By: Sunny Freeman
Published by: Huffington Post on 01/26/2014 11:33 pm EST
The best way to strike up a conversation, the attendees at this Toronto meetup are told, is to ask a stranger the rather unorthodox first question: “How did you find out about Bitcoin?”
That’s because this is the first meeting at Bitcoin Decentral, one of Canada’s first physical spaces dedicated to the currency that exists only as software — no bills or coins, despite the name. The unchartered digital currency is free from interference from any central banking authority, financial institution or middle man. Bitcoin and its ilk have been threatening a shakeup in the way disruptive technologies have revolutionized the music, movie and news businesses.
The nearly 100 guests crammed into a furniture-less room include a neighbor who popped in on the way to buy groceries, a designer from across the street who is considering accepting the currency, an early buyer now kicking himself for selling his years ago. And then there’s the crowd waiting to use the newly installed Bitcoin ATM, the second in Canada.
Many here are looking to strike it rich in the digital gold rush: the bitcoin miners looking to share tips on the fastest algorithm-solving instruments, the hardcore fan in his Bitcoin T-shirt and matching cellphone cover, speculators trying decide whether there’s a bitcoin bubble and entrepreneurs swapping insights on the next big cryptocurrency idea.
The building is a metaphor for the digital currency: new, unconventional and full of frenetic energy.
This year is being heralded by enthusiasts as “year of the Bitcoin,” a game-changing moment for broader adoption of digital currency — and Canadians are leading the charge.
“2014 will be a dramatic year for Bitcoin because it will start to hit the mainstream,” said Danny Wettreich, CEO of Toronto-based GreenBank Capital Inc., which earlier this month became the first public company to accept Bitcoin in a private sale of its shares.
“It’s just like the early days of the internet where you have dramatic changes on an annual basis, which significantly improved the system.”
Bitcoin has been around since 2009, when it traded for fractions of a penny. It was thrust into headlines last year after $25 million worth of the virtual money was seized from the illicit vice site SilkRoad. On Monday, SilkRoad came back to haunt the community, when the CEO of a bitcoin exchange in the U.S. was arrested and charged with running an illegal scheme to sell $1 million in bitcoin to SilkRoad users.
But the bitcoin has sparked investors’ interests when it topped US$1,000 in November, a 5,000 per cent appreciation from its $13 ask last January. One bitcoin currently hovers about $900.
The growing community of Bitcoin enthusiasts believes it could revolutionize the global economy, stabilize financial transactions in underdeveloped nations and pose a libertarian challenge to the role of modern governments.
First, however, Bitcoin needs to expand beyond the underground economy to be recognized by mainstream consumers and businesses as more than just a fringe phenomenon.
The last quarter of 2013 saw a significant influx of venture capital investment into Bitcoin start-up companies, a sign investors are “waking up to the growth of Bitcoin,” says Wettreich. He believes that will accelerate this year and once that happens, retailers and consumers will follow.
“As you get more and more acceptance both by consumers and by retailers, the whole thing starts to snowball.”
Vancouver became home to the world’s first bitcoin ATM late last year, with Toronto, Ottawa and Montreal following suit since the beginning of this year — making Canada the top bitcoin dispensing nation in the world. Also in the past 30 days, online glasses retailer ClearlyContacts.ca said it would become the first major Canadian retailer to accept bitcoin, joining hundreds of small businesses across the country.
Some Canadian consumers are eager to get into the digital economy as online currencies trickle their way into the mainstream consciousness. Earlier this month, Vancouver’s Sarah Yu became a local media curiosity when she put her car up for sale for eight bitcoins (about $7,500). Yu said she was surprised that her decision invited so many questions. To her, the currency is a no-brainer “long-term hold.”
“It’s people that are over 40, they don’t understand it, so they bash it.”
After seeing her initial bitcoin purchase already quadruple in value, she is convinced that the sharp appreciation in the currency is a sign not of a speculative bubble but of just how many people are interested.
That used Volkswagen is far from the quirkiest item Canadians are willing to part with for Bitcoins. A Craigslist seller in the GTA will unload a grey parrot for the Bitcoin equivalent of $1,500 (nearly two bitcoins), while a seller in Montreal is selling his skateboard deck for $25 (just a fraction of one bitcoin). Because Bitcoins are virtual, they can be broken down into any denomination, allowing users to purchase a simple cup of coffee using their digital wallet.
Even the Canadian government is taking part in the digital currency game.
The Royal Canadian Mint this month debuted the MintChip — making Canada the only country in the world pushing into the digital currency space.
The mint is consciously working to be “at front end of this curve” in an increasingly competitive area, said Mark Brule, the mint’s chief emerging payments officer.
“Like any new technology, at the front end there are lots of people that will try to be first to market, what survives at the end of the way will be the fittest.”
The Canadian government is taking a wait-and-see approach to Bitcoin, unlike Germany which recognizes it as private money, or, at the other extreme, China, which forbade its banks from dealing in the currency. Earlier this month Canada vaguely acknowledged the existence of Bitcoin, saying only that it does not recognize the currency as legal tender, but it has also declared that it is not tax exempt either.
Regulation is not only a point of contention in the cryptocurrency community, but a paradox as well. The early adopters and ideologists bought into Bitcoin specifically because it is not controlled by governments that can artificially inflate or devalue its worth, while the lack of legal, financial and consumer protections leaves consumers, investors and merchants wary.
Widespread usage in the buying and selling of goods is one of the core characteristics of a good currency. The ability to hold a stable value over time is another.
Bitcoin requires mainstream adoption for it to perform these functions, and that means enthusiasts will have to accept a regulatory framework, says David Descôteaux, associate researcher with the Montreal Economic Institute.
“If Bitcoin wants to be something else than just some marginal phenomenon, it will need some kind of regulations,” he said.
Descôteaux believes the technology behind Bitcoin has the potential for groundbreaking innovation, but he thinks regulation will need to be addressed first. And that question will be one of the central preoccupations in the financial world in 2014.
“The more popular it becomes, the more central banks and regulators realize they have to do something about it. What will it be? That’s the big question,” he said.
“In that sense, 2014 is going to be a very interesting year for Bitcoin.”