Bitcoins, a web-based virtual currency, are traded pretty fast and loose these days. Camp BX, an online trading site for the Bitcoin currency that launched Tuesday, wants to do things a little bit differently.
Camp BX founder Keyur Mithawala launched the site to transform Bitcoin trading — which is little more than a hobby for geeks and tech enthusiasts these days — into a professionally-traded currency. That means the site is subject to security audits from third-party security providers like McAfee. It also means that the trading options should be more robust and emulate other trading markets like the stock market, Mithawala said.
There are two other major trading sites for Bitcoins — Mt. Gox and TradeHill. But neither of those sites allows for short-selling, which is basically a hedge on the price of the Bitcoin that injects cash into the trading ecosystem. Camp BX will let its users short-sell Bitcoins, which will help stabilize the volatility for the young currency. Today, an 8 percent swing in the value of the Bitcoin throughout the day is pretty typical.
“They have kind of a hobby project feel to them, and they are doing $27 million a month in trades,” Mithawala said. “Other than speculators, no one wants to deal with a highly volatile currency like that.”
Mt. Gox, one of the largest trading sites for Bitcoins, has around 60,000 users. But a majority of those users did not have a balance of Bitcoins, so only around 6,000 of those users are active traders, Mithawala said. Mt. Gox was also recently hacked, sending the price of the Bitcoin down to nearly zero before it later recovered. That site was basically forced to roll back the trade and pretend the whole incident never happened.
Bitcoins are designed to remove the middle man in transactions. That can be a transaction provider like PayPal or a bank when someone makes a purchase with a credit or debit card. When someone makes a transaction, the Bitcoin is automatically transferred to the recipient through an encrypted transaction that ensures Bitcoins can’t be hacked or created artificially. New Bitcoins are added to the market through “Bitcoin Mining” — a process where individuals run servers that handle Bitcoin transactions and get paid in Bitcoins for doing so.
Camp BX, like other online Bitcoin trading sites, takes a cut of the transaction as a fee. The site charges 0.55 percent of the transaction made as a fee for letting Bitcoin traders use the website. But that transaction fee is still lower than what PayPal and other payment providers charge, which keeps it in line with the Bitcoin ethos of trying to eliminate transaction costs, Mithawala said.
The number of Bitcoins available to users is algorithmically limited — meaning the number of new Bitcoins introduced into the economy decreases over time and reaches a cap of somewhere around 21 million. That means that, similar to days on the stock market where there is low trading volume, smaller moves in the market are able to cause greater swings in the value of the Bitcoin.
Camp BX is based in Atlanta, Ga., and has four employees — Mithawala and three contractors. Mithawala founded the company in May this year and spent the next several months rolling out the trading service. The company built the service in a little more than a month, and the site ran around 1,600 transactions amounting to 90,000 Bitcoins in the 11-day testing phase. The site has around 200 users so far.