Bitcoin, a quickly emerging, completely virtual crypto-currency, is gaining popularity by the day––and could be a lucrative investment for students.
On Oct. 21, one bitcoin was worth $176. On Nov. 4, less than two weeks later, the same bitcoin was worth more than $230. The volatility of the currency could be worrisome as the value of a single bitcoin fluctuates daily, but many still see the advantages to be greater than those of the U.S. dollar.
The online currency’s official website http://www.bitcoin.org boasts that there are no late fees and money is transferred directly from person to person online, without the need for a bank. Fees are much lower and accounts can never be frozen. The virtual currency can be used in any country and Bitcoin is almost completely untraceable.
If students were to buy low and sell high, the investment would be in their favor.
“If I were mining a year ago it would have been more likely that I would have made a profit, if I were mining next year it would have been less likely to be profitable, and so on,” Georgia State senior Jeffery Cole Copeland said.
Bitcoins are generated by being “mined,” and anybody can mine if they have the free, open-source application software “Bitcoin Miner” as well as the necessary hardware. The program runs complex codes to solve mathematical problems and thus mines the bitcoins.
“About 85 percent of bitcoins will be mined before 2021,” Copeland said.
Just like mining for gold, there is a finite supply of Bitcoin. There will never be more than 21 million bitcoins in existence, and, like gold, when more people go to mine, there is less to be had.
The Crypto-Currency Conference, held in Atlanta on Oct. 5, offered a closer look at many virtual currencies.
Bitcoin advocate and conference attendee Daniel Krawiszsaid there is no longer a need for government regualtion of money.
“Bitcoin has proven that, through mathematics, there is no need for the state,” he said.
Copeland, a political science major, was invited to the conference as campus coordinator for Students for Liberty. His Georgia State club “Young Americans for Liberty” is in its final stages of becoming a chartered campus organization.
“For now, for students, I think it’s something we should be educated about. We should know something like this is going to happen sooner or later,” junior economics major Mitchell Oliver said.
Because The Silk Road––one of the largest online black markets to ever exist––was seized by the U.S. government in early October, bitcoins plummeted in value at that time. They bounced back up just one day later.
The Silk Road, which accepted only Bitcoin as a form of payment, has some people wondering if Bitcoin promotes illegal purchases.
Oliver wants to see more improvements within the currency before he makes an investment.
“The Silk Road is a great example of Bitcoin being used for bad. Right now, it’s a really easy way for illegal stuff to happen,” he said.
Copeland says the U.S. government does not oppose the currency at this time.
“The government is okay with Bitcoin existing right now. They’d have gone after The Silk Road no matter what currency they were using,” Copeland said.
The government may not always be so lax about the system, however, because there is no governing body for the currency. Instead of paying enormous exchange rates when traveling abroad, students could exchange Bitcoin to other currencies, ultimately saving money.
Copeland said that in previous years, the majority of bitcoins were used for drug trade and trading Bitcoin-to-dollar.
“That’s another thing that begs the question, ‘Is this legal?’” he said.
According to Jeremy Liew, a Lightspeed Venture partner, transactions from SatoshiDice (a gambling website) accounted for “somewhere between 25 percent and over 50 percent of all Bitcoin transactions in the month of June 2013.”
Copeland invested in his first bitcoin last May, but hasn’t bought anything tangible yet.
“I’ve played a few hands of blackjack with it, but never purchased a product,” he said.
Oliver, on the other hand, advises against students investing in what he refers to as the “unstable” online currency.
“Right now, unless you have a lot of money to spend, it’s not a smart investment because it is fluctuating so much…it’s risky. I don’t advise that for college students.”
Even though the system isn’t regulated like a traditional bank might be, Copeland said the chances of getting money taken or stolen from you are minuscule, since each Bitcoin account––or wallet––is password protected.
He also said that anyone can look at anyone else’s Bitcoin wallet if they have the technological know-how. Whether somebody has one bitcoin or one thousandth of a bitcoin, you can see every wallet it’s ever been in, right down to the miner.
“I keep [my bitcoins] with Coinbase exchange…it provided me a free Bitcoin wallet,” Copeland said. “You can save them on your computer yourself, but if you do that and your computer crashes, they’re gone. There’s no recovering them.”
Doing personal research on exchanges with good reputations is recommended to students before purchasing bitcoins.
“Georgia State students should realize that whether they like it or not, Bitcoin is the future of money,” he said. “It’s something everybody should at least take a look at. It’s a cool project and I’m excited to be a part of it.”