Dismissed as funny money, how bitcoin just got serious
THE LIST of places where bitcoins are currently accepted in Yorkshire is short, but eclectic. Should you find yourself in receipt of the virtual currency you could head to a Sheffield fishmongers, a York hairdressers or an electrical store in Grimsby. There’s also one Leeds sauna which is apparently happy to take them instead of credit cards.
None have so far reported a flurry of transactions, but that may soon change. Born online nine years ago, for a while the currency looked little more than a passing fad on the brink of collapse. However, this week the bitcoin made a remarkable comeback.
At the start of the year, one bitcoin was worth $1,000. Not bad for something you can’t physically hold in your hand, but this week it hit a record $10,000 amid a flurry of investors buying up the currency.
“Bitcoin was started by a mysterious individual known as Satoshi Nakamoto,” says writer and cryptocurrency expert Julian Jackson. “To be honest, we don’t even know that it was an individual, it might have been a collective. What we do know is that initially at least it was a bit of experiment for geeks.
“The premise was Nakamoto would set complex mathematical problems and whoever solved them would receive bitcoins. The process was known as mining, because a bit like gold mining where you have to dig a lot of dirt before you get to the prize, the bitcoins were the reward for someone’s mental efforts.”
Quite quickly though the problems set by the elusive Nakamoto became too complex for the average home computer to solve and the bitcoin phenomenon moved up a notch.
“Now it has almost become an industry in its own right and it’s largely based in China where electricity happens to be cheap,” adds Jackson, who is the proud owner of a small amount of bitcoins, but not enough to give up the day job. “Nakamoto disappeared a few years ago. No one has heard of him since, but the bitcoin market he started is now stronger than ever.”
With no bitcoin equivalent of the Bank of England, the currency is monitored instead by a network of computers. Around 3,600 new bitcoins are issued every day with around 16.5m currently in circulation.
“The vast majority of these are held as an investment, rather than used like regular, everyday currency,” adds Jackson. “However, that may change. There is something called Roger’s technology acceptance curve which tracks how new technology goes from niche to mainstream.
“First you start with it being used only by the ‘innovators’, then it is embraced by the ‘early adopters’, eventually it ends up being used by a group called the ‘early majority’ and finally pretty much everyone is using it.
“If you take something like the telephone or the television, it took a long time to reach the end of that curve. Likewise bitcoins were the preserve of a niche group of people, but this year something changed. It hit the zeitgeist and over the last few months the speed at which it has been adopted has been quite incredible.”
With bitcoins having doubled in price in just a month, some predict a crash will not be far off. Jackson though is more optimistic.
“There are now 1,200 different cryptocurrencies in circulation,” he says. “Most will fail, but I don’t think bitcoin will be one of them. The first ever bitcoin purchase was two pizzas for 10,000 bitcoins. Whoever made those pizzas is sitting on a very nice nest egg and I don’t think they need to sell just yet.
“We can probably all remember those days when most people thought that email would never take off or that the internet would only have limited use. I honestly think it’s the same with bitcoins. They are here to stay.”