You can’t touch bitcoin, you can’t see it, and it doesn’t actually physically exist. News 13 spoke with two Western Carolina University professors to find out why people believe so strongly in the cryptocurrency.
WHAT IS BITCOIN?
“It’s a number of things. Is it a currency? Does it store value? Mechanically, it’s the advent of a new technology that’s only existed for the last 10 years: A blockchain,” Larry Trautman, a WCU associate professor of business law, said.
Trautman said blockchain is a digital transaction record, like a digital ledger. People view bitcoin as more mainstream now, but it didn’t start that way.
“The bitcoin currency gained prominence several years ago for its use, particularly in black market operations, for the purchase of drugs, guns, armaments, death for hire, and that was where the notoriety came in,” Trautman said.
“You first get a virtual wallet to hold your virtual bitcoin,” Dr. Taft Dorman, a WCU assistant professor of finance, said.
HOW MUCH IS BITCOIN WORTH?
In December the vale of one bitcoin reached almost $20,000. Now one bitcoin equals about $9,000.
“As we know, the price has fluctuated extensively. If we actually look at it, and compare it with the general financial markets, the price is fluctuating dramatically, more than the general financial markets,” Dr. Dorman said.
Dorman says millennials seem more likely to invest in bitcoin than stocks.
“The volatility of bitcoin is so much greater than the financial markets. It really makes me question why, why would you be interested in investing in something that’s so much riskier than the financial markets,” Dorman said.
HOW SECURE IS BITCOIN?
“While the encryption of bitcoin seems to be sound, very often many of the participants in the market suffer just like any other entity from a cyber security risk,” Trautman said.
“In the middle of December there had been reported about $500 million lost, and then subsequent to that during January there was a hack of a Japanese coin entity that cost another $500 million,” Trautman added. “We have almost a billion dollars that has been lost.”
HOW SHOULD IT BE REGULATED?
“This raises an issue of how you regulate technology that is so new, and very often difficult to describe, and generally unknown by 65 and 70-year-old regulators,” Trautman said the issue of regulating bitcoin raises challenges and dangers.
WHAT WILL HAPPEN IN THE FUTURE TO BITCOIN?
“I still think it’s going to take some time for consumers to really catch on and use them. It’s going to take time for regulation to catch up to it. So, I don’t think it’s going to be a dominating currency within the next year, or two,” Dorman said.
“Were still in the early stages for bitcoin, and we’ll see if that’s still here in a number of years. If not, it is most likely that another virtual currency for some reason displaced it,” Trautman said.
Bitcoin is set up to have a limited supply, which the professors say help create its value. The origins of the currency are somewhat unknown, but it came on the to the market around 2010.