Hansen: Customers not yet sinking teeth into virtual currency Bitcoin - Omaha.com
Published Thursday, December 19, 2013 at 1:00 am / Updated at 11:17 am
Hansen: Customers not yet sinking teeth into virtual currency Bitcoin
Bitcoin virtual currency

Because there is no middleman such as a bank, there are almost no transaction fees or limitations. Large amounts can be transferred quickly, saving time and money when dealing with foreign transactions. Also, the system safeguards privacy.


The system can be volatile, with large fluctuations in the value of bitcoins.

Transactions are irreversible; refunds can be approved only by the person receiving the funds, if willing. Early adopters have reaped greater rewards than those joining now. Transactions are anonymous and untraceable, and that has attracted criminals to the system.

Getting Bitcoins

By using real money: You can buy bitcoins by using real money at online payment companies or exchanges.

By “mining:” New bitcoins can be minted, or “mined” — unlocking lines of computer code — only by advanced Bitcoin users called miners; miners are given a complex mathematical puzzle, which they can solve only with the help of special mining software; once a miner believes that he or she has solved a puzzle, a message goes out to the entire network; if other users agree, a new bitcoin is added to a public ledger; the successful miner is then awarded a bit of the new bitcoin for his or her trouble.

Source: bitcoin.org, lifehacker.com, Wired magazine, the Washington Post

Tony Stuntz will scrape away the plaque on your teeth. He will remind you to floss.

And then he will accept cash, check, credit or a revolutionary digital currency created by a shadowy computer genius and then popularized by hackers, wildcat investors, libertarians and those twins who sued Mark Zuckerberg.

So, yes, he's a dentist, one who runs a nice little practice, Stuntz Family Dentistry, on Madison Avenue in Council Bluffs. And he's also the owner of what is probably the first Omaha-area brick-and-mortar business to accept Bitcoin.

Haven't heard of Bitcoin? Don't really understand it? Join the club.

“Nobody has actually paid with it yet,” Stuntz says. “If somebody tried to, I'm pretty sure (the receptionist) would have to come and get me.”

I went in search of locals who use and understand Bitcoin, and I found a loose coalition of men who are small in numbers but outsized in their love for this four-year-old, government-less currency that exists on your computer but not in your wallet.

There is Tony, the 33-year-old dentist and brother of former Cornhusker quarterback Mike Stuntz. Tony started a meet-up group to discuss all things Bitcoin. There is Matt McKeever, a 44-year-old lawyer, who bought a couple of bitcoins on an investment lark and is working to be the state's leading legal voice on digital currency.

There are IT guys and day traders, computer programmers and Ron Paul supporters, united by a single belief: Bitcoin might just change the world, or at least how we buy and sell stuff.

“It's a bit of a novelty at this point,” Tony says. “But it's picking up a lot of steam. And can you imagine if Amazon starts to accept it?”

Before we imagine that, let's make sure we understand — let's make sure I understand — what Bitcoin actually is.

In 2009, a developer calling himself Satoshi Nakamoto — maybe one person using a pseudonym or maybe a group of the world's best computer coders — invented a new currency called Bitcoin. This one wouldn't be issued or controlled by a government. And it wouldn't be an actual coin at all.

Instead, it's wholly digital. Bitcoins are actually lines of computer code that can be “mined” or unlocked by powerful computers, and then bought, sold and traded in much the same way as any currency or commodity.

Nakamoto created a finite number of bitcoins — 21 million — that are meant to be unlocked by around the year 2029.

(Cameron and Tyler Winklevoss, the aforementioned twins who famously accused Zuckerberg of stealing the idea for Facebook, made waves earlier this year when they announced that they owned about 1 percent of all bitcoins in circulation.)

Nakamoto's hope: that the digital currency would take the power of currency away from governments and global banks and decentralize that power across the world.

“Really, what is gold, besides what we have decided is its inherent value for jewelry?” asks McKeever. “What are diamonds? Bitcoin's inherent value is that it can be used for transactions. It's free trade.”

You don't have to be a computer genius to identify a couple of basic problems with the decentralized basis of Bitcoin.

For one, who protects us if our bitcoins are stolen? The American banking industry, for all its flaws, generally does a good job of keeping us confident that if we put a dollar in a bank, it will be there when we come back for it.

How will this new currency be regulated? Bitcoin owners are not residents of the country Bitcoinia — they are American, Chinese, Norwegian, Tanzanian, etc. So how will those countries' existing bureaucracies — each of which regulates its own currency differently — deal with this new currency controlled by none of them?

And finally, is the bitcoin or, for that matter, any nongovernment-backed currency, stable enough for commerce? Four years ago, a bitcoin was worth a few pennies. One day in April, a bitcoin was worth $238. Two days later, it was $84. By Halloween, it was back around $200. And two days before Thanksgiving, the value of a bitcoin crossed $1,000 for the first time in its history.

Then Wednesday, on bad Bitcoin news from China, it crashed, plummeting to about $550 by late afternoon.

Many economists — monetary experts worth their weight in bitcoins — have spent months tripping all over themselves warning of the danger of such potential crashes.

“If the dollar was this volatile, people would be jumping off buildings,” says McKeever, the Omaha lawyer who is a Bitcoin investor and also advises a growing number of clients on digital currency.

He believes, as many Bitcoin investors do, that “fortune favors the bold.” But he also advises his clients that “the pioneers take the arrows.”

“If you aren't cautious with Bitcoin, you are going to be in trouble,” McKeever says.

But the small group of Bitcoin believers in the Omaha-Council Bluffs area, including McKeever, can easily sketch a much rosier future for the digital currency.

This group meets about once a month, an informal bull session organized by Tony, the Council Bluffs dentist.

Tony the Dentist comes to the meetings, and so does Matt the Lawyer. A couple of businessmen show up, as do three IT guys and a couple of other computer experts.

Many of them believe that governments foul up pretty much everything they touch, including money.

And many of them believe that Bitcoin can and will avoid its potential pitfalls.

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Bitcoin is safe, they say — for example, Matt shows me how he has to use several passwords, including a temporary one that disappears almost instantly, to access his accounts on exchanges where bitcoins can be bought and sold.

Other exchanges have even more layers of security, including account information that a user keeps offline.

Bitcoin is smart business, they say. The thousands of businesses that do use Bitcoin — most of them online — don't have to pay credit card processing fees. That allows many to give a discount to people paying with Bitcoin. Tony, for example, offers a little discount on teeth cleaning for anyone who wants to use the digital currency.

And Bitcoin looks increasingly safe, they say, at least in the United States. The U.S. government seems increasingly likely to regulate it as it does any other currency rather than try to shut it down.

The Chinese government, however, may not be so accommodating. China's central bank recently barred financial institutions from accepting the currency, a move that prompted Baidu, China's largest search engine, to stop accepting Bitcoin. And then Wednesday, China's largest Bitcoin exchange stopped taking deposits, prompting the price crash.

But before we dismiss Bitcoin entirely, back to Tony Stuntz's original thought: What if major, U.S.-based retailers like Amazon someday start accepting it?

Increased use would seemingly stabilize the currency and make it a reality of commerce instead of a novelty.

Until then, the Omaha-area residents into Bitcoin will continue to talk and to trade it among themselves. Tony bought pizza for one meet-up, and the others paid for their share in Bitcoin.

Matt is thinking about giving out a Christmas present or two that involves digital currency.

And Tony gave his employees at the dentist's office a surprise not long ago.

A bonus. A bonus that wasn't paid in dollars. A bonus paid in Bitcoin.

How did they react, Tony?

Tony the Dentist laughs.

“They went along with it,” he says. “Maybe just to be good sports.”

Bitcoins' value takes a tumble

If Bitcoin is a bubble, as its critics contend, it is showing signs of deflating.

A rapid succession of moves by governments around the world has cast doubts on the legitimacy of the virtual currency, and its price fell about 60 percent at one point Wednesday morning from its high this month. It recovered some as the day went on.

China had been the fastest-growing part of the Bitcoin world, but there and elsewhere government officials have started to worry about the virtual currency. Over the past week, the European Banking Authority and authorities in Denmark, Norway, Australia and New Zealand have raised an alarm about the speculative nature of the new online currency.

The price of a bitcoin had topped $1,000 earlier this year and was near that level last week. A bitcoin was trading at around $562 Wednesday on Bitstamp, one of the more active online exchanges where bitcoins are traded for dollars and other currencies.

— World-Herald press services

Contact the writer: Matthew Hansen

matthew.hansen@owh.com    |   402-444-1064    |  

Matthew Hansen is a metro columnist who writes roughly three columns a week focusing on all things Omaha.

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