You’ve heard the term: bitcoin. But really, what is to be made of (or from) all these digital dollars? Or, more importantly, how do they work, and might you conceivably be able to eat, live and exist entirely through the use of these mysterious moneys?
In the next airing of “Morgan Spurlock Inside Man,” the host sets out to examine all the essential elements of this most modern form of currency. And, in advance of Thursday’s episode, here are the 5 W’s of bitcoin.
1. What is bitcoin?
Formal definitions aside, how best to explain money that you can’t hold, smell or feel, yet has every bit the purchasing power of paper or plastic?
In short, bitcoin was designed as a less expensive way to buy and sell goods, all around the world, while dodging pre-exisiting financial institutions.
“Its founder wanted to create a global currency that existed outside a central bank or government,” notes Spurlock. “Just a person to person system that could be used instantly and internationally.”
Void of traditional surcharges and fees, but fluctuating like any other currencies, at the time of Spurlock’s quest, one unit of bitcoin was equal to roughly $624 U.S. At present, that value has dropped to $235.85 U.S.
Either way, at least it won’t weigh down your pockets with a ton of silver and copper.
2. Who uses bitcoin?
While the virtual money is available to anyone, it isn’t accepted by everyone, yet.
For the time being the electronic currency is most prevalently used, not surprisingly, by other electronic companies. According to a recent write-up in The Motley Fool, bitcoin is particularly popular on sites like Overstock.com (the first major retailer to accept it,) PayPal, 1-800-Flowers, and travel sites like Expedia.
However, in his own neighborhood, Spurlock struggled to simply caffeinate his experience, repeatedly hearing that various coffee shops would not allow him to pay with bitcoin.
But the host did learn that bitcoin is extremely popular, and regularly utilized, throughout the Internet’s seedy underbelly. So, while java can be tough to get, drugs, guns, various documents or even a hit man are available to those with the bitcoin.
Joined by Chris Tarbell, a former FBI agent who helped take down “Silk Road,” one of the first subsurface sites that allowed users to anonymously surf the Internet, Spurlock learns firsthand just how easy it is to cash in on illegal goods via the use of bitcoin.
“Can we go up to the prescription medication? 3,355 possibilities,” he reads, as Tarbell helps him tour “Silk Road 2.0.” “You can get Xanax, Diazepam, Viagra, Zopiclone, Valium, Modafinil, Oxycontin, generic. It’s like it’s a grab bag. We should probably go to psychedelics.”
So, while bitcoin may not yet get you a grande espresso with whipped cream, you can use it to satisfy other, slightly more sinister — and illegal — addictions.
3. Where is bitcoin (and how can I use it)?
Loosely stated, bitcoin is everywhere, and anywhere, as the the creators designed the currency to be used worldwide. But specifically, it’s in your wallet — though Prada, Kate Spade, Coach and Gucci won’t help you here.
To use bitcoin, you’ll need a digital wallet, something you download. In learning about the product, Spurlock got some guidance.
“So you want to search by Aegis Wallet, that’s one of the top ones right now. Install that, click that,” explains an expert on the bitcoin trading floor.
Once you’re outfitted with your digital wallet, an NFC chip serves as a password and helps encrypt — and thus protect — your bitcoin account. The account is given an address, not unlike an email address, that is identifiable by a unique QR code. And it’s this QR code that is scanned upon the acquisition of bitcoin, as well as during the purchase of goods at participating vendors. Once scanned, money is then transferred in and out of accounts.
So, while your new wallet may not be 100% leather, it is plenty comfortable enough to carry your bitcoin.
4. When will bitcoin be released, fully, into circulation?
2140. That’s the projected date by which experts expect to see the full lot of bitcoin — roughly 21 million units — released into circulation. At present, digital miners are working feverishly to solve complex mathematical problems, the completion of which result in the release of additional bitcoin. The cap was placed in the beginning as a way to guard against inflation.
“As the popularity of bitcoin increases, the bitcoin network automatically changes the difficulty of the math problem being solved,” learns the “Inside Man.” “That means it continually takes more power and more energy to release the new bitcoin, stabilizing the rate that new bitcoin are released into circulation.”
The moral of the story: Buy your bitcoin now, before the virtual well dries up.
5. Why use bitcoin?
Quite simply, bitcoin makes sense. And cents. For the user, the exchange eliminates clunky transfer surcharges, while for vendors it increases profit and eliminates fear of fraud.
“So every time I wire money every month to my free checking, free wire account it cost me $25.00,” reveals the host. However, for his bitcoin purchase – -1 unit for $623.00 dollars — the fee was 6/10th of one cent.
Meanwhile, for Brooklyn Bodegas, a food store that served as a grocery guinea pig, the use of bitcoin minimizes proprietor risk.
“You know, credit card fraud is so prevalent today and, you know, as a small business owner you assume that risk,” explained Van, a store employee. “So if there was another option to where, you know, that was cheaper, that was safer, bitcoin at this point in time is able to do that.”
So, cheaper, and safer, but not exactly universally accepted. Is bitcoin the future’s money? In the latest episode of “Inside Man” (airing Thursday at 9 p.m.) Morgan Spurlock cashes in his traditional money, buys in on bitcoin, and tries to function effectively in an all virtual world.