Despite bumps, Bitcoin sees increase in transactions

Alex Añón, 47, waits patiently for customers and listens to music while he works on a bike in the back of his shop. Bucephalus Bikes seems like a typical small business. Bits of personal flair from Yellow-Submarine Beat- les figurines to Superman posters garnish the bike shop.

A new flyer hangs among the memorabilia. It displays a bike wheel and within the spokes is a capital B with two vertical lines through it, otherwise known as a Bitcoin.

Añón began accepting Bitcoin at the end of January. He thought it wise to use Bitcoin because it provides an al- ternative from paying $5,000 worth of credit card fees a year. Bikes and accessories add up for both the seller and the buyer.

“Two percent for a small business is a lot,” said Añón. “If it’s something enticing for a small business you can imagine what it would be for somebody who does a big volume of transactions.”

While the price of Bitcoin fell the past few months, the number of daily Bitcoin transactions continued to grow.

  The amount of daily Bitcoin transactions from January 2009 to March 2014 (Source: Coindesk.com)    

The amount of daily Bitcoin transactions from January 2009 to March 2014 (Source: Coindesk.com)

 

Back in 2009 when Bitcoin began, less than 200 Bitcoin transactions occurred in a day. Since Feb. 27, 2014, a little more than 70,000 transactions occur daily, according to Coindesk.com.

The digital currency offers quick exchange, minuscule transactions fees, a lack of a central banking system and great potential. However, Bitcoin isn’t flawless.

Arvind Krishnamurthy, 45, is a professor of finance at Northwestern University’s Kellogg School of Management. He believes Bitcoin has a lot of question marks surrounding it.

“It’s hard to know where it’s going to go,” he said. “The most clearly productive aspect of Bitcoin is they’re offer- ing a more efficient way of transacting. It’s possible that the existing transaction providers adapt and improve their technology. Then you just eliminated the one thing Bitcoin brings to the table.”

According to Krishnamurthy, Bitcoin lacks the important aspect of safety that is characteristic of major currencies.

“Historically, people trade currency for three reasons,” said Krishnamurthy. “It’s safe, it’s widely accepted and it’s easy to transact. For Bitcoin, safety is a question mark with security issues and even price volatility.”

Last October the FBI seized $3.6 million worth of Bitcoin from the online drug running service Silk Road, effectively shutting it down. (Gabbatt)

Rumors of insolvency surrounded Mt. Gox, a major Bitcoin exchange platform, weeks before it announced bankruptcy Feb. 28, taking all of its users bitcoins, an estimated $425 million, down with it. (Kageyama)

Jonathan Solomon, 28, owns Chicago Mint, a Chicago-based business that helps local businesses to accept Bitcoin and find solutions to avoid volatility. Solomon predicted Bitcoin would rebound from the poor practices of some exchangers and the volatile drops in value.

“Six months ago that would’ve ended the whole Bitcoin world,” he said. “There’s so many other exchanges that have popped up that it’s not even the biggest anymore. It’s a broken arm, but we just cut it off and grow a new one. This is a really resilient technology.”

Bitcoin receives a lot of media coverage, mainly highlighting its problematic and scandalous aspects.

In the past week two major stories about Bitcoin hit the headlines. A Newsweek article published March 6 “revealed” the identity of Bitcoin’s mysterious founder Satoshi Nakamoto, though many call it speculation. (Bauder) A young CEO of a small Bitcoin exchange committed suicide. (Wagstaff)

Kim Adams, 24, is a grad student at Northwestern. After writing several stories about Bitcoin and its development, she believes Bitcoin is working toward a better image.

“I think it is eventually going to become regulated and a much safer currency,” Adams said. “I think that these couple downfalls that they’ve had that have stolen the headlines will force other exchanges to wake up and say ‘How can we really make this a secure currency that people aren’t afraid to use or experiment with?’”

Back in February, the Chicago Sun-Times decided to experiment with Bitcoin itself. For 24 hours a pop-up prompted visitors to donate Bitcoin to the Taproot Foundation or skip to the website.

“We were a little worried because it was such a new thing to do,” said Stephanie Pelletier, 29, the IT leader of the Sun-Time’s development group. “We got quite a good amount of positive feedback and financial support for the charity. It was interesting how willing people were to try something new.”

Bitcoin’s future is unknown. However, some local Chicagoans began “meet-ups” aimed to promote Bitcoin use today. On Tuesday members met at Atlas Brewing Company and payed for their meals in Bitcoin. These meet- ups encourage interaction and discussion between cryptocurrency enthusiasts and Bitcoin newcomers.

Jimmy Gomez, 26, bought his first Bitcoin last month.

“Being at the point right now where I could potentially have an impact in Bitcoin’s presence here is kinda awe- some,” he said.

Works Cited

Bauder, David. “Newsweek Dives Into Huge Controversy With Bitcoin Story.” The Huffington Post. TheHuffington- Post.com, 08 Mar. 2014. Web. 12 Mar. 2014.

Gabbatt, Adam, and Dominic Rushe. “Silk Road Shutdown: How Can the FBI Seize Bitcoins?” Theguardian.com.

Guardian News and Media, 03 Oct. 2013. Web. 27 Feb. 2014.

Kageyama, Yuri. “Tokyo Bitcoin Exchange Files for Bankruptcy.” News from The Associated Press. The Associated Press, 28 Feb. 2014. Web. 28 Feb. 2014

Wagstaff, Jeremy, and Rujun Shen. “CEO in Apparent Suicide Was Bitcoin Fan, Had Other Issues, Too.” Reuters. Thomson Reuters, 06 Mar. 2014. Web. 12 Mar. 2014. 

 

Originally published March 13, 2014 for Medill's Writing and Reporting class.