Tom Ferguson, owner of Rise bakery, is the first business owner in Durham to accept Bitcoins.
Bitcoin is a digital currency created in 2009 that allows people to buy goods and services and exchange currency across borders without going through a bank. Many small business owners opt for Bitcoin in place of credit cards because of the smaller transaction charges.
“I pay as much as $30,000 a year in credit cards, which is really rough if you are a small business owner working with small margins,” Ferguson said.
Instead of having his customers swipe credit cards, Ferguson has a machine that converts dollars to Bitcoins. Customers scan a barcode with their smartphones, and the online currency is automatically transferred to Ferguson’s account with Coinbase, a third-party Bitcoin exchange company. Coinbase then converts the Bitcoin back into dollars–at a much cheaper rate of 1 percent.
Campbell Harvey, J. Paul Sticht Professor Professor in International Business in the Fuqua School of Business, noted, however, that the bitcoins are very volatile.
“Bitcoin is ten times more volatile than holding the stock market, and it is ten times more volatile than the price of gold,” he said. “That doesn’t mean it isn’t useful, it just means you don’t hold it for that long.”
The notoriously volatile currency made national headlines recently when the major Bitcoin exchange, Mt. Gox, appeared on the verge of bankruptcy. The company had been defrauded out of 744,000 Bitcoins over several years, raising questions for some about the security of the currency, according to an article in The New York Times Monday.
Ferguson said he is not concerned though.
“There’s really no chance that I’m taking with this,” he said.
Harvey said the security concerns about Bitcoin are overblown. According to him, the Bitcoin network has enough computer power to perform 312 quintillion operations per second—approximately 10,000 times more operations per second than the world's fastest computer.
Sophomore Raffi Garnighian, a Coinbase fraud monitor, said the failure of Mt. Gox to keep their assets secure was unrelated to the Bitcoin network.
“Mt. Gox is run by 18 to 22-year-old children,” Garnighian said.
Harvey said Mt. Gox was defrauded through a series of online hacks. The robbers would withdraw some Bitcoin and then alter the transaction record in such a way that it would appear as though the transaction did not go through. They would then complain to Mt. Gox that they never received any of their currency, getting two withdrawals for the price of one.
Ferguson said he is not risking his business by using the currency because he never holds the currency for long enough for it to depreciate, as it has in the wake of Mt. Gox’s downfall.
“I own two Bitcoins,” he said. “That’s my big risk.”
Lori Leachman, professor of the practice of economics, said the more businesses begin to use Bitcoin, the more it will appreciate.
Garnighian said he believes online currency such as Bitcoin is the future of money, especially in foreign countries where monetary systems are not as stable as they are in the United States.
Ferguson said his use of Bitcoin is partially a symbolic act. He wants people to change how they think about money and how they think about technology.
“I really hope there’s something to this,” he said. “I’m just trying to put a little hope out there.”Get The Chronicle straight to your inbox
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