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Bitcoin: bank breaker or millionaire maker?

By Collin Carroll, Collin Carroll, collin.carroll@kvia.com
Published On: Nov 06 2013 12:21:03 AM CST
Updated On: Jan 16 2014 06:43:47 PM CST

Bitcoin has a bit of a bad rap.

The curious crypto-currency is being used to avoid everything from credit card fees to taxes to government regulation. The FBI recently shut down a black-market website called Silk Road after millions of Bitcoins anonymously changed hands there in exchange for illegal drugs.

But more than $2 billion worth of Bitcoins remain in circulation -- a larger economy than dozens of small nations.

EL PASO, Texas -

Bitcoin has a bit of a bad rap.

The curious crypto-currency is being used to avoid everything from credit card fees to taxes to government regulation. The FBI recently shut down a black-market website called Silk Road, after millions of Bitcoins anonymously changed hands there in exchange for illegal drugs.

But more than $2 billion worth of Bitcoins remain in circulation -- a larger economy than dozens of small nations.

"I think there's gonna be a free-for-all," said Kipp Gray, owner of Kipp's Cheesesteaks in downtown El Paso.

The electronic currency can be traded for real goods, but it's not regulated by a central authority. In the same way that some businesses accept a foreign currency, such as the peso, others -- mostly online -- accept Bitcoin electronic currency, developed by computer programmers rather than a government.

"It's only regulated by people who use the currency," said Robert Chacon, a computer information systems student at UTEP. "Everything lies within secrecy."

There are no physical coins, Chacon said, just electronic units of value. He uses an online Bitcoin wallet to make anonymous charitable donations.

"So here we've entered their Bitcoin address," said Chacon, referencing his computer screen. "And here we enter the number of Bitcoins we want to send."

But the program is not 100 percent secure, said Dr. Adam Mahmood, a computer information systems professor at UTEP. A lack of regulation welcomes fraud and volatility, he said.

"In a few days it can go from $10 to $100, and you are not being able to do anything about it," he said.

Today there are roughly 12 million Bitcoins in circulation, and each one's worth more than $200.

"To put this into perspective, a Bitcoin was worth about $5 a year and a half ago," Chacon said.

Users can mine their own Bitcoins, but they'll need a complex system of computer servers to perform lengthy algebraic equations, Chacon said.

But Bitcoins are also for sale at a number of online exchange houses like Mt. Gox, where users can trade the virtual currency for dollars or vice versa -- or pesos, rubles, yen or euros.

Localbitcoins.com is the Bitcoin version of Craigslist, where users can find traders in their area.

"You'll have to find a store that takes the coin," Mahmood said.

And there aren't many out there. Bitcoinshop.us is basically the Bitcoin Amazon. At brick-and-mortar retailers with the Bitcoin wallet app Bitpay, shoppers can checkout with their smartphone by scanning the vendor's QR code receipt. Transaction fees are less than half of what credit card companies charge.

Gray doesn't yet accept Bitcoins at his restaurant, but his clientele and Bitcoin's are of a similar demographic, he said.

"If I were to start accepting them as a form of payment here at the store, it would really give me the opportunity to carve out a niche," Gray said.

He's all for a currency whose value is based on demand, rather than on the government printing money or toying with interest rates, he said.

"I think the Bitcoin future is bright, provided that the people who are rolling them out are as bright as the idea is," Gray said.

Gray, too, is concerned about the lack of accountability and market volatility, but said he won't be surprised if one day he's filing his taxes with a line item for "Bitcoin receipts."

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