BitPay Right at Home at Transact ’15
April 3, 2015
BitPay has a knack for flair. They sponsored a college bowl game known as The Bitcoin Bowl in St. Petersburg as well as a driver in the NASCAR Camping World Truck Series race. BitPay is bitcoin, but all grown up.
As a member of the ETA and with a business model similar to just about every other card processing acquirer, BitPay didn’t really look too out of place. At a press briefing on April 1st at Transact ’15, company co-founder Tony Gallippi sat in between Osama Bedier of Poynt and Joan Herbig of ControlScan to discuss the road ahead for payments.
Gallipi explained that they are working to integrate with POS platforms so that merchants can accept bitcoin using their existing systems. He also sought to dispel the myth that bitcoin is an untraceable currency by citing the bombshell news report published by the New York Times just the day earlier that revealed government agents had been caught stealing bitcoins.
“The agents, Carl Mark Force IV, who worked for the Drug Enforcement Administration, and Shaun W. Bridges, who worked for the Secret Service, had resigned amid growing scrutiny, and on Monday they were charged with money laundering and wire fraud,” The story states. The agents stole bitcoins recovered in the Silk Road case and laundered it. But since bitcoin is the perfect opposite of untraceable, both agents were caught.
Bitcoiners, start your engines! BitPay #NASCAR driver @jbossracing now starting his 1st lap at Daytona! #JBossBitcoin pic.twitter.com/Bzq4rYY8IC
— BitPay (@BitPay) February 21, 2015
Referring later to the phenomenon of using your mobile device to make a payment, Gallippi said, “a lot of the difficulty in changing is just muscle memory. We’re all so used to just reaching for our wallet to make a payment.”
While BitPay wore a good corporate face for the conference, news that their sponsorship of future college bowl games had been terminated hit the press right in the middle of it. According to Fortune, “neither side is talking about the abruptly ended sponsorship, but it likely has to do with the value of the game, and the value of bitcoin.”
That doesn’t sound good for BitPay, but it may have come down to whether or not it was a good use of their marketing budget. For one, their company name wasn’t even attached to the bowl title. It was the Bitcoin Bowl not the BitPay Bowl. But at least their one run was a moment to remember.
Hopefully BitPay will still be going strong at Transact ’16 next year.
deBanked Inks Deal with Lenders Marketing in Bitcoin
March 10, 2015
deBanked has inked an advertising deal with Lenders Marketing, a company that provides trigger leads to the business financing industry. The deal is significant because it was priced in Bitcoin, not dollars.
“Bitcoin’s value against the dollar is volatile,” said deBanked’s Sean Murray. “But 1 BTC today is still equal to 1 BTC tomorrow.”
deBanked does convert a portion of its Bitcoin revenue into dollars, but holds the rest. “I think it’s important to practice what you preach,” Murray added. “What better way is there to debank than by using Bitcoin as a currency?”
Lenders Marketing and deBanked used Coinbase to transact, the country’s first regulated Bitcoin exchange.
deBanked’s March/April print magazine issue will be distributed in the mail at the end of this month. Anyone can subscribe to receive it for FREE.
Lender’s Marketing monitors business credit databases, credit card processing companies, financial institutions, government and public filings and merges them with their own database to provide a real-time reflection of current business loan needs.
In the upcoming magazine issue, you will literally be able to smell the leads. You’ll have to hold a copy in your hand to find out what that means.
Federal Government Selling Bitcoins
February 18, 2015
If the webpage didn’t say www.usmarshals.gov in the address bar, it’d look like a poorly disguised scam. The page, which looks like it came out of the 1990s (no SSL either for a government website?) is offering 50,000 bitcoins for sale, an amount worth $11.8 million at current market prices.
This sealed bid auction is for 50,000 bitcoins separated into two series: Series A (10 blocks of 2,000 bitcoins), and Series B (10 blocks of 3,000 bitcoins). You will not have the opportunity to view other bids. You will not have the opportunity to change your bid once submitted.
Bidding ends at Noon on March 2nd and in order to bid you have to wire the U.S. Marshals at least $100,000 upfront just to be considered a legitimate bidder.
The old fashion system instructs bidders to email them their driver’s license, completed bidder form, and receipt that says they wired them a hundred grand. There’s a special email address to do this and they should hear back from someone if they get approved.
I bet you never thought you’d seen an email address like this, USMSBitcoins@usdoj.gov.
So why are the U.S. Marshals in the Bitcoin business? Surely you know about Silk Road already…
If you want to get in but don’t have enough to cover a lavish bid, why not syndicate it out? That’s allowed:
Can I form a syndicate of buyers?
The person or entity that registers to bid on this auction must satisfy all registration requirements, including certifying that the bidder is not acting in concert with the defendant or defendant entity. This certification extends and applies to all members of a syndicate. The primary bidder should perform whatever due diligence the bidder feels is necessary in order to comfortably make that certification.
And if you don’t win, the Marshals will just ACH your deposit back, but not until after they’ve probably put you on some kind of watch list. Nothing says suspicious person like randomly wiring 100k+ to the U.S. Marshals just so you can be considered a bitcoin bidder. Expect them to be curious about who you are.
Hopefully their technology is more advanced than the way their website looks though.
A Bitcoin Moment
February 1, 2015
I had a moment recently. It was late at night and I was ready to hit the hay.
“Oh wait, there’s something I need to get out of the way,” I told myself.
I had kept delaying the purchase of a new printer cord to replace the one I mangled. It was time to end that procrastination now! Even though it was 1 AM, I was sure that it would only take a few minutes to place an online order and I summoned the motivation to go for it.
Addicted to Amazon’s 1-Click ordering feature, I was bummed to discover they didn’t have the cord I needed. With no time to waste, I used Google to find a site that did carry it.
Found one.
Add to shopping cart.
Select payment method.
Ugh…
I didn’t have my credit card number memorized and I looked across the unlit room to see if my wallet lay nearby. It was somewhere in a pile on the coffee table, or maybe it was upstairs, or maybe I left it in my pants pocket. Unsure and too tired, I selected PayPal to speed things up, a service I hadn’t used in a while.
Incorrect password.
Ugh…
I entered my email address and completed a captcha.
No email…
Refresh email.
Still nothing.
Refresh email again.
Nothing.
Agitated, I started Googling for help about not receiving a PayPal password reset email and instead ended up on a message board where people griped about PayPal in general.
After perusing that forum like a zombie, I got up and walked around. My wallet wasn’t downstairs or at least I couldn’t find it.
Thirty six minutes had gone by since I first encountered the checkout screen. I stopped caring about the cord and I resolved to never print anything ever again.
Before shutting down the computer for the night, I checked my phone. The only news alert I had was about bitcoin. I laughed out loud and went back to the checkout screen. Bitcoin was a payment option. I selected it, copied and pasted the payment address and sent bitcoins stored on my computer to it.
Order placed.
—–
tl;dr
I needed to buy a cord online. Credit card was out of reach. PayPal password was forgotten. Bitcoin saved Gotham.
ACH is the Annoying Little Thing We Can’t Live Without
January 19, 2015
A few months ago I paid an invoice via ACH. The vendor was used to getting paid by check and didn’t accept credit cards. When I mentioned the funds would be paid overnight, they got excited but were suspicious. Would there be a fee to receive the money like a Fed wire might? “Nonsense,” I told them.
When the banks opened the next morning, they didn’t see it. The funds had been withdrawn from my account and I double checked that the account and routing number matched their voided check. They took no comfort in that verification of course because they didn’t see the money on “their side.” That put the burden on me to convince them nothing had gone wrong or that I wasn’t lying. “It should be there,” I told them. “Who knows, depending on your bank it might not post until tomorrow.”
Let’s spend all day researching this payment
Putting the blame on the recipient’s bank or the ACH system as an imperfect fluid thing that comes with no guaranteed delivery schedule only heightened their levels of suspicion.
If you’ve been in this situation before particularly when funding a merchant who claims the funds are not there, there is only so much you can say or do to pacify them.
“Can you give me some kind of confirmation number?” they ask. Ahh, the mythical confirmation number.
So you call your bank, get some kind of number and pass it along to them which their bank does nothing with because they have no record of any incoming payment.
At the vendor’s behest, I went back and forth between my bank and their bank to try and locate these funds. The quest to find the missing deposit took up the first six hours of my day. Honestly I wasn’t worried about it. I was pretty sure it would show up eventually, but the vendor was freaking out.
With the work day almost over, the receiving bank finally logged a pending deposit in the vendor’s account.
It was good enough for them. They finally believed me. Phew.
You got the money, right?
How do I know my vendor actually got the money? Well because they told me they did…
Good enough perhaps, but a few years ago I helped a merchant get financing that claimed they did not receive their funds even though I was pretty sure they did. I went through the whole shebang, ACH system this, your bank that, confirmation number this, let me double check that, etc.
Three days later they claimed they still had not gotten it. It turns out they had but they knew without direct access to their bank account, we couldn’t confirm it, at least not in time to try and reverse the transaction successfully. Did we screw up somewhere? Was the routing number right? It’s a horrible feeling to believe you didn’t deliver what you promised you would to a merchant.
After more than a week we had figured out he not only received the cash, but had moved the money out of the account and bailed.
Once the money goes into the ACH system, you really don’t know anything. Some alternative lenders can confirm clients received deposits by requesting the client’s username and password to log into their bank account. This is a terribly flawed system.
Out there in the regular world I couldn’t have asked my vendor for the credentials to their online banking. Oh you didn’t get the ACH? Give me the password to your bank accounts, I’ll go have a good look.
You call this efficient?
In 2015 I can send money and have no idea if the other person got it. Somehow this is standard. It’s like e-mail in a way. I know I sent it but until they tell me they received it, who really knows.
There are obviously options to transfer money instantly but it comes at a great cost. And someone still has to tell me it got to the other side. I can’t confirm it myself.
In the age of the Internet, it’s amazing how inefficient payments are. We refer to modern payment processors as disruptive services, but it’s same problem with a different twist. Somebody pays you by credit card and the payment processor flags the sale, causing you to have to send documentation to their risk department to review. If rejected, the funds are held for six months and quite possibly your merchant account terminated. The customer won’t know all this though. All they knew is that their card was charged.
Intermediaries make transaction processing easy but they also make it really hard. The alternative lending industry spends entirely too much time managing payments.
The ACH debit was successful… or was it? Let’s wait 3 days to find out if it gets reversed before we really know for sure.
Did they get the money? Let me call them to confirm. Oh they didn’t pick up. I’ll write them an email asking them to confirm that they got my ACH.
They said they sent the money but I don’t see anything. Can you send me a confirmation number?
I sent you that email on thursday, you didn’t get it?
We’re used to a system where the only thing you can confirm is that something was sent and so we spend countless hours and money trying to figure out if they were received.
Meanwhile, in the future…err present day
One of the most remarkable features about the Bitcoin system is that I can confirm that the money I sent was received by the other person. Everyone else in the world can confirm it too. The dollar/bitcoin balance of all bitcoin addresses are public and anyone can create a near infinite number of bitcoin addresses.
I joked before that in order to truly see with my own eyes that a vendor did not receive my ACH was to request the credentials to their online banking and log in. But all they need to do is generate a one-time use bitcoin address for the transaction and when I send funds, both they and I will see it deposited there, instantly.
Money sent, they got it instantly, I see it there, end of story.
Recently, .01 BTC was sent to this bitcoin address of mine: 19kzD1RkC8MjazfCkCJkfx7369ULCyPsg1
Check it out here: http://bitref.com/19kzD1RkC8MjazfCkCJkfx7369ULCyPsg1
or here: https://blockchain.info/address/19kzD1RkC8MjazfCkCJkfx7369ULCyPsg1
If you needed to pay me, I would click a “generate address” button on my computer, you send bitcoins to it, and there will be no doubt that they were received because you can view the balance of it yourself. I can keep the funds in that address or move them to another one. Even if moved, the paper trail that they were there remains. There is no uncertainty or research required.
So who confirms the transactions? Not the Automated Clearing House thank God. Bitcoin miners and nodes do. You can read about my experience as a miner here.
At present, the standard bitcoin network transaction fee is .0001 BTC, the equivalent of 2 cents. Transactions are also irreversible! No chargebacks!
You can send me a thousand dollars or a million dollars instantly for the price of 2 cents and view the balance in my receiving address as proof that I got it. Thousands of people do this every day.
Bitcoin’s adoption has been slow, it’s history volatile, and its reputation murky, but I pray everyday that a decentralized technology like this will last in the mainstream. The bureaucracy, inefficiency, and lack of transparency in other forms of payments are a drag on commerce.
If you’ve ever spent longer than a minute trying to figure out if money made it from point A to point B, you need to start learning about the Bitcoin system. If you’ve ever spent more than 2 cents sending money, you need to start learning about the Bitcoin system. And if you’ve ever had a payment processor give you a hard time about a transaction, you need to start learning about the Bitcoin system.
You might be happy with ACHs for now but we were all happy with telegrams once. That’s about the level of sophistication the mainstream payments industry has now. I can’t wait until this era is over.
Confessions of a Bitcoin Miner
December 18, 2014If you’re even vaguely familiar with Bitcoin, you’ve probably heard that you can mine them. It’s one of Bitcoin’s most unfortunate pieces of jargon because it sounds like a scam. We can’t mine U.S. Dollars so there’s no frame of reference for what enthusiasts are talking about. We can mine gold and silver of course, but how the heck can one mine a digital currency? It’s clear there’s more to Bitcoin than just being a form of money and that frightens people. It certainly frightened me.
The first time I imagined bitcoin mining, I pictured sentinels from The Matrix drilling down with unrelenting intensity towards the last human city of Zion. Perhaps the humans were hoarding a vast trove of valuable bitcoins and a war was being waged to achieve digital hegemony. Like Ray in Ghostbusters, I couldn’t help it. The thought just popped in there.
The next thought was that I better stay away from Bitcoin. It was easier to take the blue pill where “the [Bitcoin] story ends, you wake up in your bed and believe whatever you want to believe.” That’s what many consumers have done in the past. And who could blame them? I liked my life without Bitcoin in it, so why mess it up?
But the maniac I am, I took the red pill and explored just how the deep the rabbit hole goes.
I mined some bitcoins and the machines didn’t kill me, at least so far. I’m mining them right now as I type this. If you’re getting excited that I’m about to tell you that I’m getting rich while you fools sit on the sidelines, you’re going to be disappointed. There is no actual mining. It’s just slang for facilitating bitcoin transactions over the Internet. Womp womp. If people weren’t sending bitcoins back and forth, then there would be nothing to facilitate and therefore nothing to mine.
To illustrate simply, I’ll start off by reminding you that Bitcoin has no central authority. There is no Visa, no banks, and no Federal Reserve to sign off on a transaction. Instead Bitcoin transactions are validated by computers connected to the Internet running free Bitcoin software.
If I have 5 bitcoins and I send 3 to you, computers all over the world running this software are processing algorithms to validate this and make them permanent in a global ledger. The computers make sure you really have those bitcoins to send and then transfers them. You can’t create a fake bitcoin or spend one you’ve already spent because the Bitcoin system will know about it.
On just a single day there are nearly one hundred thousand bitcoin transactions. That’s too much for just a few computers to handle, not to mention that the processing power required to validate them is intense. Validating transactions requires lots of processing power and utilizing processing power has a cost in electricity.
So it pays
The Bitcoin system has a built in reward system to incentivize people around the world to keep the system in order. If your computer achieves a specific milestone while facilitating transactions, you are rewarded with bitcoins. Again, don’t get excited. These milestones are extremely rare to reach and totally random (for the record it’s called solving a block). You could facilitate transactions for 200 years and never get any bitcoins back as a reward.
But while random, it’s a probability game. The faster your processing power, the better your odds of being the lucky computer to receive the reward. That’s a necessary but unfortunate component to Bitcoin because there’s a built-in arbitrage opportunity. Why be a passive facilitator when you could arm your computer with a faster processor and rig the odds in your favor? If your computer was significantly faster than the other ones on the network, you could potentially get rewarded bitcoins often enough and with enough consistency to cover both the cost of your upgraded computer and the electricity to keep it cranked up.
And with that understanding, an international arms race began for increased processing power. Up until early 2013 you could quite easily profit from being a facilitator. Those folks didn’t see themselves as facilitators anymore but as miners. It wasn’t a passive activity. It was a business, like hauling ore out of a silver mine.
Today, so many people have tricked out their processors that it’s nearly impossible to get an edge. In fact, mining often results in losses. I have experienced a net loss in actual U.S. dollars through mining even though I’ve acquired fractions of bitcoins. Net loss? whuh?!
Forget about using your desktop or laptop to mine bitcoins. That’s so 2011. Engineers went on to build special hardware chips much better than household computers that do nothing other than process calculations for bitcoin transactions. Then came small boxes of chips, then large ones…
And when everyone started buying large bitcoin processing boxes, they began to buy two or three of them…
Then a stack of them…
Then a room full…
Then a warehouse full…
And of course a lot of additional money had to be spent on cooling, ventilation, and protecting against fires.
This is where a little problem started. Once everybody was using a million dollars worth of specialized hardware for speed and was spending tens of thousands of dollars per month on electricity, the edge was constantly being neutralized. Worse, the frequency that bitcoins are awarded per day does not increase. There will only be 21 million bitcoins ever placed in circulation. They’re awarded through mining at a fixed frequency. You can try to be the recipient of each reward but the frequency of which they’re awarded doesn’t increase.
Bummer for those that have amassed nuclear arsenal sized mining operations.
But also bummer for me. This is the extent of my mining equipment.
I have three small mining chips all connected via a USB strip. The outer pieces are ASICMiner Block Erupters and between them is a Bitmain Antminer U2. They run 24/7 connected to my home laptop. I can monitor their activity through this little window on my screen:
Combined they are crunching out an average of 2.2 Giga hashes (GH/s) per second, a speed so insignificant compared to the network’s competition that I will probably die without ever receiving a reward of bitcoins.
Unless…
Join forces
There’s a trick to mining to ensure you don’t die rewardless. You can combine your processing power with other miners and leverage your chances. Then if the group’s effort yields a reward, it’ll be distributed on a prorated basis. Someone got this idea a long time ago and in today’s ultra competitive environment, it’s practically a must.
They’re called mining pools. Pools aren’t just a couple of friends, they’re nearly small cities of miners working together collaboratively. The pool I mine in (BTC Guild) has 14,000 to 16,000 users mining together at any one moment and a single user could have an entire warehouse full of mining equipment. In the last hour, the fastest user provided 1,047,666.38 GH/s worth of power to our pool. That’s 476,211x more than what I contributed and he is just 1 of 15,000 users in our pool. woah!
What’s even more wild is that BTC Guild only makes up 5% of the world’s Bitcoin mining power. And yet because I am part of that pool I am paid a prorated amount for every reward the team earns. Surprisingly, that number is not zero. Running 24/7, I am earning an average of 60,000 satoshis a month.
The exchange rate of Bitcoin is extremely volatile but at this moment 60,000 satoshis is equivalent to 19 cents. Yes, 19 cents per month!
And don’t forget that the mining chips cost money to buy and running them 24/7 runs up more than 19 cents worth of electricity used. This means Bitcoin mining isn’t about getting rich. I’m losing money mining. It’s a hobby or benefit conferred upon the digital currency system to keep it running smoothly and accurately. Well at least for me…
Remember that miner that’s out-processing me on a scale of 476,211 to 1? He’s earning about $90,000 per month. I don’t know what his expenses are to run an operation like that but I’m sure it’s not cheap. His biggest enemy is that the value of Bitcoin to the dollar has fallen pretty heavily this year. $90,000 a month in revenue could become $45,000 a month just through exchange rate risk. Those are pretty high stakes to gamble with. But it could also become $180,000!
And whether the big players like that mine or don’t is irrelevant. Whether he makes money or not doesn’t matter. Arbitrage opportunities in the facilitation of transactions is for ultra geeks with big bucks. Mining as a hobby is for regular geeks. It’ll cost some money to do but you get to contribute to a system you believe in.
As for you, the potential average currency user, mining is not really of any consequence. The facilitation of digital transactions already happens with dollars, euros, and pounds. In My Journey to Bitcoin, I explained that buying a cup of coffee with a credit card requires 8 people to get paid for the transaction. Sure the process is completely different for Bitcoin but so what? Bitcoin is unique.
The problem is the mining terminology. It should be called facilitation but that doesn’t sound sexy especially if you are trying to convince an investor to give you $1 million to take advantage of potential arbitrage opportunities on the network.
And that’s about it. The real story behind mining isn’t so scary and you won’t necessarily be at any disadvantage if you still have no idea what the hell mining is. Bitcoin is full of technical nonsense best left to geeks, but you as an actual currency user do not have to worry about a lot of it.
If you’re at all like me though, obsessively curious about how things work and excited to try them out, I’m happy to clue you into the mechanics of mining and even get into the finer details behind it.
An ASIC Block Erupter costs about $10 on Amazon or eBay. I run Ubuntu Linux as my native desktop OS at home (geeky I know) but you should be able to do it with Mac or Windows. The mining software I use is BFG Miner 3.10 and I use BTC Guild as my pool. Admittedly, I am waiting for a delivery of two more Antminer U2s (5x faster than the Erupters but just as cheap) and a delivery of two Antminer U3s (210x faster than the Erupters). I will in all likelihood not achieve a profit even with the additional equipment. And that’s okay, it’s enjoyable just messing with the gizmos.
The best way to learn about Bitcoin is to try it yourself. Hey maybe you’ll hate it, but at least it’ll be based off experience. You can buy fractions of a Bitcoin, even just a few dollars worth from Coinbase. From there you can shop online, convert them back to cash, or send them all to me. 😉
I’m not afraid to say that I mine bitcoins, even if it’s infinitesimally small amounts. What else did you expect from a guy running the deBanked website?
I put my bitcoins where my mouth is. If you’re into alternative finance too, it’s finally time you gave in and tried it.
How to Use Bitcoin
December 8, 2014
The best way to get comfortable with bitcoin is to just try using it yourself. Even though there are many technological, mathematical and confusing layers to bitcoin, the currency aspect of it is by far the easiest to use and understand.
With that said, here’s how you can dip your toes in and become a big bitcoin kahuna:
1. Open an account on Coinbase.
2. You will need to buy/exchange bitcoins using your regular currency such as US dollars. To do this you will need to connect your bank account to Coinbase. This is what I did. Also it will ask you to enter your cell phone number for two-factor password authentication to prevent hacking.
3. Decide how many bitcoins you want to buy. I bought 1 whole BTC but you can buy fractions of 1 if it makes you feel comfortable. Choose whatever amount you want. You can always buy more or sell your bitcoins back into dollars.
4. Bitcoins will be deposited in your account. Coinbase will store them for you along with the private key to use them. You can choose to export your bitcoins but you don’t have to. I keep mine at Coinbase.
5. Shop anywhere that accepts bitcoin. I shopped at overstock.com.
6. On overstock.com, I selected the item I wanted and placed it in my shopping cart. For payment method, I selected bitcoin.
7. There are two ways you can initiate the bitcoin payment to overstock:
— A. Manually send bitcoins to the address provided. A random receiving address is created for each transaction.
— B. Use your Coinbase wallet (the option on the left. This is easiest and what you should do)
8. If you used option B above, Coinbase will automatically transfer the bitcoins to overstock.com and your order will be placed instantaneously.
All finished. You’ve officially joined the world of bitcoin!
—————–
Need to send a payment manually? It’s easy!
1. Log on to Coinbase.
2. Click “My Wallet” on the left hand side.
3. Click “Send”
4. Make sure you know the recipient’s bitcoin address. If you are making a payment to advertise here on debanked.com, this is an address I will supply you with. Some parties create a unique receiving address for each transaction but they can be reused.
5. Internet connected bitcoin miners around the world will automatically facilitate the transaction. This should take about 10 minutes at most. There is nothing you need to do other than wait for the receiving party to confirm. It is impossible for them to deny receipt of the bitcoins as all transactions are verified and public in the Bitcoin Blockchain.
All finished. You’re now a pro!
My Satoshi Monday
December 3, 2014Call me brave, batshit crazy, or deBanked in the modern era. Earlier this week I wound up at the Bitcoin Center in NYC, a place I didn’t really believe existed. They supposedly host events downtown by Wall Street every Monday and Thursday nights with free alcohol and food.
I don’t believe it, I thought. I called the place ahead of time, twice, half expecting the second attempt to reveal the number was actually out of service. Nevermind the fact that the first time I called, an enthusiastic gentleman was eager to have me stop by.
These bitcoin events start at 7pm. I got there 10 minutes early just to scope the situation out, that way I could escape before anyone knew I was there. Can’t take any chances with these bitcoin people.
But it looked safe. Well, safe enough. The Bitcoin Center is a giant open room on the first floor of 40 Broad Street. The lighting is dark and the floors are pure cement. It could easily double as a handball court or a trading floor, which it kind of is.
And so I kicked off a Satoshi Monday with a crowd that looked like they were doing unix programming in the 1980s. I was glad I dressed casual. We may have been physically near Wall Street but mentally it was light years away. I half expected Richard Stallman, the legendary icon of the free software movement to pop in and start handing out bitcoins, digitally of course, through some kind of cool free software.
I’ve seen mainstream bitcoin enthusiasts at payments conferences around the country, you know, banker types, but the Bitcoin Center keeps it real. Within 15 minutes of my arrival, I had already had conversations that involved taking down the Federal Reserve, the Koch Brothers, and overthrowing the government. I learned that bankers were poisoning nature and that nature was gearing up for revenge. A war was brewing and you didn’t want to be on the wrong side. “You don’t want to f*ck with nature!” someone screamed.
I had no idea what any of it had to do with bitcoin but the crowd wasn’t all like that. Thank God.
Others gave me the inside scoop on Gems, a company that wants to be the “Bitcoin of social networks”. One fellow bought XGEMS early and if I was smart I should try to pick some up too. Maybe another time…
Cryptocurrencies and cryptoassets of all kinds were uttered. Of course each one seemed to be in presale, was only being offered for a low rate today, or was only open to a select few and for a limited amount of time. If you didn’t get in now, it was too late. The more seemingly elusive they were, the more people wanted to buy them, regardless of whatever they were.
Just as I was beginning to question My Journey to Bitcoin, shit got real. “You selling?” a guy asked me. I assumed he meant drugs. But when he saw how paralyzed I had become, he started to laugh. “I’m talking about bitcoin dude,” you have any to sell?
He wouldn’t be the first to ask me that night. In fact there’s a sizable group of folks that attend just to trade bitcoin. There was even an opening bell and an honorary guest bell-ringer guy to kick off trading.
The Bitcoin Center isn’t an exchange though. Any deals made and arranged are between you and another party. Online exchange prices affect the price on the floor but deals made on the floor don’t affect online exchange prices. On Satoshi Mondays, bitcoin goes for cash money.
I thought it was dumb at first so I asked the next guy that was looking to trade, “Why would I buy bitcoin from random people like you in person when I could just do it online?” I should’ve seen it coming. “Must be easy for people like you who have a bank account,” he responded.
I let that one sink in. Just the day before I had blogged that 25 million Americans are unbanked, meaning they don’t have bank accounts or even access to banking products. This fellow was one of them. He lived off cash but wasn’t letting that stop him from shopping online. He gave you cash, you gave him bitcoins. He stayed unbanked but not cut off from the Internet connected world.
I wanted to ask him why he chose that route over a prepaid debit card, but cards are not a cure-all. Other attendees told me that they buy products overseas and that they were either being charged a huge percentage on top to cover the card processing fees or that merchants had stopped accepting cards altogether. Sure they could make an international wire transfer but even that was a headache for merchants looking to conduct an automated business online.
Bitcoin was said to be simpler for all involved, something I believe because I purchased a new monitor using bitcoins on Overstock.com just last week. It was actually faster and easier than using a credit card. Seriously. I also saved Overstock on the processing fees. See what a good citizen a bitcoin buyer can be?
An in-person bitcoin exchange also prevents the parties from having to pay an online exchange fee, not to mention that you can gain an edge through negotiating. The liquidity of cash on the spot can create some serious arbitrage opportunities.
People threw down thousands of dollars to buy bitcoins which were then transferred via a mobile app. I probably had enough to do some trading but I didn’t need the cash.
When the free pizza arrived, the crowd turned into a mob. The underbanked it seemed were also underfed and a life of living bitcoin to bitcoin meant this might be the only meal they had for some time. I pushed their weaker counterparts, the unbanked, out of the way to get a hot slice and they pushed me right back.
“Bank account lover!” they shouted. It was a harsh indictment, but they knew. As deBanked as I was, they knew that ultimately I was banked.
Damn.
Some people left right after they ate. Those that remained began to tell me about their digital mining operations, a necessary component of the Blockchain technology that cryptocurrencies like bitcoin are built off of. Bitcoins don’t just magically appear. Computers on the Internet perform wildly difficult mathematical calculations in order to facilitate the creation and transfer of bitcoins. This design is partially why nobody can beat the Bitcoin system.
One guy told me that he had his basement completely redone so that he could turn it into a mining center. Most mining is done with specialized computer hardware that can perform nothing other than mining. You can actually buy such machines at the Bitcoin Center. If your mining is productive for the system, the system will reward you with bitcoins. The processing power required to solve the complex mathematics makes the odds of being rewarded very low. As time goes on, the system’s equations get more and more difficult to crack.
Some miners are backed by billion dollar investment funds and have a serious advantage in the mathematics arms race. But for those that just casually dabbled in mining, they seemed to be getting a little something from doing it, even if it was small.
Admittedly one guy talked me into buying mining equipment, something miniscule and inexpensive, a novelty almost. It of course packs so little power that its contribution to the Bitcoin system will be insignificant and will likely yield nothing. I didn’t buy it from him though, I bought it on Amazon. Not taking any chances with the bitcoin weirdos.
I used a prepaid debit card to buy an Amazon gift card which I then used to buy a bitcoin mining machine, or something. I swear I’m not crazy. The moment I clicked buy though, something happened to me. My beard got a little more scraggly, the designer label on my pants faded away, all my past presidential votes magically got switched to Ron Paul, and I finally understood that nature was coming to kill us all.
Well, that’s almost what happened.
The Bitcoin Center might bring out the the industry’s worst stereotypes but between the lines, there’s something there. The unbanked, the merchants/consumers dealing with the costly nightmares of credit card processing, and the freeing feeling of operating outside the traditional banking system. I get it.
And they got me because I was one of the last people to leave that night. Before I knew it, Satoshi Monday almost became Satoshi Tuesday. “Party’s over buddy,” said one of the important Bitcoin Center people. I was ready to go. I really was. I had absorbed a lot. But I had just one more question for him.
“You selling?”
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Want to just try it out? Buy just $1 worth of bitcoin on Coinbase. You have nothing to lose by learning.
