How bitcoin is changing Las Vegas' economy - FOX5 Vegas - KVVU

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How bitcoin is changing Las Vegas' economy

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Some have called bitcoin the next generation economy for Las Vegas, but even its biggest fans warned that people need to be very careful before diving in. Some have called bitcoin the next generation economy for Las Vegas, but even its biggest fans warned that people need to be very careful before diving in.
LAS VEGAS (FOX5) -

Bitcoin, the digital asset, has made dramatic leaps and falls since its inception in 2009. It’s risen from a dollar in 2011 to just shy of $20,000 in 2017 before taking some equally dramatic plunges.

As of Feb. 2018, it was trading at around half its all-time high.

Some have called it the next generation economy for Las Vegas, but even its biggest fans warned that people need to be very careful before diving in.

For downtown casino owner Derek Stevens, the decision to jump into bitcoin started with a late night conversation with some younger customers.

“A lot of the guys that are part of downtown project and Fremont East, Zappos all came in talking about their bitcoin, and kept asking ‘Why don't you take it, why don't you take it?’ I really couldn't give them a reason why not,” Stevens said.

So Stevens installed a bitcoin ATM at The D. It’s the one machine inside a casino that takes cash but doesn't give any back, at least not in paper form.

"The damn machine was getting full! And it holds $80,000 worth and it's getting full every couple of days,” Stevens said.

Although the concept of crypto-currency has been around for decades, it was born of the financial crisis of 2008 and the resulting distrust many felt toward banks and the government.

Andrew Donley is the co-founder of Block 16. The name is a tip of the hat to the first Las Vegas block to offer liquor and prostitutes. One hundred twelve years later, Donley’s Block 16 helps companies integrate technology behind bitcoin and other crypto-currencies.

“Does it help me sleep better? Do I know the value is going to be there at the end of the day? Yes, I still know it’s going to be there,” Donley said.

“I think Vegas is a ripe space for it. Everyone is very progressive out here. I think the casinos and Derek Stevens and people like him are starting to see the value.”

Here’s how bitcoin works. Let’s say ‘John’ wants to send ‘Christine’ $1,000 in bitcoin. Both would install encrypted digital wallets on their phones. Their names are never seen. Then Christine would hop on an online exchange and buy bitcoins with her thousand dollars. 

Once John sends the bitcoin to Christine's wallet, it only shows up as an unconfirmed transaction between two bitcoin addresses, so both stay anonymous. Since there's no bank or credit card company regulating the transaction, Christine and the system need proof that John sent the thousand dollars.

That's where the miners come in. This is bitcoin's incentive to keep the system legitimate and to keep someone like John from spending that thousand dollars over and over.

Mining is a contest open to anyone with a computer to find a random number only used once, what they call a nonce. It's generated by the bitcoin network. It's ridiculously hard to find and takes enormous amounts of computing power, in part, to discourage hackers.

“It’s just a bunch of computers guessing all the time, trying to figure out the answer to this very algorithmically hard problem,” Donley said.

Adam Ludwin, the CEO of the technology firm Chain told his readers to think of miners like that scene in Willy Wonka and the Chocolate Factory, where Veruca Salt's father rages at his factory workers to find the golden ticket.

But in bitcoin’s case, it's the golden number.

“It’s a competition between every single machine that’s participating,” Donley said.

The miner who solves that problem then gets to scan John’s thousand dollar transaction to Christine along with thousands of other transactions. Those transactions then go on a virtual public ledger, called a blockchain. The incentive to the miner is payments in bitcoins! There isn't just one of these ledgers, but thousands.

Bitcoin has proven very popular with people living in countries with crumbling governments or currencies. They can get their money out of the banks and into bitcoin that can easily be sent out of the country. 

Some investors see bitcoin as gold, version 2.0. Gold has value because we all agree it has value. Unlike dollars that can be printed off arbitrarily by the government, only 21 million bitcoins can be mined. A scarcity, it shares with gold and supporters said that's another reason for it's astounding price growth.

"I think we're getting ready to set the biggest trend that ever hit Las Vegas,” Legends Room owner Nick Blomgren said.

The Legends Room is an upscale strip club that is the first of its kind to take bitcoin and to trade in its own digital currency called LGD.

"Some people had the dot.com era and if you didn't jump on then, you missed the boat. Well I don't feel I missed the boat this time, I got on the ground floor of something that's going to be huge,” Blomgren said.

But is bitcoin a bubble ready to burst? Depends on which expert has the best predictions.

"It's not that bitcoin is a scam, it's that it's not related to anything in reality right now,” Jordan Belfort, the author of The Wolf of Wall Street said.

"We think it could go up another 20 times from today,” bitcoin investor Tyler Winklevoss said.

Both Derek Stevens at The D and Nick Blomgren embrace bitcoin, to a point.

"I think this is a new frontier. I think you gotta take all advice with a little grain of salt and like anything else, don't go all in," Stevens said.

"We have the mindset that it's not going to last forever. We're going to take advantage of it while we can," Blomgren said.

Las Vegas loves to reinvent. Implosions lead to bigger development. Scientists continue to test the hyperloop. Driverless vehicles are already on the road.

Donley said he believes it’s that forward thinking that makes Las Vegas ready for a new way of doing business.

Crypto-currency will one day replace dollars, Donley said. “Crypto-currency is the future. It may take time for people to come to terms with that.”

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