Behind Bitcoin: An Avid Group Tries to Spread the Word

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Inside Bitcoins: The Future of Virtual Currency
Jin Lee/Bloomberg via Getty ImagesAn attendee arriving at last week's Inside Bitcoins conference in New York.
By Mary Thompson

The Monday night meetings at New York City's Bitcoin Center hardly seem the stuff of a revolution.

Wielding smartphones and computers, the mostly male, mostly under-30 revolutionaries stand in the middle of a cavernous space in the shadow of the New York Stock Exchange. Their mission is to spread the gospel of bitcoin, which they believe has the power to upend the global financial system.

"There are an increasing number of people who recognize the potential of the platform," said Miles Cowan, a former lawyer and a recent convert to the bitcoin movement.

The platform is the brainchild of an unknown person or group called Satoshi Nakamoto. In the last year bitcoin has grabbed headlines as much for the meteoric rise in its price as for its link to the shadowy underworld of cybercrime.

It has been hailed by Silicon Valley's wise man Marc Andreessen and has been criticized by billionaire investor Warren Buffett. The view of global regulators are split as well. Japan, for example, will not recognize it while Brazil does.

A mere 6 years old, the digital currency is being pushed and prodded forward by a zealous group of believers who maintain that bitcoin doubters are blind to what it can do, while its critics doubt bitcoin can deliver on its promises.

"This is a competitive currency, competitive store of value that might just have great benefits for the world," said Jim Harper, the global legal counsel for the advocacy group, The Bitcoin Foundation. "Around the world, billions of people-literally, billions of people-don't have access to financial services. Bitcoin can create opportunities for them to save, to accumulate wealth and better their lives."

As a digital currency, bitcoin is created and stored online, on a mobile phone or computer. You cannot hold it in your hand. %VIRTUAL-article-sponsoredlinks%Creators, called miners, produce bitcoins every 10 ten minutes by solving complex math problems. Miners control supply, which is limited to 21 million bitcoins-about half of which have been mined already.

Once they are mined, bitcoins can be sent instantly around the world from one digital wallet to another. These transactions can be nearly anonymous. As bitcoin moves between digital wallets, the transactions are posted and then verified on a public open-source ledger called a block chain, with each transaction identified by a unique string of numbers and letters. Nothing links the transaction to the names or addresses of the sender and receiver.

Cheap money transfers, anonymity and lack of government regulation or oversight from a central bank are all hallmarks of bitcoin. Those hallmarks, which have attracted an ardent following among libertarians, pose problems for the other set of bitcoin advocates.

Bitcoin entrepreneurs find the lack of regulation can be a hindrance to opening a business and attracting customers. Bitcoin's near anonymity attracts a criminal element looking to conduct business with a currency that is almost untraceable. While its current core function of speedy, cheap money transfers sounds good, it is done in a system that is not always secure. Digital wallets and bitcoin exchanges where the digital currency is stored can easily be hacked, and bitcoins can be and are stolen.

"The advocates think that regular people should adopt it," said Justin Wolfers, an economist at the Brookings Institute. "I don't see any need to. I walk into the stores, the stores accept my U.S. dollars. The monetary system's working perfectly OK for me right now."

Wolfers believes that because bitcoin is inconvenient to use, it will probably not achieve the widespread adoption it needs to become a parallel or replacement for fiat currencies around the world.

Advocates, including 26-year-old Jonathan Rumion, disagree.

The resident of Austin, Texas, is a bitcoin investor and software developer for a bitcoin startup. He gets paid in bitcoins and except for rent and gas, pays for most of his living expenses using dollar-denominated gift cards he bought with bitcoin.

"I can't claim bitcoin is this new big thing if I'm not willing to take the risk myself," Rumion said.

It's a risk that has paid off for the computer whiz kid who finished college when he was in his teens. He has made a lot of money, in a short time, trading the cryptocurrency.

"I think my best earning was $1,000 over 10 minutes, " he said. "Just on a quick trade and a phone call."

In 2013 bitcoin rose 5,248 percent, hitting an all-time high of $1,126.82. Since then it's dropped to around $430.

The slide in price has not deterred a growing number of retailers from accepting bitcoin payments for their services, including notable firms like Cheapair.com and Overstock.com. Regulators, too, continue to examine it though opinions vary around the world about its usefulness and viability.

The bitcoin faithful, though, has no doubt. Bitcoin, they say, is here to stay.


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Behind Bitcoin: An Avid Group Tries to Spread the Word
"Your daily habits and routines are the reason you got into this mess," writes Trent Hamm, founder of TheSimpleDollar.com. "Spend some time thinking about how you spend money each day, each week and each month." Do you really need your daily latte? Can you bring your lunch to work instead of buying it four times a week? Ask yourself: What can I change without sacrificing my lifestyle too much? 
Remove all credit cards from your wallet and leave them at home when you go shopping, advises WiseBread contributor Sabah Karimi. “Even if you earn cash back or other rewards with credit card purchases, stop spending with your credit cards until you have your finances under control,” she writes.
If you do a lot of online shopping at one retailer, you may have stored your credit card information on the site to make the checkout process easier. But that also makes it easier to charge items you don't need. So clear that information. "If you’re paying for a recurring service, use a debit card issued from a major credit card service linked to your checking account," Hamm writes.  
Reward yourself when you reach debt payoff goals. "The only way to completely pay off your credit card debt is to keep at it, and to do that, you must keep yourself motivated," Bakke writes. Just make sure to reward yourself within reason. For example, instead of a weeklong vacation, plan a weekend camping trip. "If you aim to reduce your credit card debt from $10,000 to $5,000 in two months," Bakke writes, "give yourself more than a pat on the back." 
“Establish a budget,” writes Money Crashers contributor David Bakke. “If you don't scale back your spending, you'll dig yourself into a deeper hole." You can use personal finance tools like Mint.com, or make your own Excel spreadsheet that includes your monthly income and expenses. Then scrutinize those budget categories to see where you can cut costs.    
Sort your credit card interest rates from highest to lowest, then tackle the card with the highest rate first. "By paying off the balance with the highest interest first, you increase your payment on the credit card with the highest annual percentage rate while continuing to make the minimum payment on the rest of your credit cards," writes Mint.com spokeswoman Hitha Prabhakar.
To make a dent in your debt, you need to pay more than the minimum balance on your credit card statements each month. "Paying the minimum -– usually 2 to 3 percent of the outstanding balance -– only prolongs a debt payoff strategy," Prabhakar writes. "Strengthen your commitment to pay everything off by making weekly, instead of monthly, payments." Or if your minimum payment is $100, try doubling it and paying off $200 or more. 
If you have a high-interest card with a balance that you’re confident you can pay off in a few months, Hamm recommends moving the debt to a card that offers a zero-interest balance transfer. "You’ll need to pay off the debt before the balance transfer expires, or else you’re often hit with a much higher interest rate," he warns. "If you do it carefully, you can save hundreds on interest this way."
Have any birthday gifts or old wedding presents collecting dust in your closet? Look for items you can sell on eBay or Craigslist. "Do some research to make sure you list these items at a fair and reasonable price," Karimi writes. “Take quality photos, and write an attention-grabbing headline and description to sell the item as quickly as possible." Any profits from sales should go toward your debt. 
If you receive a job bonus around the holidays or during the year, allocate that money toward your debt payoff plan. "Avoid the temptation to spend that bonus on a vacation or other luxury purchase," Karimi writes. It’s more important to fix your financial situation than own the latest designer bag.
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