Bitcoin: Not Just for Libertarians and Anarchists Anymore

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By Olga Kharif,

from Bloomberg Businessweek,

Even as the value of Bitcoin has fallen 55 percent this year against the dollar (price on Oct. 8: $344), consumers are embracing the digital currency. People have opened 41 million Bitcoin accounts worldwide, according to the Bank of England. Parents are dispensing allowances in Bitcoin to teach their kids to be digital citizens. Marijuana smokers are buying buds from Bitcoin-enabled vending machines. Consumers in emerging markets such as Brazil and Russia are starting to use Bitcoin to hedge their volatile currencies. While the total value of Bitcoin commerce isn’t known, Gil Luria, an analyst at Wedbush Securities, estimates global spending on goods and services using the currency has doubled in the past year.

New and updated apps and digital wallets make using it easier. Mainstream companies—more than 75,000, say payment services Coinbase and BitPay—accept it. Consumers can use Bitcoin to pay Dish Network (DISH) for TV service, Expedia (EXPE) for hotel rooms, and Dell for PCs. So-called Bitcoin Boulevards, where retailers take the currency, have opened in The Hague’s World Canal area and in Cleveland Heights, Ohio, where participating businesses include Mitchell’s Fine Chocolates and Shawn Paul Salon.

By far the most popular virtual currency, Bitcoin was created in 2008 by the mysterious Satoshi Nakamoto, a programmer or a group of programmers. Most currencies are managed by central banks. Bitcoin has no central administrator; a network of computers run by volunteers validates transactions, which require encrypted electronic signatures. While advocates see digital currencies as the money of the future, Bitcoin will have to overcome a number of hurdles, including concerns about security, before becoming widely accepted.

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