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Granite State trio counting on virtual currency

New Hampshire Union Leader

May 11. 2013 2:15AM
Bitcom founders, from left, Matt Whitlock, of Weare, and Josh Harvey and Zach Harvey, of Manchester, in Washington, D.C., at the International Students for Liberty Conference in February, with an earlier version of their Bitcoin Machine. (Courtesy)

MANCHESTER - Brothers Josh and Zach Harvey bought in early to the Bitcoin, a virtual currency that resides only on the Internet, with values that can fluctuate wildly from day to day.

Described by one writer as "PayPal on steroids," Bitcoin has slowly been growing in popularity since it debuted in 2009. It's based on the notion that if enough people believe in it, and enough merchants accept it, Bitcoin can eventually become a form of Internet currency free of government and central bank authority.

That appeals to Free Staters like the Harvey brothers of Manchester and their partner, Matt Whitlock of Weare. Their invention, the Bitcoin Machine, is gaining widespread attraction within the community of Bitcoin users and is likely to become even more popular after its debut at the third international Bitcoin conference, "The Future of Payments," in San Jose, Calif., May 17-19.

The machine allows users to insert currency into a bill validator, a common component of any vending machine. The machine calculates the value of the currency and displays a QB code (those fancy bar codes that mobile devices can read). Customers "read" the QB code with their mobile device, and Bitcoins are deposited into their virtual "wallet" based on the value of Bitcoin per dollar at that moment.

Although its been ballyhooed in the tech press as a Bitcoin ATM, the inventors are reluctant to call it that because the transactions only go one way. Users can redeem cash for Bitcoin, but not Bitcoin for cash.

Despite being around for four years, the Bitcoin is still in the early stages of development. "If you bought in right now, you'd be an early adapter," said Josh. "I'd call what we did as pre-early adapter stage."

The Cambridge, Mass.-born duo opened a guitar store, Stomp Romp, in the Manchester Millyard in early 2012.

"We had made a small investment in buying Bitcoins, and had been accepting them at our guitar store, but we weren't planning to get into the Bitcoin business," Josh said.

They started attending a Bitcoin meetup at the Strange Brew Tavern on Market Street, one of the most active Bitcoin gatherings in the world, according to the Harveys, with many attendees from the Free State Project.

"There's quite a bit of interest in Bitcoin around here," said Josh. One of the first brick-and-mortar establishments to accept Bitcoin was the Pao Cafe in downtown Newmarket. Republican state Rep. Mark Warden of Manchester got a lot of attention in the Bitcoin world when he announced that his campaign would accept Bitcoin donations.

Launch of Bitcoin Ventures

At a Strange Brew Bitcoin meetup last year, the Harvey brothers met Matt Whitlock, a University of Florida graduate with a degree in computer software engineering and at the time, he was a senior software engineer at a network security company.

Together, they launched Lamassu Bitcoin Ventures, and by mid-February of this year they had a prototype on display at the International Students for Liberty convention in Washington, D.C.

The machine's appeal is the easy trading of dollars for Bitcoins, a transaction that can now only be completed online through one of several Bitcoin exchanges. Unlike typical online transactions, however, exchanges require an electronic funds transfer and cannot be completed with credit or debit cards.

"Some exchanges take 30 days just to register at their site," said Josh.

The inventors used a bill validator they bought on eBay, a single-board computer and a webcam as their key components, and the first Bitcoin Machine was born. The crude wooden box used for the prototypes has since been replaced by a made-to-order steel enclosure that will be used for presentations at the San Jose convention this week.

Investors are already champing at the bit, so to speak, but the brothers are sticking with their own bootstrap financing for now.

People who exchange cash for Bitcoin these days are gambling on the hope that Bitcoin values will continue to rise as they become more widely accepted. It's not an investment for the weak of heart. One Bitcoin peaked at $266 dollars a few weeks ago, then a panic sell brought the value down to $55. On May 8, a Bitcoin was back up to $115.

Whatever direction the Bitcoin revolution takes, the local founders of Lamassu intend to be a part of it. They think it's a sound hedge against the devaluation of currency.

"It's a way to innovate in the financial sector," said Zach. "You are seeing innovation everywhere except in finance because to do anything in the financial space, you have to have a tremendous amount of capital. That's why so many venture capitalists are excited about this. It gets them into the financial space without having to be VISA."

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