Bitcoin cracked the $1,000 mark on the first day of the year. Ever since it’s been modestly gaining recognition until recently when it’s rapid rise in value grabbed the attention of investors, and “get rich quick” dreamers.
Years ago bitcoin — a currency without any backing of a government or regulation — seemed almost nefarious, but as more and more investors flock to the digital currency it’s gaining legitimacy across the globe.
WHAT IS BITCOIN?
First you need to understand: Bitcoin isn’t something you hold in your hand. You’ve likely seen pictures of metallic coins with a B on it when you’ve seen news reports, or covers of magazine articles discussing bitcoin — those are more like gift cards that were created.
Bitcoin is a cryptocurrency, or a digital currency, that has no physical backing. Instead of being backed by a government of banking system, Bitcoin lives on a computer network and is controlled by all of it’s users. Users are able to send Bitcoin electronically from one user to another, anywhere in the world.
The price fluctuates day-to-day, even minute-to-minute determined on bidding for the currency on Bitcoin exchanges.
HOW DO YOU USE BITCOIN?
Bitcoin can be used like any other currency — recently it’s become spendable on major retailers like Expedia and Overstock.com. The problem has become it’s wild fluctuation in pricing. If you bought something for roughly $11,000 on December 4th it would have cost 1 Bitcoin, that same Bitcoin was worth roughly $19,000 exactly two weeks later.
“I tell people jumping in and investing a lot of money maybe that’s not the best thing to do,” said Stephen Lacey, CEO of Bit Detroit. “Instead, participate. Get a little bit, use a little bit and learn about it.”
Lacey’s business has been helping metro Detroit companies setup their businesses to accept Bitcoin and Bitcoin cash — a second type of cryptocurrency (more on that later).
Bitcoin is most commonly used with a digital wallet. While there are various ways to store Bitcoins the easiest is to have a digital wallet that is accessible on your cell phone.
You can setup a digital with a variety of safety features, but essentially you can send and receive Bitcoins person-to-person, or person-to-business using QR codes or a string of numbers and letters that are unique to a transaction. What makes that unique from other currencies is that you can send money to the other side of the world using code without ever seeing the person face-to-face, without a middle man.
“It’s quick, reliable and transparent,” said Lacey.
IS BITCOIN DANGEROUS?
Bitcoin has had it’s issues — in it’s early years there was talk about a sinister side of cryptocurrency, mainly because it isn’t backed by a government.
As more investors have joined the Bitcoin universe it seems to be much more controlled, but it’s not without it’s problems in recent memory. Earlier this year NiceHash, a cryptocurrency-based company, was hacked and lost roughly $70 million was stolen.
If you research much on Bitcoin you’ll likely dig up articles on a company called Mt. Gox. It was a Bitcoin exchange based in Japan that was handling a large number of all worldwide transactions until it announced bankruptcy, later admitting that thousands of Bitcoins were stolen/missing. At the time some $450 million worth of Bitcoin was missing, however, due to the recent uptick in pricing the current value of the currency that was missing at the time of the announcement would have been in the billions.
Michigan’s Attorney General Bill Schuette has even issued warnings about cryptocurrencies like Bitcoin noting that while more businesses will accept digital currencies, that people need to educate themselves on them properly before rushing into investing or using them as a substitute for cash.
WHAT’S THE APPEAL? WHY ARE PRICES RISING?
You’ve likely heard of the “gold rush” around Bitcoin, or as some have called it “The Crypto-rush.”
The software that Bitcoin is based is being hailed as revolutionary by techies — the value is in the code itself, and the drive to use it. Cryptocurrencies are based on something called “blockchain.” You can learn more about the technical aspects of blockchain, here.
As for prices, there’s a number of reasons for the recent surge. As stated earlier, Bitcoin first cracked a $1,000 evaluation at the start of the year — in early December the value of a Bitcoin crossed $10,000 and it’s been wildly fluctuating ever since. As of the publication of this web story it is valued at roughly $19,000 a Bitcoin.
The announcement, and subsequent beginning, of futures trading of Bitcoin at a Chicago stock exchange has certainly added fuel to the fire. Eager investors have quickly jumped on-board which has caused some fear that a bubble is forming around the currency, but others say it’ll still go higher.
Some, like LauRyn Williams; a regional board member of the National Black MBA Association, believe that Bitcoin still has more value thanks to it’s untapped potential. She described it like Google 15 years ago.
“No one really understood how smart it could be,” said Williams. “Now Google, in concert with our smart device, can actually predict when we’re about to pickup to the phone, or what we’re going to ask it to do.”
WHO IS BENEFITING?
Currently early investors are making out big.
Jacob Alkassyonan, a Wayne State freshman, said he’s witnessed a 500-percent return on his early investments. He put his entire savings into cryptocurrency after researching it — originally he planned on investing more heavily in the stock market. Instead, his Dad told him to learn about Bitcoin and determine if investing was the way to go. It paid off.
“I don’t think it’ll go away anytime soon,” said Alkassyonan.
You’ll find plenty of people who’ve made their first, and quickly their subsequent, millions through Bitcoin investing. It was only a matter of a few years ago that a Bitcoin was mere pennies on the dollar compared to what the valuation is now.
It’s also benefiting a culture around the currency.
Kinnard Hockenhull, a former UM student, started a company to train people about the history of currencies, what cryptocurrencies are, and how they’re being used. He now has a company based out of California and is traveling the world teaching eager students about Bitcoin and other cryptocurrencies.
Similarly, Stephen Lacey is garnering success in Detroit. Lacey said he’s yet to see major businesses come calling for him to help them roll Bitcoin and Bitcoin cash into their operating structure, but he’s been helping small businesses throughout the metro Detroit area prepare for a world with cryptocurrency.
“I definitely see Bitcoing in the future,” said Lacey. “I see it as an unavoidable future — cryptocurrency. So people need to get in on it now and educate themselves in safe practices to really understand the ecosystem that they are buying into, or one day will be buying into.”
WHAT TYPES OF CRYPTOCURRENCY ARE THERE?
Bitcoin is hardly the only cryptocurrency, although it’s the best known. Here are a few of the better known cryptocurrencies outside of Bitcoin:
- Bitcoin cash: a cryptocurrency that is referred to as a “fork” in the progression of Bitcoin classic. It was created in August of this year — the purpose of it’s change in coding was to allow more transactions to be processed at a faster pace. It’s valuation is not nearly as high as Bitcoin.
- Ethereum: Similar to Bitcoin it is built on blockchain technology, but it’s more than a digital currency — the newer version of programming surrounding Ethereum makes it possible to be used for other types of digital programming, which has some eager to call it a potential rival of Bitcoin.
- Litecoin: An early competitor of Bitcoin, Litecoin has surged back into the headlines. As Bitcoin prices have surged to extreme highs Litecoin has similarly spiked, but at a higher percentage rate — meaning for a smaller investment investors have seen a higher rate of return. Litecoin was one of the first cryptocurrencies to alter the coding used to formulate Bitcoin.
