As Cypriots lose their savings in the latest crisis of the euro, the digital currency Bitcoin is enjoying spectacular success. Worth less than a dollar in 2011, its value has grown by more than 600% in 2013, with the price of a unit breaking $100 this week. As you read this it will be worth $150, and every indication suggests the rise will continue.
Bitcoin was launched by hackers in 2008 with the goal of becoming an incorruptible alternative to failing economies. “People say Cyprus was a one-off but it’s the shape of things to come,” says investment banker Mark Taylor. “If you need to keep your money safe – where it cannot be interfered with by government or banks, has complete transparency and no taxes – Bitcoin is perfect.”
Taylor is so convinced of the Bitcoin revolution that he is leaving his bank to be a full-time “miner.” Using high-powered processors, miners verify the transactions between users and gain small rewards for it, with all transactions listed on an open-source, public server. On Taylor’s iPad we watch updates as the global Bitcoin economy ticks over, listing transactions from $2 to $300,000.
Miners make $3,000 a day if their processor is fast enough, and that looks set to increase. Taylor expects the currency to approach $500 per unit by the end of 2013, and it is gaining mainstream acceptance – with WordPress and Western Union the latest big firms to take Bitcoin payments.
It is a transformation for the currency, which until recently was best known for its use on narcotic-selling websites. “It’s not only for hackers and criminals now – you do not have to be a subversive,” miner Geir Hansen of BitMinter told Metro. Bitcoin Magazine editor Mihai Alisie agrees: “Bitcoin is to banks what email was to post offices, a viable alternative without middlemen.”
However, a recent FBI warning that Bitcoin would “logically attract money launderers and other criminals” has raised fears of government regulation, which could destroy the concept. Further, cyber-criminals have succeeded in stealing small quantities. But despite such concerns, the Bitcoin value continues to march in the opposite direction to the financial markets.