NASHUA – The Free State folks would like to shake up America’s government, laws and society in general – so why not the currency, too?

That idea, using a digital, non-government money supply called Bitcoin in place of dollars and cents, is one of many topics that will be discussed Saturday during the Liberty Forum, a weekend-long Free State gathering in town.

But that talk won’t introduce the Bitcoin idea to the region. An advocacy group has been meeting weekly in Manchester for almost a year, trying to spread the word.

“Bitcoin is used online: WordPress accepts it for hosting, Reddit from subscribers. But this is New Hampshire and we like small business. We’d like to see everybody on Elm Street use Bitcoin,” said Kevin Freeheart of Nashua, a participant in the Free State Bitcoin Consortium. The group meets most weekends in Manchester and has an active Facebook group.

A few businesses in Manchester, such as Stomp Romp Guitars, accept Bitcoin, while the Vertical Dreams climbing gym began accepting them a week ago in
Manchester and Nashua. So far, according to the company, two members have said they’ll stay paying by Bitcoin.

Usually a retail transaction takes place via a smartphone, which uses a super-barcode known as a QR code to transfer the bitcoin equivalent from one digital “wallet” to another, although other methods are possible.

Freeheart – that’s his legal name, although not the one he was born with – is classic Bitcoin advocate, since he works as a systems administrator for a local tech company and also supports many libertarian ideas.

“A lot of people who are not necessarily libertarians are interested because of the technical aspect. There’s a connection with I.T., open source and the Linux crowd,” he said.

Bitcoin was developed in 2009 by an anonymous computer programmer, or possibly group of programmers, known as Satoshi Nakamoto, although the idea had been floating around for years. It is a digital-only currency, based on an open source, peer-to-peer protocol, that can be anonymously transferred from computer to computer – or smartphone to smartphone – without an intervening bank.

A set amount of Bitcoins are created each year; no more than 21 million will ever exist, with the last being released in 2140. Currently, more than $275 million worth of Bitcoins have been issued, each with a value of almost $30. One bitcoin is divided into 100 million units, called satoshis.

Bitcoin’s big difference from standard currencies, or other online pseudo-currencies issued by companies, is that there’s no central bank or government issuing and standing behind the currency, or trying to adjust its value by creating more Bitcoins or holding them back.

Their dollar equivalent is only what the community thinks it is, via trading. This can produce fluctuations more like the stock market than currency market.

This lack of central oversight and the anonymity of Bitcoin appeals to the libertarian instinct. Among other things, the government can’t freeze assets that are held in Bitcoins on your home computer, the way it can freeze assets in a bank.

Bitcoin was first adopted by some less savory industries, including the sale of drugs and other illegal goods usually through a site called Silk Road, and Bitcoin is also favored by online gambling sites. That, and the oft-discussed possibility that Bitcoin economies can avoid taxes, contributes to a sometimes unsavory reputation.

Charlie Shrem, CEO of BitInstant, a firm that makes it easy to buy Bitcoins online, says says his firm processed $4.7 million worth of Bitcoin purchases in January.

“This is the largest social economic experiment in the history of the world,” he said. “I can’t say that Bitcoin is the final solution, but it’s the first solution that has really worked.”

Shrem will be one of the speakers about Bitcoin at the Liberty Forum. The session starts at 2:30 p.m. in the ballroom at the Crowne Plaza Hotel in Nashua.

On the technical side, Bitcoin is based on an open source, peer-to-peer network, using a shared online transaction log with a digital verification process, public-key cryptography, and various other software processes to keep people from cheating, particularly from spending the same Bitcoin twice.

“It solved the trust issue,” is how Shrem describes the technology.

Hardware is also progressing, such as the development of Bitcoin-specific devices using application-specific integrated circuits (ASIC) that will increase speed and security.

“It’s still unstable,” said Freeheart of the Bitcoin value. “But as more and more people accept Bitcoin it will be more stable. Paypal went through the same thing. People weren’t sure about it until eBay endorsed it, and now it is widely accepted.”

However, the Bitcoin ecosystem is still getting its feet wet, which has led to some scares. Most notably, a June 2011 security breach caused the price of a Bitcoin to fall to one cent, wiping out the value of all the Bitcoins in the world and leading to some predictions that the system had failed. It slowly rebounded, however.

Hackers have pulled off several Bitcoin heists, including a so-called “hedge fund” that swiped more than $5 million in a fraud scheme. Also, Bitcoin can vanish during computer crashes, making the money literally disappear.

David Brooks can be reached at 594-6531 or dbrooks@nashua
telegraph.com. Follow him on
Twitter at @GraniteGeek.