BITCOIN BONANZA: What is Bitcoin and is it the future? - KWWL - Eastern Iowa Breaking News, Weather, Closings

BITCOIN BONANZA: What is Bitcoin and is it the future?

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IOWA CITY (KWWL) -

Bitcoin is the buzz...word. The cryptocurrency has been the chatter among online communities, and even dinner tables, and it doesn't look like it's going anywhere anytime soon. So, what is it exactly?

Today, there are close to 1,400 different types of cryptocurrencies but one of the most commonly-known ones is Bitcoin. It's a currency that doesn't rely on banks or government, and some think it's the future of a cashless society.  One University of Iowa student is betting big on its success.

Cameron Schrog first heard about Bitcoin in 2013, when he was just a high school junior. Schrog says a classmate suggested they go into business together.

"He said, 'We can sell Bitcoin together.' And I said, 'What the heck is Bitcoin?'" Schrog said.

Schrog said he wasn't convinced at first but, after more research, he was hooked.  Ever since, he hasn't looked back.

"I was making a lot of money for a junior, senior in high school. A lot of money. Enough to support myself," Schrog said. "I was making as much as people make for salaries, certain salaries."

Now a senior at the University of Iowa, Schrog runs his own consulting business. Much of his day is spent checking the "crypto market."

Schrog breaks down cryptocurrencies by referring to them as "digital gold."

"Some people use gold, for example, to store value, while others use money to buy things or more as a means of exchange. So, Bitcoin has aspects of all of those, as well. Right now, it's really good for storing value," he said.

Unlike gold, Bitcoin isn't kept locked in a vault. Instead, it's part of an online-only financial network for people to send payments to one another's "virtual wallets." However, it can behave like any bull or bear market. In December, Bitcoin saw a valued high of nearly $20,000 per coin before it plummeted by half to close to $10,000 by mid-to-late January.

"There's this old saying on Wall Street that goes, 'When your taxicab driver is talking to you about a certain stock, it's time to sell that stock,'" Schrog said.

But financial gain isn't necessarily what drives Schrog. He believes cryptocurrency is the future.

"Really, it's the first time we've introduced competition in the currency markets, and I think it has the power to significantly reduce government control and allow people to be their own bank.  I guess if you would wrap all that into two words, to "democractize money" or "democractize finance"," he said.

Bitcoin maintains its value by capping the number of coins available at 21-million, to curb inflation. All transactions are public through a process called blockchain, but those transactions are anonymous.  It's yet another reason why it's favored by some among the cyber community.

In January, the Iowa Insurance Division released a warning about Bitcoin and other cryptocurrencies, calling it a "high-risk investment" because it's not insured.

Cash and credit are customary among local businesses, but some big online retailers are jumping on the crypto-wave.  Microsoft, Overstock.com, and Expedia, among others, all accept these crypto coins as payment.

Others are choosing to be more cautious when it comes to financial change up.

"I think a lot of people sort of mystify what Bitcoin is. It's stored value. That's all it is. It's closer to gold than it is a currency, per say," John Courtney said.

Courtney is a lecturer within the university's Tippie College of Business's John Pappajohn Entrepreneurial Center, where Schrog was one of his students. Prior to that, he was the Vice President of Ebay's Head of Asia Pacific Operations.

"On one side of the thread is folks who saw Bitcoin as a means to free themselves of the infrastructure of central banks. On the other side of the spectrum are folks who see it as what it is, stored value, and is there potential here?," Courtney said.

While Courtney said he can see a future that involves cryptocurrencies, he's choosing the cautious approach when it comes to Bitcoin, believing their needs to be regulation.

"The financial system was very regulated yet, in 2008, we had a collapse, largely due to credit. So one would make the argument, 'Guess what? Regulation didn't work out all that well.' With that said, a world where you don't have consumer protections, a world where you don't have some sort of balance of the different levers you can do to protect, it is not plausible. If that was the case, you'd take warning labels off cigarettes," he said.

More information about what Bitcoin is, and how it works, can be found here.

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