If Kipp Grose has his way, every business in Sudbury will one day accept bitcoins the way they currently accept credit cards.
Grose is the co-founder of Digital Gold Foundries, a new Sudbury-based business that hopes to facilitate use of digital currencies in Northern Ontario.
Bitcoin was the first cryptocurrency – a form of digital currency that uses certain principles of cryptography for security measures.
It was introduced in 2009 by a mysterious developer, or group of developers, known under the pseudonym Satoshi Nakamoto.
Grose says the easiest way to understand bitcoins is to think of them as a foreign currency. Just as with any other currency, such as U.S. dollars, bitcoins can be purchased with Canadian dollars.
At the time of writing, one bitcoin is worth approximately $683.
Unlike Canada's fiat currency, bitcoins, and other similar cryptocurrencies, are decentralized.
Transactions take place through a peer-to-peer network.
Each Bitcoin user has a digital wallet which has its own unique digital signature, through an encryption key, to prevent counterfeiting and fraud.
All transactions are performed over an open ledger, called the blockchain, which keeps track of the number of bitcoins in circulation, and provides further redundancies to prevent fraud and ensure all exchanges are secure.
A person can purchase bitcoins, or a fraction of a bitcoin – since they are infinitely divisible – with just about any currency, but they are also created through a process called mining.
To mine bitcoins powerful computers hooked up to the Bitcoin network are used to collectively crunch numbers.
At this time, the process creates 25 new bitcoins every 10 minutes. The owner of the computer that solves the math problem first gets to keep the bitcoins it creates.
There are just under 13 million bitcoins in circulation at the time of writing and the total number will cap off at 21 million in the year 2140. Every four years the number of bitcoins that can be mined is halved.
When the digital currency was first introduced in 2009, bitcoins could be purchased for a few cents.
“I wish, like I'm sure millions of other people do, that I was into it in 2009 or 2010, when people were mining and they had no idea why they were mining,” Grose said.
The value of bitcoins has climbed steadily since then, and spiked in late 2013, when one bitcoin was worth more than $1,200.
Price volatility and rampant speculation has scared many away from investing in bitcoins.
But Grose said potential value for the digital currency is too great to ignore.
“I look forward to the day when I don't have to worry about Canadian dollars anymore and I can live in a Bitcoin world,” he said.
Grose said it is not Bitcoin speculation that interests him most, but the great societal benefits he believes the digital currency could offer.
With bitcoins, said Grose, people can bypass the financial services system almost entirely.
If a recent immigrant wants to send money back to his family in his home country, for instance, he could transfer bitcoins at almost no cost, whereas an international money transfer would take up a considerable share of his transaction.
Small businesses, too, could avoid expensive credit card fees, said Grose, if they made the switch to Bitcoin transactions and left Visa and Mastercard behind.
But Bitcoin has also been saddled with its share of controversy. To pay taxes, Grose needs to take the extra step of converting his bitcoins to Canadian dollars.
Because of its decentralized and encrypted nature, it is also difficult for law enforcement to seize the digital currency.
Bitcoin's decentralized nature has also made it an attractive currency for organized crime. Most notably, an underground online marketplace called Silk Road used bitcoins as the exclusive form of payment for clients to buy illegal drugs, amongst other things.
The FBI shut down the website on Oct. 2, 2013, but a second incarnation has reportedly risen from its ashes.
Grose said Silk Road ironically helped increase the value of bitcoins. “Some people say Silk Road was Bitcoin's first killer app,” he said.
But Grose dismissed the concerns about Bitcoin's potential for illicit activity. He said the digital currency is no different from any other form of money, and can be used to buy good things or bad.
“Money is money,” he said. “People will use money to whatever they see fit with it. When you get into moral things like the war on drugs, people can use money to do whatever they want.”
As for Digital Gold Foundries, Grose said he plans to start by building a cryptocurrency exchange. Some exchanges allow users to buy bitcoins with their country's currency, but Grose's would allow users to exchange bitcoins for other similar digital currencies, such as litecoins.
In his mission to make Sudbury a Bitcoin-friendly jurisdiction, Grose has so far convinced his landlord – at a co-working space called The Forge – to accept his rent in bitcoins. His landlord instantly converts them to Canadian dollars.