Page 23 - Leisure Living Magazine Spring 2018

So What’s The Deal With Bitcoin?
“Law You Can Use” Courtesy of the Ohio State Bar Association By Robert Ellis, Attorney, Hennis, Rothstein & Ellis LLP
For months now, bitcoin has been a steady presence in the news cycle and now other types of virtual “coin” are appearing and attracting additional buyers, the attention of Wall Street investors and even the Internal Revenue Service. Recent rapid spikes in the price of the virtu- al currency have also caused some early mar- ket entrants to become quite rich. In this col- umn, attorney Robert Ellis, a partner at Hennis, Rothstein & Ellis LLP, explains bitcoin, its pitfalls and the legal implications of the virtual commod- ity.
What is bitcoin?
Bitcoin is simply a method of exchange – numerical entries that can be added and sub- tracted from “accounts” anyone can set up on public ledger software called the “blockchain” that anyone can access. Blockchain technology functions as a register, visible to all, that records and constantly reconciles any transfer of bitcoin from one person to another.
But bitcoin is not actual money. It’s not backed by any sovereign nation. There is no cen- tral bank to control inflation and deflation, no deposit insurance, no bitcoin checking accounts, no paper or metal. (Those shiny “bitcoins” one sees in stock photos are just props.) Transactions on the blockchain do not involve any bank or government. Bitcoin is nothing more than num-
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bers in cyberspace. It is a “virtual currency” and as such has no intrinsic value.
Because of this lack of guarantor, if a bit- coin owner loses their password or their bitcoin account is hacked, they will lose everything in an instant with no possibility of an “undo” or a refund. The same holds true for those who keep bitcoin in an account on an exchange where they can buy and sell for hard currency. If the exchange is hacked, which happens frequently, there is no chance of mitigating the loss as there is with a bank where your money is insured against fraud.
Investing in bitcoin
So why are people willing to pay real money to acquire bitcoin? The reasons keep changing. Originally,bitcoinwasattractivetothetechsavvy and those who liked the idea of a non-govern- mental, online-only “currency.” At first it was worth almost nothing, but users found value in it because it could be used as a medium of exchange and could be converted to and from hard curren- cy if desired.
Unfortunately, bitcoin’s anonymity and untraceable nature quickly attracted the criminal element. Drug dealers, purveyors of ransomware, gun runners, money launderers, fraudsters and criminals of every sort all over the world had a
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