Winnipeg’s crypto-community covets a currency, and Bitcoin Teller Machines (BTMs) are popping up around the city.
Bitcoin is a form of digital currency that is regulated as a commodity in Canada.
Digital currencies, or cryptocurrencies as they’re alternatively known, are forms of barter currency that are not controlled by central banks or countries and can be traded anonymously.
The dollar value of a bitcoin soared from $200 to nearly $6,000 in the last year.
Although a single bitcoin currently costs thousands of dollars, they can be acquired in almost any denomination. The smallest unit of bitcoin is called a satoshi, and it currently represents a fraction of a penny.
Instead of buying avocado toast or a couple of beers, a person could put ten dollars in a BTM to receive over 200,000 satoshi.
“When I took the time to learn how bitcoin worked and to understand the fundamentals behind bitcoin, I was immediately fascinated, and my initial response was ‘holy cow this is going to change the world,’” Winnipeg realtor and crypto-enthusiast Josh Nekrep, says.
Currencies can lose value. The Venezuelan Bolivar was valued over at over 55 cents Canadian in May 2009. By the beginning of 2010, one Bolivar was halved to 25 cents. Venezuela's currencies experienced two subsequent crashes in 2013 and 2016.
The Bolivar currently floats around 12 cents.
“Our existing currencies, whether it’s Canadian dollars or American dollars, are effectively loaned into existence and necessarily require debt to create currency. It’s a system that’s fueled by centrifugal force,” Nekrep says.
“Bitcoin is a return to sound money.”
HOW (B)IT WORKS
Central banks determine the rate at which a country prints new money, leaving currency control in the hands of these same banks. Winnipeg is home to one of three Royal Canadian Mint locations where Canadian dollars are printed.
Bitcoin is not just valuable as a medium of exchange, but it is a store of value that hedges against the currencies that are endlessly printed by governments.
The value of currencies were representations of metal holdings until the 20th century, when governments like Canada’s separated the value of currencies from gold reserves, creating fiat currencies. A fiat currency is money issued by a government that isn’t backed by holdings of precious metals like gold or silver.
Many Canadian dollars are digitized into numbers and held on bank ledgers. Banks act as financial trust. At the fundamental level, banks verify transactions made with government-issued currencies.
Cryptocurrencies use a technology known as the blockchain to complete transactions.
Bitcoin’s blockchain is a public financial ledger. Transactions are performed by scripts over the internet, rather than by traditional banks.
Although the ledgers are public, bitcoin transfers remain private like cash exchanges.
A BIT SKETCHY
The main criticism bitcoin has faced is an association with criminal activity, due to the private nature of cryptocurrency transactions.
On Sept. 13, JPMorgan CEO Jamie Dimon called bitcoin a “fraud” for murderers, drug dealers and North Korea, and said that it will that will eventually “blow up.”
Dimon also said the value of bitcoin could reach $100,000 per bitcoin before it goes down.
A Santa Lucia Pizza location was the first place Winnipeggers could convert cash to digital coin in February of 2014. Bitcoin cost $815 at the time. Eager crypto-enthusiasts welcomed the machine with queues to buy bitcoin, and the CBC welcomed the BTM’s arrival with an article.
Perhaps unsurprisingly, some of the early adopters of the new rogue currency were criminals.
It wasn’t long before the currency’s less-than-lawful reputation made a physical presence.
Santa Lucia owner Greg Simeonidis had the machine removed when the restaurant saw a rise in shady “gangster kind of looking dudes” who came to use the BTM and intimidated customers.
“It wasn’t bringing a good element into our restaurant,” Simeonidis says.
“It was right in our doorway, bringing in the wrong kind of clientele, which really sucked, because probably 70 per cent of the (BTM) transactions were normal people just trying to use the new technology and embrace it.”
Although Simeonidis had the BTM removed from the restaurant, he still supports cryptocurrency and says Santa Lucia accepts bitcoin as a form of payment.
“I’m a believer. There’s no doubt about it,” he said.
Pizza, check. Beer, check. What else can you buy in Winnipeg with your bitcoin?
Best Sleep Centres is locally known for it’s “you’ll find us” tagline in advertising spots between television news and radio segments. What’s not as well known is that they accept bitcoin.
“I’m willing to take pretend money from the government. I’ll take pretend money from society,” David Keam, owner of Best Sleep Centres, says. “The concept makes sense.”
The Canadian government prints money at a rate determined by the Bank of Canada. There is no hard limit to the amount of money that can be printed. Bitcoin, however, is a scarce resource. No more than 21 million will ever be created.
“You used to be able to take your ten-pound note from the government and get ten pounds of silver. Now you take your ten-pound note to the government, and they tell you to get a Pepsi.
“As long as nobody changes their mind about bitcoin it will exist forever. Currency is based on trust and at this point in time bitcoin makes sense.”
Although Keam believes in cryptocurrency, it currently contributes a limited portion of business, accounting for $10,000 to $12,000 worth of sales.
Bitcoin is accepted by very few local businesses, however its 600 per cent value increase within a year cannot be ignored. Many have already sipped from the bitcoin fountain.
“There’s a whole crypto tsunami that’s coming that nobody realizes is happening,” says Kevin Carthy, who hosts meetings of the Cryptonutz group.
Meetings of the group take place at PCrenu, a Transcona computer store home to a glowing neon BTM that exchanges cash for bitcoin and other cryptocurrencies.
“A lot of the young people don’t have enough information and aren’t prepared for it, haven’t been able to get enough bits (units of cryptocurrency). And I don’t even care what bits you get. Get yourself some bits, because in the future, it will be the only currency that is useful and makes sense.
“Because it’s going to be around and the government’s not, or the government won’t be the same form, or it’ll be so in debt that our money will be worthless.”
Carthy says that many people he knows view bitcoin as “the new RRSP.”
“United States is in $9 trillion debt now, and now we’re talking about raising a ceiling to an unlimited number. Trump says ‘oh, we don’t need a ceiling.’ If there’s no ceiling, what is that currency worth?”
As Carthy notes, the United States faced a debt ceiling crisis in 2011, and Donald Trump seeks to eliminate the limit that the United States is allowed to indebt itself.
Carthy divides views of currency into two categories.
“There’s a crypto reality, and there’s a fiat reality. In these two realities, things are different.
“In this fiat reality, somebody pays you “x” amount of dollars, and you work your ass off, and you hope that you have something left at the end of the month. And every single year, inflation, cost of living, everything keeps driving that down, so it gets harder and harder for your average everyday person who struggles to get by every month. You’re lucky if you can to save anything. It’s designed in that fashion.”
“Crypto works exactly the opposite,” Carthy claims.
“It’s not where government decides the value of the currency. It’s where you and I decide the value of the currency.”
Published in Volume 72, Number 3 of The Uniter (September 21, 2017)