Only a few months ago, Memphis entrepreneur Philipp von Holtzendorff-Fehling attended a convention in Miami. He said it helped him glimpse into the future of money.
“I’ve always been interested in the next thing happening to humanity,” said von Holtzendorff-Fehling, a former marketing chief for Memphis-based ServiceMaster. “This is one of the next big things.”
He had come across Byte Federal, a little tech startup from Venice, Florida.
Today, one of Byte’s automated teller machines stands outside von Holtzendorff-Fehling’s Mama Gaia restaurant.
How that ATM landed in Memphis traces to tech hopefuls, schemers and dreamers betting the world is on the edge of serious financial evolution.
Americans, they say, will head out of the house holding car keys, mobile phone and a digital wallet.
It will store something called cryptocurrency, a kind of digital money backed by no important government on Earth and yet significant enough to eventually rival the U.S. dollar as a way to pay for things.
At least that’s what they say.
The new world of cryptocurrency
Sound like science fiction?
Yes, but the trend has taken root.
Among the hundreds of ATMs located in Memphis and its suburbs, about 10 are special cryptocurrency ATMs operated by Byte or rival tech startups Coinsource and RockItCoin.
I had thought these machines were used mainly to send money abroad, particularly by Latinos from home towns with limited banking. RockItCoin co-founder Ben Phillips, a former derivatives trader in Chicago, said international transactions are not the biggest draw.
“Our users come from all kinds of backgrounds,” Phillips said. “We like to put the ATMs in public and high-traffic areas. It’s mainly men, 20 to 40. Some of them see it as a way of investing money.’’
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Right now, about $3.6 trillion worth of American currency is in use worldwide. That’s the value of all minted coins, regular bank deposits and paper money the U.S. Treasury prints on linen and cotton.
Separate of the official U.S. money supply are a slew of cryptocurrencies. They have names such as Bitcoin, Dash, Ethereum, Litecoin, Monero, Ripple, Stellar and Zcash.
Fifth Third Bank, one of the oldest Cincinnati commercial banks, recently reported more than 1,000 of these crypto brands have been identified worldwide. Various guesses place the total value of all the crypto money in the brands at about $295 billion.
That’s small compared to the amount of American currency afloat, although Royal Bank of Canada analysts forecast the value of crypto money afoot someday might surpass $10 trillion.
Entrepreneurs sense an angle.
Cryptocurrency exchanges are cumbersome. They can convert digital money into dollars, or the reverse. But that takes time.
ATMs can handle the transaction faster. Put your American currency in. Bitcoins go into your digital wallet.
Nearly 8,500 of these cryptocurrency ATMs worldwide process digital money, including about 1,300 ATMs in the United States and the handful in metropolitan Memphis.
The latest was installed almost three weeks ago outside Mama Gaia in Midtown.
The ATM operator charges a fee for the service, usually about $3 on each transaction. Sponsors such as the restaurant get a slice of the fee.
‘Looking at options’
Just the other day, an employee of a public relations firm used by von Holtzendorff-Fehling to promote his restaurant emailed a press release.
A few reporters dutifully rewrote the press release and posted brief news stories online. Yes, this was like free advertising dressed up as news, but I bit, went over to the restaurant, asked von Holtzendorff-Fehling a simple question.
Could I buy the $7 ginger mango beverage with Bitcoin?
No. Traditional money backed by the United States government would work, or my bank debit card, but not crypto stuff.
“We don’t accept any Bitcoins yet,” he said. “We’re looking at the options.”
Would you walk up to the RockItCoin ATM to invest your money in Bitcoin? Would you buy a car using Bitcoin dispensed from the Coinsource ATM? Would you use Bitcoin as collateral to borrow money at the Byte ATM to keep your shop open until sales pick up?
Not today. Maybe not tomorrow, but maybe in the next few years.
Travel site Expedia accepts Bitcoin. So does online retailer Overstock and payment vendor PayPal.
Once massive online retailer Amazon accepts cryptocurrency, digital money will become more common, Phillips said.
“As soon as it hits Amazon it’s going to be something different,” said the former derivatives trader, whose firm recently sold an ATM to an employee at Memphis commodity trader McVean Trading. The ATM is in place on Appling Road.
Related: Beware of cryptocurrency scams
Cryptocurrency sounds fake. Yet some people believe in it. There’s a reason.
“If we dig deep enough we see government has over inflated fiat currencies,” von Holtzendorff-Fehling said.
What $100 in U.S. greenbacks afforded a decade ago costs $116 today. The dollar doesn’t buy as much as it used to. That’s inflation. The dollar has lost value.
For various reasons the same inflation bypasses Bitcoin. Some people figure it’s an investment, like a share of stock in a company, although it is actually computer code unleashed on the internet, the brainchild of an anonymous genius.
Bitcoin’s scarcity makes it valuable. Yet that computer code hides a lucrative seed. There’s a way to earn Bitcoins. But it isn’t easy.
Say your sister in Atlanta needs fast cash. You could wire money from your bank. That takes time. And the fees add up. Bitcoin is easier.
You instruct the ATM to place your Bitcoin in her digital wallet. Your instructions flow over the Internet directly to about 9,500 separate volunteers. Located throughout the world, these volunteers actually are computers owned by private people and companies. Some call themselves Bitcoin miners.
Your instructions are scrambled into special code, a series of 64 letters and numbers unique to your transaction. The code of every Bitcoin transaction ever conducted is contained on the internet in a single long chain broken into 10-minute chunks called blocks. This entire blockchain, including the code created when you bought the Bitcoin, is completely visible to all 9,500 volunteers.
The computers scan the blockchain, agree your Bitcoin never before was spent, confirm the transaction and race to solve a computational puzzle to get the transaction embedded on the blockchain. Solving the puzzle is hard but not impossible. The first computer to solve the puzzle wins. There’s a winner about every 10 minutes. The award: 12.5 Bitcoins for their digital wallet.
Companies call it Bitcoin mining. Try to sell a Bitcoin on RockItCoin today and it’ll fetch almost $7,400.
Miners have filled buildings with computers simply to carry out Bitcoin transactions – like the one with your sister – and get paid for solving the puzzle.
More about Bitcoin mining: Inside BitMOR, a new cryptocurrency mining company in South Dakota
Related: Bitcoin-mining ‘worm’ caused MPS computer lock down
Is this the future of money?
Star Trek actor William Shatner likes to think so.
He recruited new tenants for a solar-powered Bitcoin mining facility he plans in an old factory at Murphysboro, Illinois.
“It’s an interesting idea to see it at work because … it’s so esoteric that it’s difficult to understand,” he told the Chicago Tribune in June.
Ted Evanoff, business columnist of The Commercial Appeal, can be reached at firstname.lastname@example.org and (901) 529-2292.
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