Students Cash in on Cryptocurrency Craze
February 3, 2014
The internet has long been a source of new and interest- ing ideas, but the advent of online currency is possibly the most creative of them. Currencies that originate on- line, known as cryptocurren- cies, are quickly moving from being exclusively online odd- ities to a worldwide economic phenomenon.
Bitcoin, the first crypto- currency founded, recently reached $1,200 per bitcoin in value, sparking massive inter- est in the currencies. After a sharp decline, Bitcoin was valued at $799 on Wednes- day. Although it’s meteoric rise and volatilty in value has been criticized, investors seem to hope to make bitcoin an everyday, fully functional currency. Bitcoin investors readily exchange cash for coins, hoping to make a profit speculating on the ever-vola- tile market.
In addition to making these investments, Bitcoin is increasingly being adopted by online companies as a pay- ment option. Recently, Tiger Direct, a web-based electron- ics store, has introduced a bitcoin payment method, and in the first day cleared over $250,000 dollars in bitcoins.
Other big-name compa- nies like Overstock.com and Virgin Galactic have recent- ly opened bitcoin payments, with hundreds of thousands of dollars in transactions in the short time they have been available.
Bitcoin’s security makes it an attractive option for busi- nesses, as well as a very fast processing period; bitcoins can be cashed through wesites like Coinbase and BitPay in as little as 24 hours, faster than credit cards or checks.
“For me, the best part of Bitcoin is the inability to re- verse transactions,” said 18 year-old investor Charles Fries, a student from Jesuit High School. “Small busi- nesses pay big money in order to prevent credit card ‘charge- backs’ (payment reversals), and Bitcoin solves this prob- lem by disallowing payments to be reversed. This feature in the BTC protocol can save up-and-coming point-of-ser- vice businesses significant amounts of money.”
NEW COINS EMERGE
Bitcoin is not without competition, however.
In the wake of the media attention and investor hype surrounding bitcoin, other cryptocurrencies, some using protocol and code different than bitcoin, have emerged, attracting investors and scru- tiny from professionals.
One more popular alterna- tive cryptocurrency, Litecoin, worth about $20 per coin, has been an attractive to some in- vestors since it is much more affordable in small quanti- ties, and has a much smaller learning curve for generating the coins at home through a process called mining.
Still other cryptocurren- cies have been flooding trad- ing websites and investor fo- rums, some based entirely off other protocols, and others with their own unique ways of solving problems afflicting the original bitcoin coding.
Dogecoin, the underdog of the market, has achieved a certain amount of notoriety in the cryptocurrency market for it’s lively approach to trad- ing and investment.
Dogecoin’s claim to fame lies in it’s rapid expan- sion since it was founded two months ago. Starting as an online joke around the Doge meme, which fea- tures an adorable Shiba Inu, it was quickly transformed from a joke into a high-volume investment. It’s growth stemmed from hype built in the reddit community for dogecoin, but it has move be- yond online-only effects.
In something out of the Cool Runnings movie, the Doge community has banded together to donate $33,000 worth of dogecoin to the Ja- maican bobsled team so that they could compete at the 2014 Winter Olympics in So- chi, Russia. The online com- munity of /r/dogecoin was able organize the fundraiser, gaining publicity and expo- sure for the fledgling currency.
Dogecoin is currently the brainchild of a growing and mostly satirical community of supporters. Though some are interested in the curren- cy primarily as a humorous diversion, some investors are seriously determined in gen- erating revenue and hauling in profits by speculating in these new online programs.
“ I was able to make thou- sands of dollars because of the exponentially rising popularity of dogecoin. The reason being is because of its appealability to those who were previously intimidated by Bitcoin.” said Mark Dano, 17 year-old Sacramento in- vestor and administrator of a dogecoin speculation forum. “A single dogecoin is worth 1/10th of a penny, compared to Bitcoin which is worth around $1000 per coin”
Getting started investing in these online currencies is challenging for many begin- ning users. The basic concept of a cryptocurrency is that the coins are not minted by a cen- tral authority, but are instead published by the users in a process known as “mining.” By mining coins, you solve blocks of code that corre- spond to certain coins, which remove them from the chain and give you a profit.
“The solution is rewarded in whatever coin you are mining, whether that be Bitcoin, or Dogecoin,” said Mark Dano. “The solution to the problem gets harder and harder to solve as more users join the mining network, the mining network scales the difficulty to the targeted out- put rate of exactly one block per minute. Each block con- tains anywhere from one to one million coins. From the moment I started “mining” dogecoin, the difficulty level has increased by over 1,000x.”
The future of cryptocur- rencies remains unclear to- day, with many questions left unanswered. The regulation surrounding bitcoin and dogecoin is murky at best, and many lawmakers are un- willing to expand the defini- tion of currency to include this next-generation market.
“It’s an underground cur- rency right now; it’s use as a limited currency that’s resis- tant to inflation. The question is how much longer will it increase in value.” said Curt Cassaza, economics teacher. “Bitcoin is super high risk, super high return. What if the government decides it’s a black market currency, or makes it illegal, or taxes it?”
Not all projections are as dire, however. There is still a lot of impetuous behind the rising prices of these curren- cies that has given no signs of letting up.
“The reason bitcoin is do- ing well is because there is a limited number of them,” said Cassaza. “Any country can just raise inflation, like Japan and the US, by printing tons of money. Bitcoin has a set amount and reaches a stable level. This crazy growth spurt will shift into stabilizing as people start to use it as an ac- tual currency.”
Investors themselves are still eager to see their invest- ments appreciate in the long term. Widespread acceptance of dogecoin appears to be the project’s goal right now, and many users believe this is at- tainable.
“I remember reading an article on Reddit about one man’s vision of Bitcoin’s future,” said Fries. “Soon fiat [USD, EUR, etc.] will only be used to pay government taxes,” really encompasses what Bitcoin will look like in 5-10 years.”