A number of businesses are starting to adopt a digital currency that eliminates the need for a central bank but would you feel comfortable buying and using the virtual currency to make purchases?
CTV Calgary Consumer Watch Specialist Lea Williams-Doherty talked to the experts and says bitcoin is really just a complex computer program run by thousands of anonymous individuals called bitcoin miners.
"Who knows where it came from. It's not really that relevant because now that it's out there in the wild it's controlled by the community,” said Dave Bradley, from Bitcoin Brains.
Bitcoin miners, exchanges and buyers make up this community and so far there are four exchanges in Canada that turn bitcoin into Canadian dollars.
The bitcoin community invests in the currency and acts like it has value because it does.
"What makes a currency useful is a consensus. So the only reason the Canadian dollar has value is because we say it does and bitcoin already has that backing it,” said Bradley.
Lea says that bitcoin miners maintain the bitcoin transaction ledger the same way a bank's computing system would.
There are somewhere between 500,000 and two million bitcoin miners worldwide who offer to verify and record payments into a ledger. They are rewarded for the payment processing work with newly created bitcoins.
One bitcoin is now worth $685 Canadian and about 3600 are created every day.
The bitcoin may be shifting from speculative commodity to viable currency as more companies sign on to use it.
Expedia.com has announced that it will accept bitcoin for hotel reservations and now Canadian electronics retailer TigerDirect takes it for everything.
In Calgary, Bitcoin Brains does all things bitcoin like brokering exchanges, launching ATMs and selling mining computers.
The company plans to market a new bitcoin conversion program to retailers soon.
"If someone buys a coffee for $2.50, the merchant will get $2.50,” said Bradley.
A few Calgary companies now also accept bitcoin as payment.
"We're an international company so exchange rates for us are a big problem. We don't like paying them and we don't like the time involved in converting currency and dealing internationally. Second is the credit card fees. In Calgary alone we pay $40,000 in credit card fees every year," said Bryce Currie, Mango Maids Marketing Director.
The bitcoin still suffers from its reputation as the currency of drug dealers and tax evaders and it does carry some risk.
In February, an exchange suddenly closed taking hundreds of millions of dollars with it and financial experts say bitcoin is far from mainstream.
“I think it will be used by those people who tend to want to do things outside the world of regulation but I don't think that overall businesses and consumers will take on bitcoin in a huge way,” said Todd Hirsch, ATB Financial Chief Economist.
Lea says a limit on the number of bitcoins that can be created is written into the bitcoin computer program and that it taps out at 21 million.
So far this year, the lowest value for the virtual currency was $400 and the highest value was $1078.
(With files from Lea Williams-Doherty)
