives, not necessarily to overthrow something but to have alternatives to where you are not having to go through a central mediator to get your money from point A to point B and Bitcoin is good for that," he said.
But at the same time, Roberts cautions people on taking the leap.

"It's new, it's the wild west out there. I wouldn't suggest putting your life savings into Bitcoin, it's definitely too volatile for that right now," he said. 

Meanwhile, venture capital companies are flooding money into the Bitcoin Economy. Mitsoff said they're trying to build ways to make it easy for people to use. In February, the first Bitcoin ATM's in the U.S. were put up in downtown Austin and Boston.  

"What's happening now is that the infrastructure for all of this economy and all of these transactions is still being developed," he said, adding that we can expect more inventions to other, non-currency applications of the Bitcoin technology soon. Also in the market, there's space for competition. 

17-year-old Michael Lewellen already knows this. He began mining Bitcoins on his own two years ago when they were less recognized and therefore easier to mine. Now he's moved onto other cryptocurrencies. 

"There's a big rush on who's gonna be that number two behind Bitcoin, kind of like the Android is behind the iPhone," Mitsoff said.

"My big three are Litecoin, Namecoin, and Cork," Lewellen said. "If someone sends you Bitcoin, it'll say 'Hey you got Bitcoin,' but it's unconfirmed. It'll take you about ten minutes before you know for sure that that money is yours. But on a coin, like Cork it only takes 30 seconds," he said.   

The young techie consults people on cryptocurrencies on the side and is already discussing opportunities for a possible internship with someone interested in creating a new coin.

"I think it's a great way to learn the basics of not only technology, but finance, and just how money is interpreted. Most people see money and they only take it as face value. They don't think of anything else as money. And then you have things like gold, silver and cryptocurrencies then people start to question, 'Well, why is the dollar the only one? What else is there?'" Lewellen said.

Regardless of how interested you are in Bitcoin, users say it's not going anywhere.

"Bitcoin is not going to die. There are so many uses for Bitcoin besides just the currency. I don't think the bitcoin is going to upend the economy, I don't think it's going to ruin the U.S. dollar but I think it's something that because of the nature of how it's all these interconnected computers all over the world, it's something that can outlast the crash of currencies," Roberts said.

"I think it's going to become more stable, get less volatile and be more adopted around the world. It offers the other six billion on the planet the opportunity to come into an even playing field," Waters said. 

"You don't have to buy or sell Bitcoins but I think this is going to have a major impact on our society," Fayer said.

You can learn more directly from experts at the Texas Bitcoin Conference, which will be held on March 6 at the Circuit of the Americas in Austin.