Betting on Bitcoin? The good and the bad about digital currency

Betting on Bitcoin? The good and the bad about digital currency »Play Video
As the sign to the right says, Bitcoin is accepted at Madison's Grill in Southeast Portland. Owner of Madison's, Steve Brown (pictured), says Bitcoin is working great for his business.

PORTLAND, Ore. – The next time you order a drink or eat a meal at Madison's Grill in Southeast Portland there's no need for cash or credit - just use Bitcoin.

Bitcoin is the world's most popular digital currency. It's digital cash for the Internet. It operates person-to-person without a bank or central authority, like the Federal Reserve, to regulate it.

With Bitcoin, you can buy anything from the conventional (food), to the weird (alpaca products), to the illegal (drugs and guns).

Steve Brown, the owner of Madison's Grill says transactions are easy.

"When it comes to pay, instead of using cash or credit card, they'll take a picture of our Bitcoin QR code," Brown explained. "They take a picture of this with their smartphone and it transfers the appropriate amount of Bitcoin to our Bitcoin account."

Brown started accepting Bitcoin about three months ago after the Bitcoin Group, which regularly dines at Madison's Grill, encouraged Brown to give it a try.

"It's a group that has a lot of passion for Bitcoin and they kind of opened me up to taking Bitcoin," Brown said. "I wanted to support our community."

Now, Brown says, one to two customers pick up the tab using Bitcoin at his restaurant every day.

"I'm surprised by the number of people that have come to Madison's Grill that would never have come to Madison's Grill before because they heard we take Bitcoin."

Created by an anonymous programmer or group of programmers, Bitcoin is a digital currency controlled by thousands of machines spread across the Internet - not by a central bank. It allows for anonymous transactions. On Monday, lawmakers in Washington D.C. held hearings on the future of virtual currencies and grappled with how to regulate them.

Why not just use a dollar? Or any regular currency?

Fans of the currency say Bitcoin's fees are much lower, accounts cannot be frozen, there're no prerequisites or limits, and there's no bank involvement. Advocates also say digital currencies could offer easy-to-use economies in developing countries where people have little, if any, access to banks and financial services.

'Confused the heck out of many of us'

While plenty of businesses and individuals are capitalizing on Bitcoin, so are criminals. Monday, several federal officials testified before the Senate Committee on Homeland Security and Governmental Affairs about the future of virtual currencies including Bitcoin. Officials at the Justice and Treasury departments have recognized Bitcoin and other virtual currencies as legitimate and financially viable but have several concerns too.

Left unchecked, several federal officials say virtual currencies like Bitcoin could become hotbeds for criminal enterprises.

The Acting Assistant Attorney General for the U.S. Department of Justice, Mythili Raman, said her agency's seen criminals drawn to virtual marketplaces for two reasons: anonymity and the irreversibility of transactions.

Raman and others, like the U.S. Treasury's Director of the Financial Crimes Enforcement Network, Jennifer Shasky, listed several examples where virtual marketplaces were used in a wide variety of illegal activity including credit card fraud, identity theft, investment fraud, computer hacking, child pornography, and even murder-for-hire.

But its most notorious black market use is for buying and selling drugs.

Last month, federal agents shut down Silk Road, a black market that sold illegal goods such as heroin and MDMA and arrested its alleged operator, Ross Ulbricht. All goods were bought and sold with Bitcoin.

Homeland Security Committee Chairman Tom Carper, D-Delaware, said "Virtual currencies, perhaps most notably Bitcoin, have captured the imagination of some, struck fear among others and confused the heck out of many of us. Fundamental questions remain about what a virtual currency actually is, how it should be treated and what the future holds."

'There's an app for that'

A handful of other businesses in Portland are accepting it too.

And yes, there's an app for that: Gliph.

"If you've never used Bitcoin before, you can use Gliph to create a Bitcoin wallet," said Rob Banagale, CEO and co-founder of Portland startup Gliph.

Gliph's iPhone app was the first fully native iOS app approved by Apple for the App Store to send and receive Bitcoin. Banagale said the company - which recently relocated to Silicon Valley - first focused on secure messaging and data privacy but recently tapped into Bitcoin's success.

"One thing we noticed is that Bitcoin is really hard to use today," Banagale continued. "It's kind of like the Internet was back in its early days."

So the company created an easy interface to use the virtual currency, which the Portland native describes as "the world's easiest way to start sending or receiving Bitcoin."

Gliph has three main components. The first allows people to hide their real email addresses behind a pseudonym address, which can be disposed of at will. The second is secure messaging, which uses encryption to hide message content. And finally, it interfaces with people's Bitcoin wallets, enabling them to send money to other Gliph users easily without using Bitcoin addresses.

"Instead of sending it over traditional SMS, we use Gliph messaging which is a secure messaging environment," Banagale continued. "That means, when you're texting with someone on Gliph, no one's prying into what you're doing."

Banagale is aware of the examples of criminal wrongdoing in the marketplace of digital currency. He said, "Those are very serious and important things to be concerned about and something we think quite a bit about. Just like the U.S. dollar, any currency has the potential for people who want to do bad things with it."

Brown agrees.

He believes any currency can be taken advantage of.  But he and other businesses in Portland are continuing to stay open-minded about the benefits of Bitcoin.

'Bitcoin Fluctuation'

Bitcoin can be purchased and exchanged for standard currency, such as dollars, euros and yen. And like other currencies, Bitcoin's value changes with a daily exchange rate. Since Bitcoins first came onto the market in 2008, their value has changed dramatically.

When Brown first started accepting Bitcoin three months ago, he said a Bitcoin was valued at roughly $100. On Monday, that number surged to more than $600 at one point.

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