Bitcoin began to be produced electronically in 2009. The computer-based “cryptocurrency” has since become a global phenomenon.
While Bitcoin and other digital currencies remain a mystery to many, they spawned a lucrative international industry and now have a presence in local convenience and grocery stores.
Area IGA stores and three gas stations in Monroe County now have ATM-like kiosks which allow users to buy and sell different cryptocurrencies, including Bitcoin.
A cryptocurrency is a digital or virtual currency protected by computer-based cryptography, which makes it nearly impossible to counterfeit or otherwise manipulate. Most transactions are completed online, with purchases kept in a “digital wallet.” The kiosks allow users to buy cryptocurrency through a secure network using cash or receiving cash from the machine when selling.
Craig Norrenberns, manager of the Millstadt and Red Bud IGA stores, told the Republic-Times that the machines were placed in stores through UNFI, IGA’s food-distribution provider.
Norrenberns said UNFI entered a business agreement to place the kiosks in stores of the company’s clients. He explained the process as similar to placement of propane tank rental stations found at many stores.
Norrenberg described activity at the kiosks as “slower so far.”
Chris Rico of Sumbits, a St. Louis company that provides cryptocurrency machine services in Missouri, explained the benefits of using a “currency exchange kiosk” rather than a computer to buy and sell cryptocurrency.
One reason to use the physical machine is speed. He said that purchasing transactions generally take less than an hour to complete. Online trading of cryptocurrency also requires “linking approvals” and other barriers to speedy transactions, according to Rico.
He also noted that a kiosk-based exchange carries less risk than its online counterpart. At a kiosk, users may sell or purchase up to $500 of cryptocurrency using only a name and phone number. Rico explained that internet-based exchanges often require a bank transfer or some other connection to a person’s financial information, which can be vulnerable to misuse.
Rico said the transaction fees associated with cryptocurrency kiosks, usually around 8 percent, are a trade-off for “privacy” and “convenience.” He also warned that, as “happens with everything” online, accounts are subject to hacking and scams.
For those who have secure crypto “wallets” and know how to avoid scams, Rico says that Bitcoin itself can be a “valuable property in the current monetary climate” and an “inflation hedge.”
He explained that Bitcoin is on a “fixed schedule,” meaning that the number of Bitcoin that will eventually be produced, 21 million, will never increase and therefore not lose value due to hyperinflation.
Government-issued legal tender, such as the U.S. dollar, can lose value or drive up the price of goods as more currency is released into the economy. For instance, the increase in Federal Reserve Notes (printed money) circulation between June 2019 and June 2020 was $226.3 billion, a 35 percent increase from the previous fiscal year.
As with any investment, Bitcoin is not without risk.
Rico described it as an “asymmetric investment,” meaning there is a “large chance” the value will increase, and less of a chance that Bitcoin’s value will “stay the same or go down” and an even “smaller chance that it goes to zero,” or becomes completely valueless.
“(Bitcoin) value goes up the more people use it,” Rico explained.
With multi-billionaires like Elon Musk backing cryptocurrency and businesses beginning to invest their profits in Bitcoin, it does not seem likely that the phenomenon will be going away anytime soon.
There is still much hesitancy regarding cryptocurrency, evidenced by volatile Bitcoin trading in recent weeks. Its uncertain nature and bizarre beginnings have led some investors to hold off on buying until it becomes a more stable asset.
At the start of 2009, a person known as Satoshi Nakamoto, whose true identity has never been revealed, began electronically “mining” the first block of Bitcoin.
Mining is the process in which a computer runs a program to verify the data in each unique “block” of a cryptocurrency “mine” program. Once verified, a part of a cryptocurrency is released from the “blockchain” and added to a ledger, the electronic means of accounting for location and movement of cryptocurrency.
The process of mining Bitcoin makes it almost impossible to steal anything using the cryptocurrency, according to Rico.
Bitcoin itself was first used as payment on black-market internet sites and then became an easy way for hobbyists to complete financial transactions, but it is now a widely accepted form of currency.
In 2010, a little over a year after the initial mining began, it was used at a Jacksonville, Fla., Papa John’s restaurant to buy two large pizzas. Over a decade later, construction of a “Bitcoin City” in El Salvador is being planned by using money from Bitcoin-backed bonds.
With the current price of one Bitcoin fluctuating between $55,000 and $60,000, the value of the almost 19 million Bitcoin currently in circulation is over $1 trillion.
Each Bitcoin can be divided into eight decimal places, so buyers and sellers do not need tens of thousands of dollars to begin investing. The smallest unit of trade is called a “Satoshi,” what Rico described as the equivalent of a penny, although it is roughly equivalent to .000001 of a penny worth $55.
The prevalence of cryptocurrency usage has caught the eye of lawmakers, who see its use as a way to avoid taxes, which has been one of the benefits for those who have been using cryptocurrency in recent years.
One caveat of the recently-signed Infrastructure Investment and Jobs Act is the taxation of Bitcoin. U.S. Rep. Mike Bost (R-Murphysboro) called the idea “bizarre.”
“By doing this, we’re the only nation that taxes a coin that you can move offshore instantaneously. So we won’t generate taxes off that, (Bitcoin owners) will move it,” Bost argued.
“Here’s how you generate taxes off Bitcoins,” Bost continued. ”When you liquify the Bitcoin, it is reported into your bank account and then you have to report it through the IRS. So we were collecting taxes on that, but now they’re going to tax Bitcoin in a way that no other country ever has and they think that they’re going to stay here.”
Regardless of how different governments around the world deal with the challenge to traditional monetary systems, cryptocurrency is likely to be around well into the future.