Sunday, Feb. 23, 2014 | 2 a.m.
What is it?
Bitcoin is an online-only, alternative form of money. It can be traded between individuals, businesses or both for goods and services.
It’s easy to use. Once users download a Bitcoin wallet — usually as a smartphone app — transactions can be made. Once a purchase price is determined, buyers scan their account information with a QR scanner in the phone and type in the purchase amount in whatever currency is being used for the transaction. The amount is converted to its Bitcoin equivalent and received by the merchant’s scanner. The merchant can keep it in the account or convert it to the local currency.
It’s still vulnerable to thieves. Although transactions are encrypted, hackers have found their way into Bitcoin wallets and drained them. Two users believed to be illegal online drug sellers recently reported Bitcoin thefts of millions of dollars. In another highly publicized theft, a Bloomberg broadcast anchor flashed a Bitcoin gift card on the television screen and a viewer was able to capture the QR scan code on TV and download the gift card.
The IRS view
Financial regulators and the Internal Revenue Service have been asked to weigh in on Bitcoin, but the technology is still too new and misunderstood for any regulations to be drafted. Derek Stevens, CEO of the D Las Vegas, said the IRS is expected to issue directives this year.
How much is a Bitcoin worth?
It depends on the instant a transaction is made. Visit the preev.com website and you’ll see how rapidly a Bitcoin changes value. At the time of this writing, one Bitcoin had the value of about $655. But it changes every five to 10 seconds. At the $655 rate, a $20 purchase at American Coney Island at the D would cost 0.03053435 Bitcoin.
Experts say all the Bitcoins in circulation today are worth $10 billion.
Bitcoin a fad?
Ronald Mann, a Columbia University Law School professor, said in Forbes magazine that online currencies have come and gone and that Bitcoin may be no different. Online payment systems like Digicash, Flooz and Beenz were never accepted by consumers because their costs exceeded their benefits and there was no good reason for merchants to use them. In addition to Bitcoins, there are Dogecoins, Litecoins, Primecoins and Peercoins in circulation as online currency.
The use of Bitcoin has grown to the point that two downtown Las Vegas hotels and a high-octane attraction at the Las Vegas Motor Speedway accept it.
In addition, a Las Vegas company has developed and installed the world’s first Bitcoin ATM. The machine, which operates at a coffee shop in Vancouver, British Columbia, converts Bitcoin to cash and vice versa.
But what exactly is Bitcoin? And are consumers and businesses wise to use it?
The answer to the second question is in debate. The short answer to the first question is that Bitcoin is an open-source online currency for transactions between individuals, businesses or both for goods and services. Introduced in 2009 by a developer or developers under the pseudonym Satoshi Nakamoto, Bitcoin transactions are encrypted and logged online.
Anyone who has exchanged currency to make a purchase in a foreign country will grasp one of the reasons people use Bitcoin. Bitcoin, which can be accessed via your computer device or smart phone, doesn’t recognize political borders. Because there are no transaction fees, it costs less than if you use a credit card or exchange money.
Derek Stevens, CEO of the D Las Vegas and the Golden Gate, grasped the Bitcoin concept immediately, having grown up in Detroit and frequently carrying Canadian money back across the Detroit River after he and his friends would kick around in Windsor, Ontario.
He said he rarely exchanged Canadian currency for American money when he returned because he knew he’d need Canadian dollars for his next trip across the border. Having currency that would have worked on either side of the river would have been convenient.
A year and a half ago, when people first started asking Stevens about whether his properties would accept Bitcoin, he’d say no and ask why he would do so. As more and more people made the request, he began asking himself, “Why not?”
Stevens assigned his financial team to explore the pitfalls of accepting Bitcoin and determined there was little risk and the potential for high rewards.
He figured he could make a name for himself as one of the first local properties to accept Bitcoin. He was right: The day his company announced it was going to accept Bitcoin payments, Stevens was besieged by national media and he landed on the front page of USA Today.
Las Vegas attracts plenty of foreign visitors, people who may be most inclined to use the Internet currency. Downtown Las Vegas also is becoming home to more tech-savvy consumers who may use Bitcoin.
When Stevens made the decision to accept Bitcoin, he immediately went to an exchange and bought some and divided it up among his executive team so they could make some transactions among themselves before allowing anyone to make payments at the hotel, its restaurants and gift shops. Guests can’t use Bitcoin for wagering.
Although Stevens won’t say how many Bitcoin transactions have occurred at his properties since they began accepting them in early February, he said the response has been better than he expected.
Meanwhile, another Southern Nevada attraction announced that it would accept Bitcoin payments. Dream Racing, which enables customers to drive Ferraris and Lamborghinis at the Las Vegas Motor Speedway, announced that it would begin accepting Bitcoin to pay for driving packages and merchandise.
But it’s not difficult to find critics of Bitcoin. They say it lacks two critical qualities that make the dollar and other formal currency valuable. One, the price of Bitcoin has fluctuated wildly, meaning its buying power isn’t predictable and reliable. Two, Bitcoin isn’t backed by an institution like the Federal Reserve, which works to regulate and protect the value of U.S. currency. In short, critics say, people who buy it or accept it could end up with something worth far less than they paid for it, if anything.