Bitcoin Lunch

Morgan Benton, an associate professor of integrated science and technology at James Madison University, gives a presentation on bitcoin and other cryptocurrencies at a Shenandoah Valley Technology Council luncheon at Wood Grill Buffet Thursday afternoon.

HARRISONBURG — If you’re pondering a dive into cryptocurrency, Morgan Benton has some words of caution for you.

“I’m not saying they’re not going to pan out,” the James Madison University professor told more than 60 people Thursday at Wood Grill Buffet during a Shenandoah Valley Technology Council luncheon. “Some of them obviously will, and some obviously have. Some people have gotten fantastically wealthy already.

“It’s very much a speculator’s market right now, and so you want to be careful when you get into that.”

Benton, who teaches in the integrated science and technology department, spoke for more than 50 minutes about cryptocurrency and the blockchain technology that supports them during a presentation titled “Bitcoin, Cryptocurrency, Blockchain: What Is It? Why Should I Care.”

Digital currencies aren’t backed by any government. Traditional currencies, such as the dollar, can be exchanged to purchase bitcoin or other cryptocurrencies, which can be used for some transactions.

The currencies are popular in underground economies and have been embraced by marijuana businesses in states where recreational pot use is legal. Many banks won’t accept money from cannabis businesses for fear of federal action because the businesses are illegal under federal law.

Bitcoin, the best-known form of cryptocurrency, has been on a value roller coaster recently. Once available for a few dollars a coin, its price soared to more than $19,300 in mid-December before falling. Its value on CoinDesk, a currency exchange company, was listed at $11,224.15 a coin at the close of business Thursday.

Benton said bitcoin’s rise represented “one of the biggest speculative bubbles in history” and said people should think hard before pouring their life’s savings into any digital currency.

“If you’re in this space now,” he said, “it should be Vegas money. Don’t spend more than you can afford to lose.”

Tech Has Other Uses

While cryptocurrency is the best known use of blockchain, the technology has other applications.

Benton said blockchain basically is a database. However, whereas most databases are on one or more servers in some location, blockchain is distributed throughout the network of users operating in the space it supports.

A digital ledger records all transactions. Everyone working in the space has access to it, and it’s very difficult to change.

“In a certain sense, if you get the infrastructure set up right, it could obviate the need for auditing in a lot of cases,” Benton said.

Blockchain, he said, can be used to create a music service. Musicians would download their work onto the service, and they’d be paid in cryptocurrency every time someone listened to all or part of their song.

It can be used for supply-chain management, cutting down greatly on the paperwork required to ship items internationally and cutting down on theft or the need for intermediaries to facilitate shipments.

It can be used for “smart contracts,” which release currency for a product once the recipient scans in a delivery electronically, and to track the source of items, such as food.

If a foolproof identification method can be devised, Benton said, blockchain could become a global, decentralized system that could be the basis for electronic voting or to facilitate travel across borders. It can be used to create databases that prevent people from fraudulently obtaining someone’s real estate.

IBM and Walmart are among the companies using blockchain technology, he said.

Cryptocurrency is so new, Benton said, that very little is certain about it. It’s technically illegal for people to establish a currency to rival a government’s currency, but countries would have to shut down the internet to end the use of digital currency.

Princeton University, the University of California-Berkeley and other institutions have free lectures about digital currency available on YouTube.

Thousands of cryptocurrencies exist because any tech-savvy person can access open-source code available online and create their own, he said. The creator can develop their own rules for their currency.

Said Benton: “It’s still very much the Wild West.”

The professor said he’s still not certain whether or how cryptocurrencies should be regulated. That’s largely because their true value remains unknown because no legal authority polices digital currency.

“It’s not really clear that there is necessarily any value or that there’s anything enforcing their contract,” Benton said. “So if you buy somebody’s token, somebody’s currency, and they don’t deliver on what they said they would do, that’s kind of like if you were a venture capitalist and were investing money, you don’t necessarily know if you’re going to get anything back out of it and you may or may not get equity for that coin.”

Contact Vic Bradshaw at 574-6279

or vbradshaw@dnronline.com

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