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Bitcoin believers hoping their faith will pay off

“If we’re the first restaurant in New England accepting bitcoin, it’s a no-brainer,” says Thelonious Monkfish’s Jamme Chantler.MATTHEW J. LEE/GLOBE STAFF

Jay Best walked into the Thelonious Monkfish restaurant in Cambridge's Central Square earlier this month with no intention of paying for his sushi rolls with cash or a credit card. Best planned to settle the tab with bitcoin, a virtual currency used around the world to buy everything from baklava to marijuana.

But when he pulled out his smartphone to calculate the bill, Best was dismayed to discover the value of a bitcoin in US dollars had plummeted from a record high of $266 the day before, to below $80. Suddenly, old-fashioned cash seemed more appealing.

"If I paid [with bitcoin], I would be overpaying," he said. "The market value just doesn't reflect the retail value right now because tomorrow it will probably go up."


For bitcoin users like Best, such volatility has become the norm. At the start of 2013, a single bitcoin was going for $15. After zooming past $200 over several months, the currency tumbled to about $50 less than a week later. Since then, it's once again climbed, and as of Monday was valued at $142.

Despite the uncertainty, a stalwart group of local believers — largely based around Harvard University and MIT — are confident the currency will survive, and they're urging local businesses to accept it for goods and services.

Bitcoin, which is based on mathematic algorithms, was created in 2009 in the aftermath of the global financial crisis by a developer — or developers — using the fictitious name Satoshi Nakamoto, as an alternative to currencies controlled by governments or central banks.

Users obtain bitcoins by trading them through an online exchange, buying them from other users, or "mining" — which essentially means using sophisticated computer software to free up new coins by solving complicated mathematical problems.

Apps also let users transfer bitcoins peer-to-peer by moving them from one virtual wallet to another in an essentially untraceable, encrypted transaction. Currently more than 11 million bitcoins are in circulation.


"If we're the first restaurant in New England accepting bitcoin, it's a no-brainer," said Jamme Chantler, owner of Thelonious Monkfish. "There's a big group of people willing to drive 50 miles just to use it at my restaurant."

But despite that enthusiasm, Chantler is treating the fledgling currency with caution. The wild fluctuations in value make him nervous.

"It's just too unstable right now," he said.

Veggie Galaxy, a Cambridge restaurant that recently started accepting the cybercurrency, is so far the only other physical establishment in the Boston area to do so. But online, there's almost nothing you can't buy with bitcoin, and it's also widely used in libertarian-leaning New Hampshire, where stores like George's Famous Baklava have been accepting the payment method for more than a year.

Still, many remain skeptical, including Justin Wolfers, a professor of economics and public policy at the University of Michigan.

"If bitcoin keeps fluctuating like crazy, that makes it a particularly bad form of currency," he said. "Its purchasing power can change tremendously in the time that someone buys something and I spend that money."

The swings are largely attributable to speculation by investors. They snatch up bitcoins to let them sit in a virtual wallet on a computer, hoping they will jump in value. That behavior, in turn, pushes the price of bitcoin even higher by taking more of them out of circulation, creating a cycle analysts say can end only one of two ways: a crash or stabilization.


Unlike the dollar, which is managed by the Federal Reserve, if bitcoin plummets, there is no government or safety net to rescue the currency. Even so, users aren't worried.

"If bitcoin crashes to an all-time low, a lot of people will be screaming, 'It's the end of bitcoin!' and 'I told you so,' " said Clark Minor, a computer science student at the Massachusetts Institute of Technology. "But people who are building the infrastructure and advancing the technology will say, 'Great — now we can make bitcoin better since all the speculators are gone.' There's a lot more innovation left to go."

Most transactions are conducted peer-to-peer to sell goods such as software or food. But the anonymity of the currency also makes it attractive for illicit uses like drug trafficking or money laundering. Most infamously, it's used on Silk Road, an online black market hidden deep on the Internet.

"If bitcoin has one problem, it's its reputation," Best acknowledged.

But legitimate websites such as Reddit, Wordpress, Foodler, and — most recently — OKCupid also accept bitcoins, and the roster of business online that recognize bitcoin is growing daily, according to Best.

Users argue bitcoin offers a number of advantages for merchants. Payment sites such as BitPay, which processed over $5.2 million in bitcoin transactions in March, provide on-the-spot conversion into dollars that can go directly to a bank account.


Although those payments legally have to be reported and taxed like dollars, there are no transaction fees unless a user needs a payment processed particularly fast. Even then, the fees are far less than those typically charged by credit card companies or banks.

Transactions are irreversible — so chargebacks and fraud won't leave businesses in the lurch should there be a dispute about a purchase — and they bypass the fees and limits traditionally associated with currency exchanges.

"Bitcoin transactions don't care about time zones or borders," said Minor. "I can send money to someone halfway across the world and I don't have to wait days for . . . transactions to clear, pay large fees for international wire transfers, or worry about some third party's business hours."

Bitcoin enthusiasts are also quick to point out that this new way of buying, selling, and investing is not beholden to politics — and that's part of the attraction. Local user Alexis Gates said no matter how wild the ride might be at times, the currency will always be "universal, apolitical, [and] based on cold, impersonal math."

Alyssa Edes can be reached at alyssa.edes@globe.com. Follow her on Twitter @alyssaedes.