SPRINGFIELD, Mo. -- Its being called another step into the virtual world and a way to connect countries using one global currency.
KOLR10’s Brett Martin did some digging and is here to tell us more about the newest currency, Bitcoin.
While you may not be able to hold it physically, it sits in your virtual wallet on your computer and can be spent around the globe and is becoming more and more popular.
"Its evolving and its evolving quickly and a lot of technology is being put behind it and a lot of smart people are trying to figure this out," says Ken Cox.
Now, Bitcoin, a virtual currency, is the latest way to pay.
"Its a lot easier than spending money on your credit card. I don’t have to sign anything, I don’t have to hand my card back and forth, I can literally just send it from my phone to your phone."
Missouri State Economic professor Dr. David Mitchell says Bitcoin can be used as a universal currency and a way to avoid fees from converting one form of money to another.
"Essentially if you have this in Bitcoin and this person in China accepts Bitcoin then you can have this transaction amongst itself," explains Dr. Mitchell.
Bitcoin was invented and is monitored by the Bitcoin Foundation. That is something Dr. Mitchell says could pose a problem down the road.
"With the US dollar, it is not backed by gold but it is backed by the full faith and credit by the US government. Bitcoin isn’t backed by gold and there is no government behind it either."
Ken Cox has been in the Bitcoin business for a year and says its an investment he trusts.
"The price of Bitcoins at that point when we were first raising money was probably $60 and now they are roughly, $850, so it was a good investment."
The Bitcoin network is made up of a computer, or groups of computers, called 'miners'. These miners are constantly running to decode an encrypted message, or math problem, and send the correct answer back to the Bitcoin foundation. Once the correct answer is found, the miners are awarded a block of 25 bitcoins.
Ken is the owner of several miners and of River City Mining Company in St. Louis.
"We are doing pool mining so we are in a bigger group so we get smaller fractions of those 25."
Ken shows us around his computers in St. Louis that mine 24 hours a day, 7 days a week. He says his utility bill runs around $2,000 a month.
"It is an arms race. The entire market is running as fast as they can to build bigger and better gear."
Stefan Petrov is the owner of a food truck who accepts Bitcoin as currency.
"One of our Tweedy sandwich would cost 7$. That is the price without taxes and credit card transactions to it. I can tell you exactly right now if I go to my wallet for the company, the $7 will cost you 0.0072 Bitcoin.
The current exchange rate for one bitcoin is $500 to $800 USD, but can be used and bought at a fraction of that using an equation.
"Bitcoins are divisible by 9 so in your US dollars, you can go .00 in quarters and pennies. Bitcoins are divisible by 9 decimal points."
Ken says its easier to understand how Bitcoin works by seeing the transaction in action so we found a coffee shop in downtown St. Louis to see how it works.
"I would scan the code with my phone and she would tell me the amount that is owed. So let’s say .06 BTC so I would just say .06 BTC and I would tap send."
Ken and Stefan say it takes just minutes for the transaction to go through.
Even big companies like Overstock.com and several casinos in Las Vegas accept bitcoin too.
"I can buy a video camera, cell phone, pretty much anything that I want using Bitcoins."
Ken Cox is the founder of River City Mining in St. Louis and says he's earned his fair share by getting involved in bitcoin.
There are multiple ways of getting involved in the virtual world.
"There’s a lot of different avenues for Bitcoin. There’s the trading, mining, the storage. The best thing that I can think of would be any currency, the dollar or gold," says Ken.
Dr. David Mitchell is the director of Bureau of Economic Research at Missouri State says it can not be compared to the dollar because it has no government regulating it.
"The problem with Bitcoin is one of credibility and its not backed by a government and its not backed by a precious metal," says Dr. Mitchell.
He says the only way for the Bitcoin to earn credibility is by people trusting it.
One of the biggest problems he’s seen is the value changes every minute. Since Bitcoin isn't regulated, the exchange rate can fluctuate drastically within hours and has a wide range of values.
Ken says when it first began people used Bitcoin like the stock market, now, its more like every day currency.
"We are through the batch of the Bitcoin millionaires who were mining the stuff when it was brand new."
Dr. Mitchell says its not being used enough though.
"One of the problems right now is that it is not traded enough to have a lot of the fluctuations be smooth, there's too much volatility."
Ken says, if more people get involved, it will level out and save money in the end and can help reduce debt.
"When you start living your life on Bitcoins, you live your life on Bitcoins. You can spend what you have, you can’t buy it and then charge it later."
Bitcoin has been involved in multiple investigations, mostly along the Silk Road. It is a website accused of drug trafficking.
Recently, the Bitcoin Foundation Vice President, Charlie Shrem, was arrested and charged with money laundering in New York City.
Ken says the negative attention hit the Bitcoin market but he knows it’ll bounce back.
"I think in the long run as the authorities get a better grasp on what is going on to be able to track the people that are doing illegal activity is much simpler than us dollars."
Dr. Mitchell says the illegal uses and the few places accepting could hurt its growth.
"They have to be universally accepted. I have to believe that my employer can pay me in some currency and I can take that currency and use it to buy the goods and services that I want," says Dr. Mitchell.
Ken says if you do want to get involved, it is easy.
First, you would want to download an application or sign up for a coin base on the internet and create a virtual wallet. Next, you would connect your account using a credit card and begin converting dollars to Bitcoins.
"You are just going to buy Bitcoins like a stock, you are going to do that every month. You’ll set your budget to something that you can afford to risk in the market."
While we haven’t found any places in southwest Missouri that accept it but with more trust; both Ken and Dr. Mitchell think it could be the next form of cold, hard cash.
"Its evolving and its evolving quickly, and a lot of technology is being put behind it and a lot of smart people are trying to figure this out," says Ken.
"If people begin accepting it as a form of currency, then yeah, it would be a form of currency," says Dr. Mitchell.
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