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Living on Bitcoins for three months
Austin Craig and Beccy Bingham are going to shun real money, credit and debit cards, and live only on virtual currency for the duration of the experiment;and the challenge is daunting...
On Friday, July 12, Austin Craig and Beccy Bingham are getting married. And soon after that, the US-based couple will be off on their honeymoon. But when they come back on July 27, the newlyweds will be taking a huge risk. They're going to surrender their cash, credit and debit cards, as well as their cell phones. And for the next 90 days, they'll live strictly on Bitcoins.
Bitcoin is a digital currency that is protected by cryptography. Transactions are conducted through peer-to-peer software (much like file sharing) and the economy is completely decentralized, meaning there is no single authority that controls it.
"A new marriage is adjustment enough, " Austin says of their plans, "but this is going to be a huge adjustment."
The couple wants to document every bit of their 'virtual currency' experience over the three months and have hired a filmmaking crew to do just that. They've even raised $70, 000 for the film through a Kickstarter project.
The 'Life On Bitcoin' project (lifeonbitcoin. com) will require the couple to do everything only with the cryptocurrency. And that means many sacrifices. For starters, the point of handing over their mobile phones is to go and buy a new handset by using Bitcoins.
"If I think about things I'm willing to lose, I'm willing to lose a lot of modern conveniences like my phone, " Beccy says. Austin, on the other hand, wonders if he can do the same. "That will be hard for me, " he admits, "that'll be really hard. "
But while it seems odd, the project is also intriguing...
Why live on Bitcoin?
Austin first heard about Bitcoins a little over a year ago from a friend at work.
"It was fascinating, both from a technological as well as economic perspective, " he says. "I found myself talking with lots of people about the virtual currency, and encountered the same questions from almost everybody who was new to the concept: 'What can you buy with Bitcoins?' and 'Who accepts Bitcoins?' These are valid questions. This project is an attempt to answer these questions with real experience."
Documentary filmmaker Travis Pitcher, who will be filming the couple, says: "I'm not an economist, and I didn't even really know what a Bitcoin was (before this). I don't know anyone who takes Bitcoins. But I'm really excited to see the human story that comes out of this."
Surprisingly, the couple haven't purchased or 'mined' (see box: Bitcoin Basics) any Bitcoins yet. They have recently registered their Bitcoin wallets, but are not making any more moves till the project begins.
"When I first heard about it, I wanted to build a Bitcoin miner, but quickly realised it was beyond my technical know-how," Austin says.
In the course of the first three months of their marriage, and the Bitcoin experiment, the Utahbased couple will have to buy furniture, pay the rent, pay insurance, buy groceries, pay for travel, buy fuel, pay restaurant bills, and any other expenditure that comes their way using only Bitcoins. They even plan to take a road trip or travel abroad.
"Wherever we go, we'll either have to already know somebody there who takes Bitcoins, or we'll be talking to a lot of hotels trying to convince them that Bitcoin is a currency they really should take," Austin says. "While we're starting the project with relatively little knowledge of the virtual currency, by the time we take off on our road trip, we'll want to plan out as much as we can, and work in unplanned events as we go, testing Bitcoin's acceptance everywhere we can."
Kashmir Hill of Forbes conducted a similar experiment in early May this year where she lived on Bitcoin for a week - and in her summation, she wrote: "It's hard to convince someone who has never heard of Bitcoin to accept it as payment. You can simply choose to walk away from the person who won't accept it, but that's hard to do when the person is your landlord. And Bitcoin is hard to explain to people."
It's a challenge that Austin and Beccy foresee. "We will have to evangelize Bitcoin widely and effectively if we're going to survive. We'll probably rely on our smartphones, laptops, and iPads a lot."
But the payment itself should be similar to how digital transactions like credit cards currently work. For example, tips. "We'll tip people the same way we pay people, but we'll just send a little more! It will be very similar to tipping when using a (credit card) reader to pay for things. We'll simply add a little on the top."
With a currency that is entirely digital, there are bound to be security concerns. After all, there's no way to lock up your Bitcoins in a vault. But Austin is unfazed at the moment.
"I don't have any concerns about Bitcoin being virtual. We use email, digital pictures. . . most of my dealings are online these days;even my existing financial transactions," he says.
The system still has a few glitches though. Take the case of IT professional and Bitcoin enthusiast Thomas Bennett, who Austin and Beccy went to for a few lessons. He recounts a story where he had several hundred dollars in Cryptoexchange - an online trader where you can exchange money for Bitcoins or vice versa - when it went belly up.
"There's no chance of me knocking on their door (since they're based in another country)," Bennet says. "It's a decentralized currency, so there's no police force behind it, nothing to enforce it. I've emailed them several times. I simply cannot get that money back."
Regardless, Austin is quite bullish about the future of Bitcoin. "I think it has the potential to be hugely disruptive in a way that could be very beneficial to the average person. Cryptocurrency has the benefits of cash as well as the strengths of digital. The challenges it faces are many. Certainly, there will be efforts made at a regulatory framework;and an infrastructure, in general, needs to be built. In 10 years, Bitcoin could go the Betamax (Sony's defunct video cassette format) way, or it'll be as common as the cash in our pockets."
So the million-dollar question, literally: With the exchange rate at $108 to a Bitcoin, if someone were to offer you $1, 00, 000 in Bitcoins or $10, 800, 000 in cold hard cash, which would you take?
"Right now, if somebody offered me cash or Bitcoins, I'd take cash, " Austin says. "If they made that same offer while we're running our experiment, I'd take Bitcoin."
Bitcoin was first described in a 2008 paper by a pseudonymous entity named Satoshi Nakamoto. Despite investigations, no one knows who he, she or they are. Bitcoins are generated by anyone running a free program called a Bitcoin Miner, which runs complex computational exercises that are essential for running the Bitcoin network. Every 10 minutes, one user in the world is awarded a few Bitcoins by the network for participating in mining. Mining gets more difficult as the number of Bitcoins in circulation increases. No more than 21 million Bitcoins will ever be created. So far, around 11 million Bitcoins have been mined. Bitcoin uses a peer-to-peer (P2P) architecture, making it virtually impossible for a government or company to dismantle it or shut it down. The Bitcoin network is responsible for verifying that no one is cheating, and has no transaction errors so far. The Bitcoin logo sports the phrase 'Vires In Numeris', which is Latin for 'strength in numbers'. One Bitcoin is divided up to eight decimals, making the lowest denomination 0. 00000001 Bitcoins.
A Florida-based Bitcoin user named Laszlo purchased a pizza for 10, 000 bitcoins in 2010. Today, with the exchange rate at $108 to a Bitcoin, that's a million-dollar pizza!
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