Bitcoin in Bellingham
A look into the local cryptocurrency industry and the enthusiasts hoping to change our future
Story by KAITLIN ESLINGER | Photo by JOSH DEJONG
Hidden between an ironically placed Power Fitness gym and Fat Shack restaurant sits a near-empty office space with more potential bubbling beneath the surface than many realize.
A flashing blue and red neon sign signals to any passerby the office is open, but unless you’re one of the select few who frequents this location, its purpose seems concealed. Until you’re close enough to read the sign plastered right above the door handle, that is.
Bitcoin accepted here!
The rise in Bitcoin’s popularity in recent months made Kyle Weiss recognize that people were coming into the world of cryptocurrency without much direction. As their client-base grew, Weiss and and his three partners realized downtown coffee shops weren’t going to continue to cut it as business meeting locations.
The American Bitcoin and Cryptocurrency Center was created by Weiss and his partners out of necessity — one that didn’t exist a little over a decade ago.
Bitcoin was established as a response to the financial crisis of 2008. A distrust for our government and banking system emerged, which became the perfect breeding ground for a new form of currency. This time, a decentralized cryptocurrency.
Any form of currency is an accounting system which is often controlled by a central user — banks and financial institutions — to guarantee it is real. The central users record transactions and the values ascribed to each one.
Cryptocurrency works in the same way, except there now isn’t just one central user. Most digital currencies run on a peer-to-peer network, so every computer used to buy, sell and create coins keeps track of those transactions. This is done on the blockchain.
The blockchain is a digital ledger which mimics the role of our typical financial institutions; although the physical act has fallen by the wayside, there’s still a system of checks and balances set in place.
The open-source software which allowed Bitcoin to become operational was launched by an unknown person, or possible group of people, under the pseudonym Satoshi Nakamoto.
Although the goal was to drastically uproot and change our financial system completely, Nakamoto didn’t want the recognition for Bitcoin — further enforcing the idea of a completely decentralized world.
“A lot of people say it’s not real money, but a lot of people get paid direct deposit straight to their bank account and use a debit card,” Weiss said. “Money is perceived. It’s whatever someone’s willing to take.”
The most costly process within the Bitcoin industry comes from the act of mining, which is essentially how the coins are created. Or how Weiss explains it, how the coins are minted.
Mining rigs, computers with high-processing power, share most of the leg-work when it comes to mining. The computers solve complex math equations in order to win a coin. Once that coin is mined and created, it is theoretically accessible to the rest of the market.
“It costs thousands of dollars to create one bitcoin,” he said. “Real proof of work goes into creating bitcoins, so it does have a value.”
Weiss said the thousand-dollar rigs needed can become obsolete in a few months as technologies continually change, forcing dedicated miners to constantly update. However, the electricity and power needed to keep computers operational is where most of the expenses stem from.
Weiss’s first introduction to the crypto-space was from a friend who worked for a mining company in Iceland, one of the cheapest places to mine due to their reliance on geothermal power. Weiss signed on as an affiliate for the company by purchasing a $500 mining contact, and he’s been earning Bitcoin ever since.
“I was spending it. I was mining it, and I was spending it,” he said, reflecting on his naivety. “I can go back and look at my records now and can see some of those McDonald’s hamburgers I bought would be worth $700 now. Now I’m saving it.”
Weiss’s commitment to the center stems from his interest in the world of cryptocurrency and the opportunities it creates. He began hosting monthly meetups in October 2017 to provide a collaborative environment for those interested.
“The people that come to the meetups, some of them are brand new, and some of them have been in the industry three, four, five years,” he said. “We do have some organized plans in terms of subjects that we’re teaching, but it’s mainly meeting to talk about what’s happening in the industry.”
The Meetup
The presentation topic for May’s meeting focused on different ways to store cryptocurrencies and how to buy alt-coins — alternative coins to bitcoins.
Weiss stood at the front of the room, standing out in a neon green T-shirt with contrasting white lettering front and center.
I accept bitcoin!
Four people sat before Weiss, listening intently to his advice on securing private keys offline, memorizing 24-word security phrases and the worth different alt-coins hold — a lecture those unfamiliar with the industry would be confused by.
An automated “ding-dong” announced the final three stragglers filtering in, quietly shuffling into chairs along the perimeter as Weiss finished his presentation.
As the night morphed into a round-table discussion, one attendee’s question ignited a conversational spark that didn’t falter until the end of the meeting.
“I started looking at this because I wanted to understand what this transformational technology was about. I’ve tried to learn quite a bit about it, but the sticking point for me, that I’ve never really heard anybody articulate, is intrinsic value.”
It’s doubtful the attendee Scott was alone in this way of thinking, as he wasn’t the only newcomer in the room.
“With cryptocurrencies,” he reiterated, “what is the intrinsic value?”
The catalyst.
“But there’s no intrinsic value to gold, aside from maybe use as semiconductors — ”
“Well, that’s not true though,” Scott fired back. “Gold is a tangible asset. Cash, you can say, doesn’t have an intrinsic value because it’s just a note. A promise. It’s the government’s promise that you’re going to get something in exchange for it.”
The idea of the government keeping any type of promise caused a quiet chuckle to ripple throughout the room.
As one of the few seasoned crypto-veterans in the room, Phil tried his hand at answering Scott’s question by relating new digital currencies to traditional fiat currencies — legal tender backed by the government.
Although there’s a long history of institutions helping to stabilize fiat currencies, it’s completely plausible for economies to collapse and deflation or hyperinflation to occur. The same risk is there within the crypto-sphere.
“If you don’t understand the algorithms completely, you’re having blind faith in those algorithms, just the same way you have blind faith in the government and its financial institutions,” Phil said.
Scott circled back to his original question.
“I can see if someone says you can find the intrinsic value of Bitcoin because in order to continue to produce them, it costs a certain amount to do it. But for a lot of these coins, why are they worth anything?”
“It’s faith. It’s all based on faith,” Jamie chimed in. “When we’re talking about where’s the actual value in fiat currencies, after we come off the gold standard, it’s trust. And it is time spent in which that trust is earned.”
For those stepping away from traditional currency, that faith is then placed in the blockchain.
The decentralized nature of the technology appealed the most to Aaron when he first took an interest in Bitcoin back in 2015. He began to see cryptocurrencies as a solution to the problems being caused by traditional banking and monetary policies.
“It’s not a currency reliant on any central bank or government,” Aaron explained. “You can see everything that has ever been created and all the transactions that have ever happened [on the blockchain].”
“So is it a lack of trust with the banks? If you boil it down — ”
“Thieves. Thieves. Thieves,” Weiss’s business partner Ernest Roberts mutters in the background. Some of the first words he’s said all night, but poignant nonetheless.
Conversations about fiscal accountability, the future of Bitcoin regulations and the government’s eventual adoption of blockchain technology carried on. As the meeting began to wind down, Scott seemed to have an epiphany.
“Visa has a complete network of transactions just like we’re talking about with the blockchain. The perfect illustration is that I don’t need a Visa token. It wouldn’t have any value. The network is the value.”
Weiss recognizes it can be difficult for the value to outweigh the inherent risk involved with breaking into the world of Bitcoin and cryptocurrencies.
“It’s volatile,” he said. “It’s a risky investment, if you want to call it an investment.”
Since January, its worth has skyrocketed from $12,605 to a year-to-date high of $17,101, down to $6,985 and now hovering around $8,500.
That fluctuation comes from the amount of people using the cyber currencies, Weiss said. The more people purchasing and using Bitcoin, the more the value continues to go up. It starts to fall when people stop buying and start selling rapidly.
Despite the risk, Weiss still deems the value worthy. He sees the world transitioning fully to digital currencies soon, whether that be Bitcoin or the next big coin that has yet to be created.
“Cashless is more convenient. The current system we have now can be manipulated. With crypto and the blockchain technology, it’s very difficult for individuals to manipulate the value. I think it’s just a better system.”
Weiss’s optimism for the future of this potentially foundation-shattering technology mirrors the idea at the heart of the discussion that took place at the meetup.
Faith.
Faith in the blockchain.