Dollars gone digital: Bitcoin is gaining acceptance as currency in the Granite State
An iPhone5 displays the Bitcoin Wallet smartphone app. Bitcoin is an online financial network that people use to send payments from one person to another. Illustrates BITCOIN-FAQ (category f) by Timothy B. Lee (c) 2013, The Washington Post. Moved: Wednesday, Nov. 20, 2013 (MUST CREDIT: Bloomberg News photo by Simon Dawson).
A stone foundry in Rochester, a martial arts studio in Derry, a chiropractor and a cafe in Newmarket and law firms in Concord and Manchester have something in common.
They've joined the growing number of New Hampshire businesses that accept Bitcoin, a virtual currency that exists only on the Internet, as a form of payment.
The latest version of a Manchester company's Bitcoin machine was featured last week at the Consumer Electronics Show in Las Vegas. COURTESY
The Granite State's reputation as a hotbed of activity for the digital currency was enhanced last week, as visitors to the Consumer Electronics Show in Las Vegas got a peek at the first Bitcoin ATM, created in Manchester by brothers Zach and Josh Harvey.
From left: Lamassu Bitcoin Ventures founders Matt Whitlock of Weare, and Josh Harvey and Zach Harvey, of Manchester, in Washington, D.C., at the International Students for Liberty Conference in February, with an earlier version of their Bitcoin Machine. COURTESY
At this time last year, the machine was just an idea the brothers developed as they operated the Stomp Romp guitar store in the Millyard, which has since been closed. They now focus full-time on building a business around their invention, which hit the marketplace just as the value of bitcoins began to soar.
When their invention was first featured in the New Hampshire Union Leader last May, the alternative digital currency was trading online for about $100 per coin.
"Many thought at the time that was a bubble," said Zach Harvey, "and it did go down to as low as $55, but then slowly built back up to $100 and now it's around $800. At one point in the past year, it went up as high as $1,200."
Investment in the Bitcoin phenomenon is not for the weak of heart. "It hasn't been very stable," said Harvey, "but it's been experiencing incredible growth."
Bitcoin values started the day on Jan. 8 at $820, went to $790 and back to $806 before noon. Like any commodity traded in real time, a bitcoin is only worth what someone is willing to pay for it.
Apparently, there are a lot of people willing to take the risk. Interest in alternative digital currency has spawned several other "altcoins" in the past two years, as programmers adapted the open Bitcoin protocol to launch Litecoin, Peercoin and Namecoin, among others.
Creators of an "altcoin" called Coinye West last week had to speed up the release date of their crypto-currency after lawyers for rapper Kanye West threatened legal action. Kanye West's image came off the coin, which is now known simply as Coinye.
Litecoin, called the "silver" to Bitcoin "gold," has been trading between $20 and $30, while other imitators are fetching below $10 a coin, some getting only fractions of a cent.
The phenomenon appeals to people for a variety of reasons. Some see Bitcoin as a hedge against inflation, because unlike government-managed currency, there is a limit on how many bitcoins will ever exist. There are now 12 million bitcoins in circulation, with a total cap of 21 million.
Others like the idea of online financial transactions with no middle man - no bank, no credit card, no Paypal.
Supporters of the Free State Movement, which is very active in New Hampshire, are attracted by the lack of government control, at least for now, over the Bitcoin economy.
The Free State Bitcoin Consortium, which meets every Saturday, at 6:30 p.m. in the Strange Brew Tavern is one of the most active and well-attended Bitcoin meetups in the world. The group has a Facebook page with 438 members.
Manchester Attorney Brandon Ross, who has been accepting bitcoins and represents the Harvey brothers in their business, says Bitcoin has already helped make some New Hampshire people very rich.
"I've been accepting it since last fall," he said. "It's not a frequent thing, but there are people here who invested early, who have tons of it lying around. We're talking millions and millions of dollars. There are some people here who really made a lot of money."
The Harvey brothers were among the first attendees at the Strange Brew meet-up, and from those meetings hatched the concept for what they call the Bitcoin Machine. They're reluctant to call it an ATM, since it does not convert bitcoins into cash.
The machine's appeal is the easy trading of dollars (or any other currency) for bitcoins, a transaction that can now only be completed online through one of several Bitcoin exchanges. Unlike typical online transactions, however, Bitcoin exchanges require an electronic funds transfer and cannot be completed with credit or debit cards. Some exchanges take 30 days just to register.
Bitcoin "miners" using expensive and complex computer technology should be able to generate Bitcoins from the original inventory for another 20 to 30 years, said Harvey, although the "mining" gets more difficult with every passing year. Eventually, the only way to get Bitcoins will be to buy on exchanges from the fixed inventory in circulation.
The Harvey brothers debuted their Bitcoin Machine prototype last May, and started working on the production version last summer. The first 14 were shipped last fall from the manufacturer in Portugal to buyers in the U.S., Canada, Australia, Finland and Slovakia.
"By the time we had shipped those out, we had finished another 28, and those are shipping out this week or next," Harvey said. The company the brothers created, Lamassu Bitcoin Ventures, is now into its third production run of about 100 machines, all of which are pre-ordered and scheduled for delivery between February and April to domestic and international clients.
Starting to hire
A company called Atlanta Bitcoin in Atlanta, Ga., was the first U.S. location to put one of the machines into operation.
"We are going to do some hiring in the near future, because a lot of orders have come in during the past five or six weeks," Harvey said. "We're getting a lot of interest and are really overworked. It's at the point where we definitely need some help."
Until now, they've been managing the business from their Manchester apartment, making trips to their manufacturer in Portugal and working primarily with freelancers.
Attorney Seth Hipple, of Martin and Hipple in Concord, says his law firm decided to accept Bitcoin last week after getting requests from clients.
"People kept asking me if I accept Bitcoin and I told them 'no,'" he said. "The main reason was that I was skeptical that it was worth something. At this point, it looks like it has crossed that barrier. It is now not that difficult to turn bitcoins into cash."
The most common method is to use a service called bitpay.com.
Businesses that accept bitcoins can be located at coinmap.org.
"There is some risk, but it's a risk we've discussed and are willing to take," Hipple said. "I'm not going to run my firm on bitcoins. If we have a $10,000 divorce case, I'm not going to take all of it in bitcoins, but I will take some. Obviously, we'll make decisions as they come."