Charles Winkelmann used the most modern of global currencies to buy a classic symbol of America last month when he bought a Harley-Davidson motorcycle with bitcoins.
“We know it was the first Harley in the United States, and perhaps in the world, bought via Bitcoin,” said Mike Moffett, president of Old Road Harley-Davidson, which has been on Centre Pointe Parkway since 2009, when it moved from Van Nuys. The dealership first opened in 1965.
Bitcoin, a digital and global currency, allows people to securely send or receive money across the internet. Money can be exchanged without being linked to a real identity. The mathematical field of cryptography is the basis for Bitcoin’s security.
The security of each transaction is assured by encrypting it, and linking it in an unalterable way to all previous transactions, and distributing the records, called blocks, to computers all over the world. Once recorded, the data in any given block cannot be altered without altering all subsequent blocks, which requires the cooperation of participants across the network.
Last month, the Chicago Mercantile Exchange said it will start trading Bitcoin futures later this year, once it receives regulatory approval. Cryptocurrency market capitalization has grown in recent years to $172 billion, with Bitcoin representing more than 54 percent of that total, or $94 billion, according the futures exchange. About $1.5 billion worth of bitcoins are exchanged each day.
“By accepting Bitcoin and getting the word out, we’re reaching another audience that we might not otherwise reach,” Moffett said.
His brother Tom mines cryptocurrency, and brought him up to speed on how it works.
“I talked to a couple of car dealers that accept Bitcoin, Lamborghini Newport Beach and Overland Park Jeep Dodge Ram Chrysler in Kansas, and they shared what they know. Then we signed up with BitPay, which converts the Bitcoin amount into dollars, so the transaction is seamless.”
Once they were set up to accept Bitcoin, they put the word on Reddit, the social news and discussion site, which is where, within a week, Winkelmann saw it.
“I was born in the Philippines and owe everything I have to America, so I wanted to buy an American product,” Winkelmann said. “If I see local businesses that will accept Bitcoin, I want to support them.”
Winkelmann first became aware of Bitcoin during the financial crisis, a few years after graduating with a degree in engineering from UC Davis. With jobs hard to find, he started looking into the new digital currency.
When he first heard about Bitcoin, one bitcoin was worth thirty cents. “At first I thought it was a scam, but then I did some research, and read a whitepaper called “Bitcoin: A Peer-to-Peer Electronic Cash System,” by Satoshi Nakamoto, and decided to start mining bitcoins.” Mining involves solving complex computational puzzles and adding previous transactions to an ever-growing linked list, called a blockchain, in exchange for newly released bitcoins.
It’s unclear if Nakamoto was a single individual or a pen name for a group of authors of the whitepaper, which remains a useful primer on how Bitcoin works.
When Winkelmann, who lives in Gardena, started mining in 2011, it was possible to use off-the-shelf personal computers. More recently, only high-end specialized computers are up to the task. Slower computers consume more in power costs than they can generate in value.
These days, Winkelmann only uses Bitcoin for items that cost more than a thousand dollars, to avoid transaction fees on smaller purchases.
He has a Bitcoin tee shirt he bought with 9 bitcoins when they were worth $5 each. Today, one bitcoin is worth about $8,227, so these days he jokes about his $74,000 tee shirt, which he wears while tinkering with his Harley, which cost less than two of the fairly new currency.