Bitcoin eyed after 'Silk Road' drug site shut down

October 3, 2013 6:55:42 PM PDT
Some would argue an online black market for drugs called Silk Road was able to exist because instead of dealing in dollars, it dealt in Bitcoins, an anonymous, electronic currency that's been steadily catching on.

In a little pink store front in San Francisco, the Cups and Cakes Bakery is world famous.

But not for its deep dark chocolate, or rich red velvet; it's for this little sticker that reads, "Bitcoin accepted here."

"Wall Street Journal, Forbes, Marketplace, BBC, SF Weekly, SFist, we're on all of 'em," Cups and Cakes Bakery owner Jennifer Longson said.

Though most customers pay cash or credit, Cups and Cakes accepts another kind of payment -- Bitcoin.

"Type in 36 dollars, cuz that's their total, press checkout now, and they scan their QR code," Longson said.

It all happens digitally, says CNET's Brian Cooley.

"You can't hold a Bitcoin," he said. "You can't get a coin or a piece of paper that represents it. It's all done in digital cryptographic accounts over the Internet."

And Bitcoin is its own currency whose value changes by the minute, just like euros or yen.

It's electronic, like credit cards. But anonymous, like cash.

"With a virtual currency you're operating far more out of the spotlight than you are with money and credit cards, which are being watched by hundreds of global entities," Cooley said.

For the moment, these cupcakes are one of the few things you can buy with Bitcoins. But that hasn't stopped some people from betting big on the new currency; in some cases, converting millions of dollars into Bitcoins.

"Bitcoin has grown in popularity quite a bit in the last six months and it's reflected in its price," TechCrunch writer Alex Wilhelm said.

Wilhelm showed us the value of a Bitcoin fell off a cliff when word got out that the Silk Road drug trading website had shut down.

"Silk Road was a very very large and important Bitcoin marketplace," he said. "I mean, it was a marketplace that only accepted Bitcoin. So a lot of people would buy into Bitcoin, start to use Bitcoin, trade Bitcoin, because they wanted to trade on Silk Road."

Wilhelm says there will be another Silk Road, maybe ten more.

But in the meantime, Jennifer Longson hopes to keep showing the good side of Bitcoin, by selling a different kind of addictive substance.

"I'm not selling drugs, I'm selling cupcakes," she said. "It's really easy for me to say it's legit."


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