The Bitcoin Frenzy

Photo from: https://themerkle.com/bitcoin-gold-devs-claim-their-premine-is-a-postmine/

Bitcoin: Is it a coin? Is it a really tiny coin? Is its value rising? Is it falling? Block chain technology, cryptocurrencies — what is all this? Should I be investing in Bitcoin? Is the future of money sweeping past me?

Currently, one bitcoin equals $9,234.77. That value is nearly guaranteed to change by the time you’re done reading this.

Members of The Campus sat down with the Distinguished Wayne Angell Chair of Economics Professor Russ McCullough to provide a “Bitcoin for dummies.” McCullough explained that bitcoin is like “a sophisticated math problem that has a number of solutions to it.” Those solutions help determine the value.

Bitcoin is 100 percent electronic with no tangible form of “money,” and generates its value by the demand of holding one or part of its 21 million bitcoins that are out in the marketplace. Thus, there is a “fixed number of bitcoins in existence that cannot be altered by any human being,” according to McCullough.

Different from “traditional currency,” Bitcoin cannot lose its value by someone creating additional coins in the marketplace.

“When governments print more of it [currency], that creates inflation,” which decreases the purchasing power, or the amount you can buy for a set dollar amount,” McCullough says.

Bitcoin has and can become an everyday form of payment.

“The creator of Bitcoin came up with this sophisticated math problem, which allowed bitcoins to be harvested,” McCullough says. “And then, as people started to accept those things as a means of payment, the faith on it is that someone else is willing to take the bitcoin. That’s all money is: anything that’s generally accepted as a means of payment.”

McCullough believes multiple cryptocurrencies will be the next form of currency generally accepted as a means of payment. He believes the government cannot stop the trading of bitcoins as a currency avenue; however, the government could create regulations that, in turn, make it illegal.

Bitcoin can be compared to the popular driving company, Uber, in that “the general public demands that we should have the right to use something else other than the (current) currency,” McCullough says.

Although it’s illegal to create your own currency in the United States, because Bitcoin is computer-based, there is no physical transaction for an exchange, which has allowed the currency to fall outside current US government regulations.

When asked if he would recommend the investment for someone coming right out of college, with no hesitation, McCullough answers “no.” Over the past year, the Bitcoin wave has seen the value jump from under $1,000 per coin to nearly $20,000.

Although it’s not recommended to invest into cryptocurrency just yet, don’t be surprised to see innovative forms of currency come as forms of payment within the next decade.

-- Jon Painter contributed to this story