Scenes from a recent Bitcoin event in Chicago. (Photo courtesy of Neil Sy…)
About 40 people gathered on a sub-zero day in early January to eat pizza and drink beer at Atlas Brewery in Lincoln Park. Most of them left without paying a dime.
It was a trial run for the brewery to accept Bitcoin, a digital currency that's an alternative to cash and credit. At the end of the night, the final tab for food and beer came out to 0.5960 bitcoin (or BTC, the standard abbreviation for bitcoin), the equivalent of about $500 cash given the exchange rate at the time. It was an event organized by Jonathan Solomon, a 28-year-old entrepreneur who has joined the ranks of Bitcoin advocates trying to cash in on the new digital currency.
If you don't know what Bitcoin is, you're in the majority. Though it's been around since 2009, the concept of a completely digital currency that can be exchanged for goods and services is new. Though bitcoins can be exchanged for U.S. dollars or other traditional currencies, it is entirely digital, and has no physical manifestations -- nothing that can be stuffed into a wallet. It's difficult to estimate exactly how many users Bitcoin has, though the number of users of just one Bitcoin "wallet" application used to store bitcoins jumped from less than 200,000 in February 2013 to more than 1.1 million in January.
"This is sort of a new thing here, it's just starting to catch on," Solomon said . "A lot of people have gotten into it in the past three to six months."
Bitcoin has, in fact, made a splash locally and nationally in recent months. In January, the Chicago Sun-Times announced a 24-hour experiment offering readers a chance to bypass paid portions of its website in exchange for a bitcoin donation. A handful of Chicago businesses have also begun accepting the currency as payment, including Pilsen-based screen printers Booshworks, beer tour guides Chicago Beer Experience and even a one-man Christmas tree delivery service. Plans for a bitcoin ATM are in the works for Chicago, as well as cities like Austin and Seattle, and larger online retailers like Overstock, Target and Amazon have also adopted it.
But there are risks inherent with bitcoin use. The federal government has no oversight over Bitcoin, meaning bitcoin funds don't have protections that standard bank accounts do. Because of the currency's structure and relative novelty, a single bitcoin's value can fluctuate hundreds of dollars in a single day. In December, when the Chinese government reportedly warned against their use, the value of a single bitcoin tanked from about $1,200 to less than $600 in less than a day.
Bitcoin's value is largely influenced by supply and demand, as well as speculation. While there are some highly tech-heavy ways of obtaining them, the easiest and most common way is through trading for goods or services.
That's exactly how entrepreneur Nick Wesley increased the size of his digital wallet in December. Twenty percent of the 23-year-old suburban LaGrange resident's Christmas tree delivery service--about 50 orders in all--was dealt in Bitcoin. He ended up making about $600 worth of BTC.
"There's a lot of people that just want to support the ecosystem," he said. "I want to make an effort to find Bitcoin merchants and pay them in bitcoins."
Why would any business, whether it's a small operation like Wesley's or a brick-and-mortar retailer, want to deal with them? There are advantages. For one, transaction fees from credit cards can be bypassed. Additonally, for an entrepreneur like Wesley, the value of the bitcoin pile can increase. Given the fluctuations of the Bitcoin market, the Bitcoin "savings" could increase dramatically.
Wesley said he's followed Bitcoin since its beginning, but has only recently made an effort to collect bitcoins. Like most Bitcoin users, he won't discuss exactly how many bitcoins he has. It's a question akin to asking someone how much money they have in their bank account.
Wesley was also among the Atlas Brewing crowd Jan. 7, the night the brewery tested out Bitcoin. He spent about $15 (a very small fraction of one bitcoin, which, while varying in value, hovers around $800) on a few beers during the meetup.
"As a merchant, I don't really care how you pay, I just want [you] to be happy," said Steve Soble, one of the owners of Atlas.
Soble said Solomon approached him about the concept late last year. Though he wasn't keen on the idea at first, he said he is planning another night for the Bitcoin crowd at Atlas.
"There's such interest in this," he said. "There are a lot of people in the community that are fascinated by where this Bitcoin thing is going."