Banking on Bitcoin: Harlingen couple look to make money with online cash system

HARLINGEN — So how much is that $20 bill worth?

Not as much as it used to be worth, that’s for sure.

But when it comes to currency, particularly virtual currency like bitcoin, the answer to that question is a bitcoin is worth what everybody agrees its worth.

Bitcoin is at the forefront of a wave of digital cryptocurrencies that are bought, sold and used on the Internet just like cash. Or if not cash, used as you would a debit or credit card to purchase a product.

The rationale for using bitcoin is that the number of bitcoins is limited, so investing in bitcoin is regarded as a hedge against inflation.

Precious metals like gold used to fill that financial niche, but bitcoin is far easier to move and use than physical gold which an investor has in his or her hands.

Bitcoins are produced by a process called “mining.” There is an upper limit of 21 million bitcoins that will ever be mined (hence the hedge against inflation; there’s no government to increase the amount of money in circulation, which lowers the value of a dollar, euro or renminbi).

Boyd Stone and his wife, Julia, of Harlingen, are bitcoin miners.

Stone said he and his wife have been hard at work attempting to set up revenue streams for their household. Bitcoin mining is one of them.

“We’re trying to build up some revenue streams that don’t involve dealing with customers,” Boyd said. “Just set them up and they’re easy to maintain after that.”

Bitcoin mining meets those requirements.

“The way bitcoin works is it’s a decentralized form of banking for the entire world,” he said. “Instead of having a central bank, you have a decentralized network of miners that run the banking for everybody.

“In return for running the banking, new bitcoins are created to pay us for the computers we have to buy and the electricity we have to supply, and stuff like that,” Boyd added.

Boyd said he and his wife had an initial outlay of about $3,500 for the high-end computers needed to handle the heavy load bitcoin mining demands. Added to that, the power-hungry computers use about $270 a month in electricity.

Once those computers are paid off, Boyd estimates that bitcoin mining — less the power bill — will bring in about $700 per month.

Bitcoin isn’t just bringing in revenue for the Stones. More and more retailers are embracing the currency as well.

The biggest companies and organizations that accept bitcoin as payment include the Dish Network, online retailer overstock.com, Dell computers, PayPal, Reeds Jewelers, travel website Expedia and even the United Way.

Bitcoin’s worth is monitored just like a stock on the New York Stock Exchange or NASDAQ. On Friday afternoon, for example, one bitcoin could be purchased for $447 U.S. dollars.

“The only reason that bitcoin has any value is that people believe it has value,” Stone said. “That’s the same for fiat currency like the dollar bill.

“I’m bullish on bitcoin and I’m betting it’s going to be around for a while and keep going up,” Stone added.

As evidenced by the major retailers that now take bitcoin as payment, the virtual currency is winning new fans.

“I actually saw a mainstream investor person suggesting that people actually buy some bitcoins as part of their investment portfolio,” Boyd said. “I thought that was great.”

Texas banking officials issued a memo in 2014 stating that under regulatory guidelines they deem bitcoin and other virtual currencies as speculative investments, not legal money.

Therefore, bitcoins would not be regulated in the state. The flip side is that there are no regulatory guarantees or rules that might come into play to help protect your bitcoin investment.

rkelley@valleystar.com

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