STEVE INSKEEP, HOST:
Bitcoin has been on a wild ride. You know, bitcoin, the virtual currency. Can't hold it in your hand, although you can send it online. You just can't really spend it in a physical store. The price of buying bitcoin with other money has tripled this year as buyers rushed in. If you could go back to 2010 and buy $1,000 worth, it would be worth an estimated $20 million right now.
DAVID GREENE, HOST:
You're making it sound like we should buy this.
INSKEEP: Well, maybe you should have. We sent NPR's Kevin Leahy to see how bitcoin works. Let's see what he says.
(SOUNDBITE OF PHONE RINGING)
PETER VAN VALKENBURGH: Hey, are you downstairs?
KEVIN LEAHY, BYLINE: I'm in the lobby.
VAN VALKERBURGH: OK. Let me come grab you.
LEAHY: So before I bought bitcoin, I came here to Coin Center, a Washington, D.C., think tank with hipster vibes, exposed brick walls, cold brew coffee on tap and a small staff all funded by investors with a stake in digital currencies. Coin Center's lead researcher and chief enthusiast is Peter Van Valkenburgh. He explains bitcoin as cash for the Internet.
VAN VALKERBURGH: People understand cash. Cash is something I keep in my wallet in my pocket. And I can pull it out of my wallet, and I can hand it to Neeraj here.
LEAHY: Neeraj Agarwal, his colleague with us. Van Valkenburgh says sending money through banks is way different from cash.
VAN VALKERBURGH: I'm with Bank of America. Neeraj is with Wells Fargo. They promised me that they have this much value in deposit for me. And if I want to send to Neeraj, I talk to them. They talk to Wells Fargo. Wells Fargo credits Neeraj. That's not cash. That's a brittle system that's reliant on a lot of trust and a couple big, giant corporations or banks.
LEAHY: As opposed to bitcoins, he says, which can be sent directly from smartphone to smartphone through a decentralized network. The network lists every transaction on a kind of public digital ledger.
VAN VALKERBURGH: Peter sent to Neeraj. Neeraj sent to his mom.
LEAHY: Except instead of names, you're identified by strings of letters and numbers, which creates a level of anonymity. But enough of this technical stuff. I need to get rich right now. So with $50 in my boss's money, Peter and I set out to buy some bitcoin at a falafel shop around the way. Yes, this falafel shop with its 4 a.m. closing time is home to a bitcoin ATM. It's a one-way ATM. Cash only goes in.
VAN VALKERBURGH: It looks like it's well-maintained.
LEAHY: It's got a big display monitor and one single button.
I'm going to push the button that says buy bitcoins.
VAN VALKERBURGH: The only button on the screen.
LEAHY: I punch in my phone number and get a text with a verification code.
VAN VALKERBURGH: Now, you've got to bring up the QR code here. See the X there?
LEAHY: OK, here goes my cash - two 20s, two 5s.
(SOUNDBITE OF BITCOIN ATM)
LEAHY: And out comes a receipt. I check the Wallet app I downloaded onto my smartphone. And I'm the proud owner of .016 bitcoins. (Laughter) So my $50 got me just a tiny sliver of one bitcoin. A whole coin would have cost me 3,068 bucks including the fees. Now, waiting behind me is a buff guy in a tank top and a ponytail. We'll call him Tony (ph). He asked us not to use his real name, and he's not here for falafel. He's here for bitcoin.
TONY: And I kind of like the anonymity of it, you know, like, the fact that it's easier to gamble with on casinos.
LEAHY: He's talking about online gambling.
TONY: Dealing with credit cards, they don't like the transactions obviously because it comes from, like, China and stuff. So it's really easy to get money in and out for sports betting and things like that.
LEAHY: Then another guy came in. He put so many $20 bills into the machine one by one, he actually pulled up a chair to do it. It was going to be a while. Back at Coin Center, the think tank, I asked Peter Van Valkenburgh if it's wise to shove all in on bitcoin.
VAN VALKERBURGH: Never, never, never invest more than you're willing to lose because it could go to nothing.
LEAHY: Me? I've lost some money so far, but I'll hang on to my small piece of bitcoin and report back. Kevin Leahy, NPR News. Transcript provided by NPR, Copyright NPR.