Depends on whom you ask. The faithful believe Bitcoins will eventually meld into the mix of worldwide financial options and become a valid — and better — way of transacting business. On the other side of the scale are those who expect the phenomenon to burst like a bubble. In between the extremes are millions around the world who simply don’t know what the approach to virtual money means.
Launched in 2009, the Bitcoins approach has become central to ongoing debate about the feasibility of the use of virtual money that has no central control and seemingly tenuous parameters. Created by anonymous programmers, it seems at bottom to lack the substance you’d expect of a medium that is finding some acceptance in worldwide commerce.
Opinions about Bitcoins range from “speculative mania” to predictions that the initial consternations will be resolved and that Bitcoins will one day become as commonly used as the credit cards that decorate the pockets of people around the globe. Optimists say it will ultimately lower payment processing and make transactions more secure. Financial experts are lining up with conferences, seminars and other forums for looking more closely into what virtual money means and whether it has a place in today’s financial array.
Even as the debate heats up, the concept shows a huge amount of growth. The value of a single Bitcoins topped $700 today recently and the overall network’s worth was hovering around $7 billion.
Part of the problem is that early early experience with Bitcoins shows that it has stepped beyond ordinary purchases and payments and moved into the illegal areas of drugs, weapons and child pornography.
In October, federal authorities arrested principals of an online market that told clientele that they could use Bitcoins to purchase drugs and other illegal products. Silk Road, one of the Web’s biggest purveyors of drugs, phony documents and other illegal items, also was shut down. Bitcoins appealed to Silk Road’s clientele because of the lack of any oversight. The potential for money laundering and other criminal uses has raised the antennae of some regulators and they are making moves that would inevitably, it seems, create some oversight over time.
Some businesses that have considered accepting Bitcoins in payment for products have backed off, even though they see value in the option, while they wait to see how the control issues are going to play out. One of the attractions, from their viewpoint, would be a lowering of payment processing costs. Retailers who pay 2 to 3 percent of the value of a sale when a credit card is used to make the transaction have been looking for options and some see Bitcoins as a possible solution.
One of the hazards of using the new Bitcoins is the wild fluctuation in value. Although a boon to currency speculators, that causes headaches for ordinary consumers. So far, it has attracted the interest of a relatively few merchants who will accept bitcoin in payment for their wares. According to a New York Times article on the phenomenon, these include such diverse interests as a winery in British Columbia, an online dating site and a Seattle lunch truck that specializes in grilled cheese sandwiches.
Beyond its own specifics, Bitcoins has focused the financial spotlight on fundamental issues that surround the potential use of virtual money. With an increasing proportion of the world’s business being conducted via computer, they are questions that need to be answered. It may make a difference in whether you will soon find your “wallet” filled with virtual cash. Stay tuned.