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Friday, March 21, 2014

Panelists warn of Bitcoin dangers, discuss benefits at Nashua Science Cafe

NASHUA – Uncertainty was a common theme Wednesday night as expert panelists discussed Bitcoin, and the future of the cryptocurrency, with five dozen onlookers attending the Nashua Science Cafe at Killarney’s Irish Pub.

“From my point of view, this is a grand experiment,” said Michael Carter, a professor of economics at the University of Massachusetts Lowell. ...

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NASHUA – Uncertainty was a common theme Wednesday night as expert panelists discussed Bitcoin, and the future of the cryptocurrency, with five dozen onlookers attending the Nashua Science Cafe at Killarney’s Irish Pub.

“From my point of view, this is a grand experiment,” said Michael Carter, a professor of economics at the University of Massachusetts Lowell.

Carter called Bitcoin an “extraordinarily high-risk investment” for the ordinary individual and said he’s steered his own students away from putting their money into the currency.

The currency first entered use in 2009, with the first bitcoins trading for cents on the dollar. Since then, the idea has blossomed in popularity and value – today, a single bitcoin trades for more than $550, although that figure has fluctuated wildly.

The bitcoins were worth more than $800 less than a month ago.

Bitcoins are a digital-only means of exchange created by an anonymous programmer in 2009. They aren’t a currency in the traditional sense because they have no government backing, and there are no printed bills or minted coins involved.

Bitcoins are traded on a person-to-person basis and verified by encoded cryptography, which is unique to every bitcoin.

In recent years, Carter believes Bitcoin has grown in popularity because of some false perceptions and uncomprehended risks.

“Bitcoin has this allure that a lot of really, really smart people thought this up,” Carter said. “In fact, since its inception, the road has been extraordinarily bumpy.”

Carter said, until now, those who got in on Bitcoin early have done well but added folks should understand that they have little recourse if their cryptocurrency is stolen.

“Despite all the advances in encryption technology … the reality is there are still a number of ways through which nefarious individuals with some sophistication have been able to steal bitcoin,” he said.

Carter pointed out programs in the United States, like the Federal Deposit Insurance Corp., which allow for recourse if your money disappears.

Carter also said the anonymity of Bitcoin will provide a problem if the currency looks for governmental recognition.

“I can’t think of a case when money has not been recognized by governments,” Carter said. “If this currency really gains traction, I can’t see any government really being comfortable with it.”

Mike Segal, a Manchester-based software developer specializing in cryptography, countered and said Bitcoin provides people with more transparency than regular currency.

“For the first time in human history, we have a distributed public ledger that anyone can audit,” Segal said, speaking to a feature, which allows users to review logged transactions at different Bitcoin addresses.

Andrew Stone, a software architect who has been a Bitcoin investor since early 2012, agreed.

“Bitcoin is the world’s first engineered sound money,” Stone said in comparing Bitcoin to commodities like silver and gold.

Stone said only a certain number of bitcoins can be created, or “mined,” which allows the currency to be considered a virtual commodity.

Segal called the downfall of Mt. Gox, a Japanese Bitcoin exchange that recently went belly up after $450 million dollars worth of the coins disappeared, a “good step forward” and said the company was already “insolvent.”

Segal suggested that the bitcoins from Mt. Gox may have been stolen years before to the theft’s discovery this month. The discussion about Mt. Gox, which stands for “Magic the Gathering Online Exchange,” led into a more abstract discussion about the wisdom of throwing money into the cryptocurrency.

The panelists agreed the cryptography technology may very well be the most lasting feature of Bitcoin, but even Segal, who said he moved to New Hampshire in connection with the Free State Project, advised people to hedge their bets.

“As an investment, I don’t tell anybody to invest in Bitcoin,” Segal said. “That can be an extremely risky venture.”

Bradford Randall can be reached at 594-6557 or brandall@nashua
telegraph.com. Also, follow Randall on Twitter (@telegraph_bradr).