Sunday Morning

Bitcoin and the future of money

March 23, 2014 / 1:45 PM EDT / CBS News

Gold coins are one highly visible form of money. But is an INVISIBLE form of money now on track to become the high-tech coin of the realm? Here's Alexis Christoforous with an introductory lesson in "Bitcoin 101":

It's been said that cash is king, but lately it's been getting a run for its money.

It's called Bitcoin. Despite its name, you can't hold it in your hand. It's a digital form of money that only exists in cyberspace, sent globally from one computer to another. You can buy Bitcoin online. The virtual currency is then stored in a digital wallet on your computer.

There are no rules or regulations. It's not connected to any bank or government. The attraction? Lower fees and no middleman.

Austin Alexander is the director of the Bitcoin Center NYC, just steps from the New York Stock Exchange, where he extols the virtues of this virtual currency. He calls Bitcoin "probably the most global, most decentralized phenomenon in human history."

He described the action at the Bitcoin Center to Christoforous: "This is the auctioneer and he's reading out people's offers. So he's telling anybody listening what people are willing to pay for Bitcoin, and what people are willing to sell Bitcoin for."

Think of Bitcoin like a commodity, just like gold. Its value fluctuates from day to day depending on the markets.

There are, of course, advantages and disadvantages to that. For instance, last Fall speculators drove the price of a single Bitcoin to more than $1,200. But in recent months, the price has plummeted to half that, due in part to the bankruptcy of the world's largest Bitcoin exchange after nearly a half-billion dollars in investor money vanished.

But that hasn't deterred retailers from accepting Bitcoin, including Jennifer Longson's cupcake shop in San Francisco.

For Jennifer Longson, Bitcoin's lower transaction fees help keep her business costs down while offering her customers lower prices and an easy way to pay: take a picture of a barcode, and press "send payment": "And there you go."

Big businesses are getting in on the action, too. Now you can use Bitcoin to shop on overstock.com, to buy a ticket to space on Richard Branson's Virgin Galactic, or go to an NBA game. There's talk Netflix may be next.

Nobel laureate Robert Shiller, professor of economics at Yale University, says Bitcoin is gaining traction.

"I have some Monopoly money here," said Christoforous. "What's the difference between Bitcoin and Monopoly money?"

"Well," Shiller laughed, "this has a physical presence. This is real. This is a piece of paper."

"But I guess if you and I both agreed it had value and we had enough people to agree that it had value, could it be a payment system?"

"Yes, it is," Shiller said. "And by the way, Bitcoin is a payment system, and it is a form of money. It has succeeded. It has value, and people are buying and selling with it."

But Shiller says he doesn't expect that to last: "I don't actually think that Bitcoin has a long future. Bitcoin came as a big surprise. I don't think of it as the New World.

"There's going to be lots of other innovations, and ultimately the way we do commerce is likely to change.

For now, advocates are banking on Bitcoin to succeed.

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