Bitcoin goes wild in New Zealand
Wednesday 20 Nov 2013 12:43 p.m.
A single bitcoin is now worth around $800, up from around $150 in April (file)
The explosive growth of the world's first legitimate virtual currency is making people all across the world very, very rich – and Kiwis are along for the ride.
Digital currency Bitcoin has flown largely under the radar since its inception in 2009. But in the last few months its use has skyrocketed, and the value of one Bitcoin has jumped from around $150 to about $800.
Kiwis are jumping in while the going's hot, trading hundreds of thousands of New Zealand dollars every month for a piece of action.
Daniel Newton, a 32-year-old software developer, runs an online exchange that helps users buy and sell Bitcoins in New Zealand. The early adopter says parts of his exchange have seen a 1000 percent increase in prices over the last six months.
"More and more people are interested all the time," he says. "All sorts of people, certainly investors, but also people who like the concept."
Conceived by a secretive individual known only by the pseudonym Satoshi Nakamoto, Bitcoin is decentralised – so, unlike every other currency in the world, it's not tied to any country, major bank or really anyone in particular.
Instead users share money with each other through a peer-to-peer system, the same sort of thing that keeps Skpye's video calls running smoothly.
Every user is independent of each other but, by working together and agreeing to a set protocol, people are able to send Bitcoins across the world instantly. There are minimal fees and no middlemen.
The revolutionary change could, according to Mr Newton, shake up the finance sector in the same way that email revolutionised communication.
"Bitcoin makes sending money as fast, and also as cheap, essentially, as sending emails," he says.
"There's thousands of different email servers that different people run and there's thousands of different Bitcoin nodes that are all participating in the network."
The price of the currency is regulated by a complicated mathematical process called 'mining', which stops inflation from blowing out of control.
Fundamentally, it works a lot like a lottery – users can download a 'mining' computer program and, by running it on auto-pilot, are given millions of tickets to the draw every hour.
A set number of Bitcoins are then awarded to users randomly to keep the currency stiffly regulated. From there the real-world price is set by demand, just like gold or silver.
However there are now so many miners vying for the same draw that, for most users, it won't be worth the electricity bill to join in.
The currency is accepted by a few local internet companies, most notably file-sharing service MEGA, but it's largely used underground on the darknet, parts of the internet hidden to everyday users – often by criminal entities.
Mr Netwon says he's seen a remarkable uptake in New Zealand since Bitcoin's inception in 2009 but he's not making any hard predictions on the currency's long-term future.
"When I found out about Bitcoin it was just hard to get them here in New Zealand, I couldn't get any myself," he says.
"In the circles that I talk to it's getting more exposure but that tends to be people who have a technological background."
The phenomenon has "great promise", the software developer says, but he's not sure where it'll end up in future.
"It could just be like a supplementary system but if it overhauled everything that would be interesting," he says.
"[It] could potentially make commerce a lot easier in some ways, kind of like email made communication a lot easier, but that's the goal and the dream I guess".