Love it or hate it, bitcoins are a national craze

LAS VEGAS — It's fitting the future of Bitcoins is being debated in the gambling capital of the world.

In the sterile setting of a hotel-casino ballroom here, hundreds of people — almost all men — copiously took notes Tuesday on the intricacies of Bitcoin mining and investments in the controversial currency. They cheered the simplicity of Bitcoin while jeering banks and credit-card issuers.

The conference — Inside Bitcoins: The Future of Virtual Currency — "is the Woodstock of Bitcoin," says Robert Brewster, CEO of Whidbey Wasabi, a farmer of wasabi outside of Seattle. "I was skeptical until a skateboarding friend of mine put his last $10,000 on Bitcoin and made $90,000. It changed his life."

"(This year), Bitcoin will be the single-biggest sector for venture capital investments," Brock Pierce, managing director of Clearstone Global Gaming, said to whoops and hollers.

With whispers that the value of the controversial digital currency will top $10,000 by the end of 2014 — and counter arguments the whole thing will unravel soon — "risk" usually appears in the same sentence as the highly-speculative Bitcoin market.

The debate often pivots on capitalism vs. crime, and the inherent risk in so volatile a form of payment.

Consider the points and counterpoints:

POINT: PHENOMENON. "Now, it's a commodity; soon, it will be a phenomenal currency," says James Beshara, CEO of Crowdtilt, a crowd-sourcing mobile platform that accepts digital currency. (Thousands of online vendors accept Bitcoins as payment.)

"Once governments start to invest, it will take off," says Beshara. He put all of his disposable income — $2,300 — into Bitcoins this year. His investment is now worth $24,000. He predicts Bitcoin value will soar to $10,000 by the end of 2014 — making his initial investment a tidy $230,000.

Seeing Bitcoin's potential among gobsmacked investors, Bank of America Merrill Lynch last week became the first major bank to initiate coverage. It says the currency can become a "major means" of payment, and placed its value at $1,300 per Bitcoin – with a maximum market capitalization of $15 billion.

Meanwhile, venture-capital powerhouses Google Ventures and Andreessen Horowitz are among those who have invested in Bitcoin start-ups.

COUNTERPOINT: THE DARK SIDE. "Criminals have been using Bitcoins since Day One because of the anonymity — it is hard to trace," says Etay Maor, fraud prevention solutions manager at Trusteer, an IBM company. In a recent report, Trusteer detailed how cybercriminals are leveraging the Bitcoin boom, and how hackers target it.

This month, China warned that Bitcoin carried considerable risk and instructed its financial institutions not to trade it. At the same time, Bitcoin has become a haven for penny stock-style, pump-and-dump schemes.

Apple this month forced Gliph, a secure-messaging app, to remove the ability to send Bitcoin payments or face being booted off the iOS App Store.

Love it or hate it, Bitcoin is a craze that is stoking a national debate. As speculators line up for a piece of the virtual currency action, vocal skeptics dismiss it as a new-age Ponzi scheme.

The 4-year-old creation – unregulated and pseudonymous for users – saw its unit value pass that of an ounce of gold in late November, at $1,242, and it has big-name backers. Billionaire Sir Richard Branson says he will accept them as payment for space flights, and outgoing Federal Reserve Chairman Ben Bernanke praised the technology in a recent letter to the Senate.

The currency is based on a deflationary concept: A limited supply of no more than 21 million coins, whose value does not drop easily.

"It's how money should work in an electronic world," says Lawrence Lenihan, managing director of FirstMark Capital, which focuses on investments in e-commerce and other fields. "It removes friction, it destroys barriers, and it enables opportunity. You'll see it first disrupt remittances and money transfer and then it will move to commerce and payments. From there, the uses will explode in ways I don't think we can even fully understand at this point."

The internationally flavored two-day conference – representatives from Brazil, Sweden, South Africa and Germany were in attendance – had the feel of a revival. After he finished his panel on Bitcoin funding, Pierce was engulfed by about 20 people.

Sam Cole, co-founder of KnCMiner, which sold $8 million worth of hardware to "mine" Bitcoins in just days, drew an equally adoring mob.