By Michelle Brisebois
By Michelle Brisebois
To understand how Bitcoins can be a viable currency, you must start by
accepting two facts pertaining to money. First, money has value because
we say so, and second, we physically touch only a very small percentage
of our wealth . . . it’s mostly virtual.
To understand how Bitcoins can be a viable currency, you must start by accepting two facts pertaining to money. First, money has value because we say so, and second, we physically touch only a very small percentage of our wealth . . . it’s mostly virtual.
|The debate rages on, and in the meantime, Bitcoin is an emerging form of payment worth examining.|
Vending took a leap into the big leagues when ATM machines began dispensing paper money. In the 45 years since money was first dispensed by machine, virtual currency has become increasingly common. Credit and debit cards and PayPal – these tools all allow me to pay for goods and services without ever physically touching a dollar bill. It was only a matter of time before somebody took this to a new level.
Bitcoins have been around since 2009. They are what is referred to as a “crypto currency,” and they are not regulated by a central bank. They were created by Satoshi Nakamoto of Japan. Satoshi left the project in late 2010, maintaining anonymity. The community has since grown exponentially, with many developers working on Bitcoin. Over the last five years, the currency has gained footing and credibility. Bitcoin’s creator determined there would be only 21 million ever made and that the coins would be created by special computers that work to solve complicated mathematical problems. When the problem is solved – a Bitcoin is created or “mined.” Only 10 million of the 21 million coins available have been mined at this time and it’s predicted it will take until 2140 for all of them to be created. Much like gold – and unlike paper currency, which central banks can print until potentially there is so much flooded onto the market it is worthless – Bitcoins are a finite resource. Advocates of the currency argue that without intervention by central banks, Bitcoins are actually a more reliable form of currency, as the gold standard has been historically.
Bitcoins are, however, virtual, which means they are easier than gold to store and transfer for payment. Given that most of our “real” money is managed electronically these days anyway – this leap of faith is actually quite small. Bitcoin ATM machines allow patrons to purchase the currency to store in virtual wallets for use with vendors who accept the currency as payment. Bitcoins can be converted back into Canadian dollars by physical currency exchanges such as Bitcoiniacs or online exchanges such as cointrader.net.
Those who are opposed to Bitcoin highlight its lack of regulation by a central bank, the volatility of the currency in terms of its trading value (in December 2013 it was worth $1,147; by early April 2014, it had plunged to $445) and online security as reasons to be cautious. Hackers have broken into online Bitcoin wallets and have stolen significant amounts. Those who believe in Bitcoin point out that traditional currency has been subject to volatility and theft throughout its history too. The debate rages on, and in the meantime, Bitcoin is an emerging form of payment worth examining to gauge its risk and potential benefits for the location hosting the ATM as well.
Bitcoiniacs is a Bitcoin exchange based in Vancouver, B.C. Companies such as Bitcoiniacs have emerwged to begin connecting the general public with the currency – in effect, elevating it from “geek niche” to mainstream. Bitcoiniacs installed the world’s first Bitcoin ATM machine in Waves Coffee House in Vancouver.
“We are carefully choosing locations to install these ATM machines,” says Cheyne Mackie, co-founder of the company. “Waves is a good location because they accept Bitcoins themselves as vendors and because the ATM transaction takes 10 minutes to process, leaving just the right amount of time for someone to hang around for a few minutes and order a coffee,” shares Mackie. The ATM machine works by accepting cash (only at this point) and the Bitcoins are then transferred to a virtual wallet on the customer’s cellphone. The transfer happens by scanning a QR code presented after the transaction is complete. For those preferring not to store the Bitcoins electronically, a paper wallet receipt with a QR code can be printed.
Shortly after the ATM was installed at Waves in the fall of 2013, traffic to the coffee shop was up significantly. The degree to which a spike like this can be maintained is connected to the ability of the digital currency to become accepted by more vendors and used by more consumers. Bitcoiniacs has installed ATMs in Singapore, London (England), Romania and Tokyo, in addition to the unit in Vancouver. They are currently also working to develop a point-of-sale terminal as well.
If you’re wondering where to begin in terms of learning about plans to potentially install a Bitcoin ATM someday, Cheyne Mackie has straightforward advice. “Start by accepting Bitcoins as a method of payment” is his instruction to those who want to dip their toes into the digital waters. “Vendors will save 2.85 per cent to 3 per cent in banking fees by choosing Bitcoins over other traditional forms of non-cash payment.” More high-profile retailers are beginning to accept Bitcoins as payment. In the U.S., Overstock and Tiger Direct are two of them. Overstock has benefited by embracing the new form of money. When Overstock announced its acceptance of Bitcoin on Jan. 9, 2014, the retailer received nearly 3,000 orders in Bitcoin as of Jan. 29, 2014, with a total value of more than $600,000. The payments are converted immediately into U.S. dollars, mitigating the currency value fluctuation risk somewhat.
Bitcoiniacs shows website visitors how to set up a Bitcoin wallet at http://www.bitcoiniacs.com/what-is-bitcoin/wallet/. Vendors could limit their acceptance of Bitcoins to the purchase of gift cards, a strategy that will allow them to trace the currency to a single sku and simplify the accounting trail come tax time. Bitcoins are still income and subject to all of the taxation rules of traditional currency. The Canada Revenue Agency has said digital currency must be included in the seller’s income for tax purposes. The CRA indicates that the amount included would be the value of the good or service in Canadian dollars. It also notes that since the digital currency can be bought and sold like a commodity, any resulting gains or losses could be taxable income or capital. Check with your accountant for details.
The debate may currently be framed as “Is the Bitcoin here to stay?” when in fact, the question really becomes “Is digital currency here to stay?” In a world where an electronic pay stub heralds a worker’s payday influx of money and online bill payment shuffles “dollars” to those we owe, it feels like the question has already been answered. If one of us were to find a thousand dollar bill on the ground, we’d rejoice because it’s worth a lot.
Actually, on the physical plane, that bill’s value is a few cents at most. Just a bit of paper and ink. If it’s worth a lot, it’s because you and I believe it to be. That, my friend, is why digital currency most likely won’t be going away anytime soon.