A bitcoin ATM that debuted at South Station this month made it possible, for the first time, for people in Boston to interact physically with their digital cash. Previously, local tech junkies had to go online to buy bitcoins, the innovative but highly unstable Internet currency. But the advent of the South Station machine allowed people to convert their digital holdings into greenbacks — or vice versa. Bitcoin owners can use the machine to withdraw cash against their account, or insert cash to buy new bitcoins on an exchange.
Bitcoins are meant to work just like any other form of currency; you use them to buy goods and services, albeit only at a small number of online retailers and forward-thinking shops. However, unlike with dollars, there is no government that determines the number of bitcoins in circulation. Instead, computers can perform complex algorithms to “mine” for new coins and add them to the system. The lack of government oversight is a boon to libertarians and privacy activists, but it also greatly contributes to the currency’s volatility. A bitcoin that was worth $1,242 in November is now only worth a little under $600. Adding to investor concerns this week was the bankruptcy of Mt. Gox, one of the Web’s largest exchanges, after the apparent theft of 744,000 bitcoins.
The idea of an unregulated, online currency understandably puts some people on edge. For now, though, bitcoins are best understood as a deeply speculative investment or alternative-currency experiment by privacy advocates. It’s an idea that must be given time and space to develop, but it’s definitely not for the risk-averse. So let the bitcoin-curious commuter beware: If you’re waiting for your train at South Station, make sure you’ve done your homework before shoving dollars in the machine.