Bitcoin
Bitcoin is a virtual currency that surged in popularity in 2013. Bitcoin are mined by computers solving complex financial puzzles. Bitcoin production is limited to 21 million and at the end of 2013 there was an estimated 12 million Bitcoin in circulation.
Bank of America Merrill Lynch strategists, David Wo, explains Bitcoin this way:
Bitcoin is a digital currency designed by Satoshi Nakamoto, a pseudonym, in January 2009. Bitcoin allows users to send payments within a decentralized, peer-to-peer network, and is unique in that it does not require a central clearing house or financial institution clearing transactions. Users must have an internet connection and Bitcoin software to make payments to another public account/address.
Satoshi is the smallest unit of Bitcoin; 1 Bitcoin contains 100 million Satoshi. By design, the supply of Bitcoins cannot exceed 21 million Bitcoins (2,100 trillion Satoshi). The total amount of Bitcoin in circulation will increase predictably, based on its underlying code, until reaching the cap in 2140. The current supply is 12 million Bitcoins or 57% of the eventual total (Chart 2). A public history of all transactions is continuously updated and verified by "miners" who gather batches of new transactions into blocks and attach these blocks to the end of the "Blockchai"n. This public history forms a ledger of transactions where every single Satoshi is tracked from its first owner to the present owner. Having the full history publicly available guarantees that a buyer actually owns the number of Bitcoins he or she wants to spend, preventing fraud.
Bitcoin supply is increased with every new block of transactions added to the public history (i.e. Blockchain). The verification of new transactions by miners is relatively easy and many transactions can be easily compressed in a single block. However, there is a computational task for each block of a high degree of difficulty designed to constrain the increase in the money supply, no matter how slow or fast the overall mining network is. If no external transactions are outstanding, a block with a single transaction to pay the miner would be produced. Indeed, the first several thousand blocks simply paid the miner and contained no other transactions (presently blocks contain a record of hundreds of transactions). This way the initial seed currency was distributed to miners who bore the speculative risk in the Bitcoin's success.
As a rough analogy, suppose competing journalists (miners) are asked to document the national news on each given day for the National Archives. The journalist is asked to write down the events (transactions) in a book (block) and the Archive will eventually buy one such book for a fixed fee. To determine which of the books the Archive will buy the archive has an additional requirement for journalists that the book contains the fingerprints of 10 people whose birthday was on that particular day. Note that the list of people isn't related to the national news (transactions) but is simply meant to control the supply of books coming out per day. As more journalists collaborate to find people, the Archive increases the number of fingerprints required.
Exchanges allow the conversion between real-world fiat currencies and Bitcoin. The participation in exchanges requires consumers to take on credit risk by transferring Bitcoins from a personal account to a third-party's account, which is similar to entrusting real-life cash to depository institutions. However, unlike banks, Bitcoin third-party accounts are not regulated nor do they provide FDIC protection. While personal accounts are easy to secure, start-up exchanges in overseas jurisdictions with online digital wallets are often targeted by hackers. Exchanges also have some risk of the operator absconding with the money before the currency conversion is completed. Major exchanges ordered by volume are BTC China (CNY), OkCoin (CNY), Mt.Gox (USD, EUR, GBP, JPY, AUD), FXBTC (CNY), Bitstamp (USD), Bter (CNY), BTC-E (USD), BTCTrade (CNY), VirtEx (CAD).
Bitcoin as a medium of exchange, distinct from speculative transactions on exchanges, initially gained popularity with companies involved within the Bitcoin ecosystem. For example, miners can purchase specialized chips with Bitcoins. To facilitate transactions, payment processors such as Bitpay provide software to merchants, and absorb FX volatility risk by guaranteeing exchange rates and sending daily bank payments. Since April 2013 significant investment was made into start-ups that develop and promote Bitcoin as a means of exchange for merchants (as opposed to speculation investment on the exchange). For example, CoinLab has received seed money to incubate other Bitcoin start-ups like mining companies and exchanges. The most notable company to accept Bitcoins may be Baidu, a major Chinese portal, which began accepting Bitcoin for its online security services in October 2013.
The rapid rise in BTC prices (292% a year) has generated a comparable exponential growth in mining revenue, which in turn has attracted large capital investment. Indeed, the number of computations has grown 521% a year, requiring expensive, heavy-duty Bitcoin-mining chips. The competition for revenues has taken away the low-hanging fruit and each dollar mined is now hundred times "deeper". Electricity costs are also going up as miners use more computers.
View Older Stories
-
Form S-1/A Kryptoin Bitcoin ETF
-
Number of Crypto Traders on Robinhood Platform Soared 458% in Q1
-
Ebang International (EBON) to Address the Shareholders in an Open Letter
-
The9 Limited (NCTY) Signs Memorandum of Understanding on Additional Purchase of Bitcoin Mining Machines
-
Mogo (MOGO) Payments Platform Announces Partnership with LendingClub Bank
-
Riot Blockchain (RIOT) to Acquire Whinstone in $651 Million Deal
-
Riot to Acquire Whinstone, Creating a US-Based Industry Leader in Bitcoin Mining
-
Riot to Acquire Whinstone, Creating a US-Based Industry Leader in Bitcoin Mining
-
MoneyLion to Empower Members to Buy, Sell and Earn Cryptocurrencies via Strategic Investment in Zero Hash
-
Graph Blockchain Announces Acquisition of the Chainlink Token ("LINK")
-
Diginex's (EQOS) EQUOS Origin Token (EQO) starts trading today
-
EQUOS Origin Token (EQO) starts trading today
-
Jackpot Piñatas Deluxe Hits PlayCroco Online Casino
-
Engiven's Cryptocurrency Donation Management Platform Selected by the Orang Utan Republik Foundation
-
UPDATE: Morgan Stanley Upgrades WisdomTree Investments (WETF) to Equalweight
-
Caruso Partners With Gemini In Industry First To Bring Blockchain Technology And Bitcoin To Caruso Properties Throughout Southern California
-
Looking For Hot Stocks To Buy? 4 IPO Stocks To Watch In 2021
-
Peter Thiel Said Bitcoin Could Be 'Chinese Financial Weapon' Against U.S. - Bloomberg
-
Thiel Calls Bitcoin A Chinese Financial Weapon at Roundtable - Bloomberg
-
Form D/A Galaxy Bitcoin Fund LP
-
SUMA Academy Launches Financial Education Initiative for Financial Literacy Month
-
Gemini Taps Alloy to Streamline Identity Decisioning for Credit Card with Crypto Rewards
-
Riot Blockchain (RIOT) Announces Milestone Purchase Order of 42,000 S19j Antminers, Growing Total Hash Rate to 7.7 EH/s Upon 2022 Deployment
-
Riot Blockchain Announces Milestone Purchase Order of 42,000 S19j Antminers, Growing Total Hash Rate to 7.7 EH/s Upon 2022 Deployment
-
Riot Blockchain Announces Milestone Purchase Order of 42,000 S19j Antminers, Growing Total Hash Rate to 7.7 EH/s Upon 2022 Deployment
-
Children's Charity Creates Bitcoin Superhero "Billy Bitcoin" To Encourage Bitcoin Donations
-
Cryptocurrency Mining Company Argo Blockchain Achieves Record Q1 Revenue Growth
-
Coinme Launches 300 Bitcoin-Enabled Coinstar Kiosks in Florida
-
Why ISW Holdings (OTC US: ISWH) May be the Value Play in Crypto (NASDAQ: MSTR) (NASDAQ: RIOT) (NASDAQ: MARA) (NYSE: SOS) (OTC US: HVBTF) (NASDAQ: CAN)
-
DeFi Technologies’ Wholly Owned Subsidiary, Valour Structured Products, Announces the Launch of its Second Product, ETH Zero on the Nordic Growth Market
-
Ebang (EBON) says Hindenburg Report contain many errors, unsupported speculations and inaccurate interpretations of events
-
Form D/A Galaxy Bitcoin Fund LP
-
Jump Trading backs fan tokens startup Chiliz
-
Crystal Expands Blockchain Coverage & Crypto AML Compliance Solutions
-
HIVE Announces Fiscal Year End HODL Coin Assets
-
Ebang International Responds to Short Seller Report
-
Ebang International Responds to Short Seller Report
-
XELS, an eco-conscious blockchain platform for buying and trading carbon credits, lists on Bittrex Global
-
XELS Launches Eco-Conscious Blockchain Platform for Carbon Offset Credits
-
Cryptocurrency inflows hit all-time high of $4.5 billion in first-quarter: Coinshares
-
Ebang International Announces Closing of Follow-on Public Offering
-
Ebang International Announces Closing of Follow-on Public Offering
-
Exodus Anticipates Receiving SEC Qualification for its Reg. A Offering on April 8th
-
Exodus Anticipates Receiving SEC Qualification for its Reg. A Offering on April 8th
-
Coinbase (COIN) Announces Verified Users of 56 million, Q1 Revenue of $1.8B
-
Coinbase Announces First Quarter 2021 Estimated Results and Full Year 2021 Outlook
-
Huobi Charity Pledges $1 Million to UNICEF to Drive Social Impact Through Blockchain and Emerging Tech
-
Proactive news headlines including The Parent Company, One World Lithium, Vox Royalty and Global Energy Metals
-
Proactive news headlines including The Parent Company, One World Lithium, Vox Royalty and Global Energy Metals
-
Gemini Partners with Learn & Earn to Deliver Cryptocurrency Education to High School Students