The computers that maintain Bitcoin guzzle electricity, enough so that many people admit to running them at work instead of at home to shift the cost (many people rely on specialized GPUs and multiple units to run the software, such that power bills can noticeably increase). They are driven by an incentive. Every time a computer seals a block of transactions with a hash function, Bitcoin software creates 50 new coins and assigns them to the owner’s account. This is how new currency is issued in the first place.
Given that Bitcoin transactions occur in public, it's easy to measure the level of participation. According to Garzik, Bitcoin is expanding faster than it ever has since its birth three years ago. More than 60 trillion Bitcoins bounced between accounts since the beginning of this year, constituting nearly five million transactions, which is more than twice the number of transactions processed in 2011.
Ever so slowly, merchants seem to be warming up to Bitcoin, according to Tony Gallippi, whose company, Bitpay, provides mobile checkout services to companies that want to accept Bitcoins. "I went to the Prague conference in November 2011 and we had about 100 merchants," he says. "We have about 1,100 now."
Very few merchants deal only in Bitcoin. Most—for example, a massage therapist in Vancouver, a guitar shop in New Hampshire and 18 craftsmen in the Etsy marketplace—list Bitcoin alongside the standard payment options. When they finalize a deal in Bitcoin, they do so knowing that the transaction can never be reversed. The Bitcoin network doesn't edit its ledger. As such, merchants no longer have to worry whether they are charging a stolen credit card.
"'The fraud mitigation is big for Internet merchants, because they are all handling card-not-present transactions. And the business has to eat the loss if the payment is reversed later on,"' Gallippi says. "'Using Bitcoin, a business can receive a payment from any country on the planet, instantly, with no risk of fraud."'
Underworld and legitimate uses
For others, Bitcoin has become a lifeline.
In December 2010, soon after WikiLeaks uploaded 251,287 leaked U.S. embassy cables to its site, VISA, MasterCard, PayPal, Bank of America and Western Union united to embargo the group, refusing to carry out its transactions. According to WikiLeaks, the blockade, which continues today, choked off 95 percent of its donation stream. The activist group has been able to restore donations, in part, by accepting Bitcoin. As of September 30 WikiLeaks was holding the equivalent of $12,000 in its public Bitcoin address.
"'It's important to them. At least they have one way of getting donations,"' says Birgitta Jónsdóttir, a member of the Icelandic parliament and a co-producer of the WikiLeaks's Collateral Murder video (which chronicles two 2007 U.S. Army helicopter air strikes in Baghdad that killed two Reuters war correspondents and several probably unarmed men), who spoke in favor of Bitcoin at the conference.
It would seem that Bitcoin has a little something for everyone: You can send money overseas to your kid in college without paying wire fees. You can anonymously fund activist institutions. You can buy drugs (legal and illegal pharmaceuticals as well as recreational ones). But first you have to have some to spend. And right now, getting a hold of Bitcoins is much harder than the people who advocate the currency would like it to be.
Many of the smaller online exchanges where customers purchase their account value have fallen prey to hackers who broke in and stole the Bitcoins users were storing on the site. This summer Bitcoinica lost over $400,000 in Bitcoins to hackers, and early this month another exchange called Bitfloor closed down as it sought to rebound from $200,000 in stolen funds.