Nothing like a little bit of speculation gone wild to kick off the holiday spending season.
Bitcoin just traded past the $1,000 per coin mark on Mt.Gox, one of its largest exchanges - as we write this, it's at $1,022, with a high of $1,030 a few moments ago.
The currency has been on a massive run the past several days, shooting up hundreds of dollars per unit, prompting complaints that its value is overheated, leaving its price unmoored from any sort of inherent utility. Well, yes, but it's still fun to watch.
Here's the chart that shows how the price has been creeping up:
The market capitalization of the Bitcoin market is far above the potential stored functional use of the currency in even the medium-term, implying to me that it is overvalued. Do what you will, just be careful.
2013年12月1日 星期日
E-gold founder backs new Bitcoin rival
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The founder of one of the earliest virtual currencies has re-emerged with a rival to Bitcoin, more than five years after his first venture, e-gold, was shut down by the US Department of Justice.
Douglas Jackson is consulting for a membership organisation called Coeptis that hopes to launch a new version of his gold-backed currency, which attracted millions of users at its height.
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The aim is to lure many of the people who have been attracted to Bitcoin and other virtual currencies this year, including businesses that are looking for a cheap way to process payments outside the traditional banking system.
Coeptis’s “global standard currency” would be fully backed by reserves of gold, held in a trust, in effect turning the precious metal into a medium of exchange.
Mr Jackson and two others pleaded guilty in July 2008 to running an illegal money transmitting business and to aiding money laundering, after federal investigators charged that “criminals of every stripe gravitated to e-gold as a place to move their money with impunity”.
Bill Cunningham, chief executive of CMO, the Florida company behind Coeptis, said the technology behind e-gold has been updated and expanded to ensure it complies with the emerging regulations covering virtual currencies. Unlike e-gold, it would verify members’ identities before allowing them to trade.
“We believe we will have better anti-money laundering procedures than any other virtual currency business and that we will compare well with the banking industry,” Mr Cunningham said.
“One of the advantages of seeing what happened to the e-gold system is we understand where we fell down before.”
The founder of one of the earliest virtual currencies has re-emerged with a rival to Bitcoin, more than five years after his first venture, e-gold, was shut down by the US Department of Justice.
Douglas Jackson is consulting for a membership organisation called Coeptis that hopes to launch a new version of his gold-backed currency, which attracted millions of users at its height.
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The aim is to lure many of the people who have been attracted to Bitcoin and other virtual currencies this year, including businesses that are looking for a cheap way to process payments outside the traditional banking system.
Coeptis’s “global standard currency” would be fully backed by reserves of gold, held in a trust, in effect turning the precious metal into a medium of exchange.
Mr Jackson and two others pleaded guilty in July 2008 to running an illegal money transmitting business and to aiding money laundering, after federal investigators charged that “criminals of every stripe gravitated to e-gold as a place to move their money with impunity”.
Bill Cunningham, chief executive of CMO, the Florida company behind Coeptis, said the technology behind e-gold has been updated and expanded to ensure it complies with the emerging regulations covering virtual currencies. Unlike e-gold, it would verify members’ identities before allowing them to trade.
“We believe we will have better anti-money laundering procedures than any other virtual currency business and that we will compare well with the banking industry,” Mr Cunningham said.
“One of the advantages of seeing what happened to the e-gold system is we understand where we fell down before.”
Bitcoin, you have a China problem
By all metrics and accounts, bitcoin’s popularity is exploding across the People’s Republic of China. It now boasts the world’s most active bitcoin exchange, BTC China, the greatest number of bitcoin mining nodes, the highest number of bitcoin wallet downloads, and set the record for the highest price ever paid for a bitcoin (7,000 yuan or approximately $1,120 on November 19) while trading at just $900 on Mt. Gox. A map of global bitcoin trading activity further illustrates China’s dominance.
Bitcoin bulls are eager to see the currency spread and gain broader global adoption, and thus may not view this as a problem. But for a currency touted for its independence from government interference, the growing concentration of Chinese influence over this crypto-currency wealth creates a single point of failure for the system. The same would be true if you replaced China with any other country (assuming it could generate similar trading volumes), but the fact that it is the notoriously unpredictable China doesn’t inspire confidence.
The rapid rise in popularity has attracted both investors and fraudsters. In late October, Lightspeed China (an international arm of Lightspeed Venture Partners) made a $5 million investment into BTC China, adding legitimacy to the already formidable company. Around the same time, GBL a supposed Hong Kong-based bitcoin exchange that was actually based in Beijing, shut down unexpectedly, taking $4.1 million worth of client deposits along with it. Despite red flags in the run-up to this disappearance, the bitcoin market barely noticed, either in China or elsewhere.
A number of possible explanations exist for bitcoin’s popularity in China, each of which raises its own red flag. One factor is that BTC China, the world’s largest bitcoin exchange and one that trades only in yuan (aka CNY or Renminbi), currently offers no-fee trading – a rarity among major global exchanges. Users pay nominal exchange entry and exit fees – 0.5 percent when using Chinese PayPal equivalent Tenpay and 1 percent by bank transfer.
But beyond fee advantages, China’s bitcoin obsession primarily traces back to two central factors: the difficulty of getting wealth out of China, and the fact that Beijing does not allow the yuan’s value to float freely. Should either of these change, bitcoin’s value could plummet.
Today, many wealthy Chinese who want to invest in international assets or send their children to school abroad are turning to bitcoin to move money across borders with greater freedom. The same can be said of Chinese looking for a hedge against the artificially stable yuan, which is widely considered to be overvalued. Should China eventually decide to float its currency, much of its purchasing power could evaporate overnight. Therefore, Chinese bitcoin adoption is less a vote of confidence in an alternative digital currency and more a vote of no confidence in the yuan, as evidenced by the premium – often as much as 20 percent – that Chinese must pay to purchase bitcoin with yuan.
Bitcoin bulls are eager to see the currency spread and gain broader global adoption, and thus may not view this as a problem. But for a currency touted for its independence from government interference, the growing concentration of Chinese influence over this crypto-currency wealth creates a single point of failure for the system. The same would be true if you replaced China with any other country (assuming it could generate similar trading volumes), but the fact that it is the notoriously unpredictable China doesn’t inspire confidence.
The rapid rise in popularity has attracted both investors and fraudsters. In late October, Lightspeed China (an international arm of Lightspeed Venture Partners) made a $5 million investment into BTC China, adding legitimacy to the already formidable company. Around the same time, GBL a supposed Hong Kong-based bitcoin exchange that was actually based in Beijing, shut down unexpectedly, taking $4.1 million worth of client deposits along with it. Despite red flags in the run-up to this disappearance, the bitcoin market barely noticed, either in China or elsewhere.
A number of possible explanations exist for bitcoin’s popularity in China, each of which raises its own red flag. One factor is that BTC China, the world’s largest bitcoin exchange and one that trades only in yuan (aka CNY or Renminbi), currently offers no-fee trading – a rarity among major global exchanges. Users pay nominal exchange entry and exit fees – 0.5 percent when using Chinese PayPal equivalent Tenpay and 1 percent by bank transfer.
But beyond fee advantages, China’s bitcoin obsession primarily traces back to two central factors: the difficulty of getting wealth out of China, and the fact that Beijing does not allow the yuan’s value to float freely. Should either of these change, bitcoin’s value could plummet.
Today, many wealthy Chinese who want to invest in international assets or send their children to school abroad are turning to bitcoin to move money across borders with greater freedom. The same can be said of Chinese looking for a hedge against the artificially stable yuan, which is widely considered to be overvalued. Should China eventually decide to float its currency, much of its purchasing power could evaporate overnight. Therefore, Chinese bitcoin adoption is less a vote of confidence in an alternative digital currency and more a vote of no confidence in the yuan, as evidenced by the premium – often as much as 20 percent – that Chinese must pay to purchase bitcoin with yuan.
Bitcoin is soaring, but financial advisers are steering clear for now
Bitcoin is soaring to record heights, hitting the $1,000 mark Friday for the first time, but financial advisers aren't biting — yet, anyway.
The virtual currency passed the quadruple digit price shortly before 10 a.m. on the Mt. Gox exchange and has since soared higher than $1,020. That marks a gain of about 5,000% from the $20 level at which Bitcoin was trading at the start of this year.
Despite the hype, many advisers are steering clear of the online currency, which is unregulated by central banks and traded freely on the Internet. Because the digital currency is so new and its rise has been so fast, advisers are doing their homework before investing clients' money.
The virtual currency passed the quadruple digit price shortly before 10 a.m. on the Mt. Gox exchange and has since soared higher than $1,020. That marks a gain of about 5,000% from the $20 level at which Bitcoin was trading at the start of this year.
Despite the hype, many advisers are steering clear of the online currency, which is unregulated by central banks and traded freely on the Internet. Because the digital currency is so new and its rise has been so fast, advisers are doing their homework before investing clients' money.
What Bubble? Bitcoin Tops $1000.
Bitcoin topped $1000 for the first time Wednesday morning.
It’s the latest milestone in yet another epic rally for the four-year old virtual currency created a man or group of people going by the name Satoshi Nakamoto.
As of early 2010 was valued at just 4 cents, according to Mt. Gox. That’s a 2,499,9000% jump.
As of Oct. 1, 2013, bitcoin closed at $140.3. The jump in less than two months: 614%.
The value of a bitcoin keeps rising but with intense bouts of volatility. With each drop in the cybercurrency’s price, bitcoin naysayers are quick to point to popping of the bitcoin bubble.
For today at least, the bitcoin bulls are winning.
It’s the latest milestone in yet another epic rally for the four-year old virtual currency created a man or group of people going by the name Satoshi Nakamoto.
As of early 2010 was valued at just 4 cents, according to Mt. Gox. That’s a 2,499,9000% jump.
As of Oct. 1, 2013, bitcoin closed at $140.3. The jump in less than two months: 614%.
The value of a bitcoin keeps rising but with intense bouts of volatility. With each drop in the cybercurrency’s price, bitcoin naysayers are quick to point to popping of the bitcoin bubble.
For today at least, the bitcoin bulls are winning.
Speculators push Bitcoin above $1,000
Speculators are trading Bitcoin above $1,000 for the first time, pushing the mania for the experimental virtual currency into a new phase.
The price for a single Bitcoin quoted on the Mt.Gox exchange hit $1,044 on Wednesday, double its level one week ago and 80 times the prevailing price at the start of the year.
More
ON THIS TOPIC
Silicon Valley catches Bitcoin fever
Alderney to hold talks on Bitcoin plan
Island seeks self-sufficiency with Bitcoin
Royal Mint explores plan to make Bitcoins
IN CURRENCIES
Yen at five-year lows as inflation rises
E-gold founder backs new Bitcoin rival
Bitcoin must learn from past failures
Poor growth and low oil sales hit rouble
The media coverage and social media debate that has stoked the buying has intensified in recent weeks, as supporters claim Bitcoin could one day become an effective alternative to government currencies or a cheap way of moving money around the world.
Even sceptics accept that the price could continue to soar before any flaws in the concept become apparent.
“It’s a massively multiplayer online game,” said Jim Angel, professor at Georgetown University. “If you can guess where the crowd is going to go tomorrow, you can have some fun gambling here.
“But as a store of value it fluctuates too much and as an alternative to traditional payments systems it has got a lot of competition. There is also huge technology risk here. All it takes is one hack and, puff, it goes down to zero.”
Bitcoin was created in 2009 by an unknown computer scientist and transfers of ownership of the currency are recorded in software stored across a network of computers.
In depth
Increased trading in the decentralised virtual currency has begun to attract the attention of regulators
It is not backed by any central authority, so its value is derived only from speculators’ expectations of its future utility. A number of small businesses have begun accepting Bitcoin as payment, but usually convert the money back into government-run currency.
Regulators in the US and in China, the twin centres of speculative Bitcoin activity, have in recent weeks shown their willingness to let the experiment continue, as long as Bitcoin exchanges and brokers comply with anti-money laundering rules.
Jeremy Liew, partner at Lightspeed Venture Partners of San Francisco, which has an investment in the largest Bitcoin exchange in China, said that the currency might have particular use in emerging markets with under-developed banking technology.
And he added that a Chinese penchant for speculation has been playing a part in Bitcoin’s exponential price rise. “It is no accident that Macau has a larger gaming industry than has Las Vegas,” he said.
The price for a single Bitcoin quoted on the Mt.Gox exchange hit $1,044 on Wednesday, double its level one week ago and 80 times the prevailing price at the start of the year.
More
ON THIS TOPIC
Silicon Valley catches Bitcoin fever
Alderney to hold talks on Bitcoin plan
Island seeks self-sufficiency with Bitcoin
Royal Mint explores plan to make Bitcoins
IN CURRENCIES
Yen at five-year lows as inflation rises
E-gold founder backs new Bitcoin rival
Bitcoin must learn from past failures
Poor growth and low oil sales hit rouble
The media coverage and social media debate that has stoked the buying has intensified in recent weeks, as supporters claim Bitcoin could one day become an effective alternative to government currencies or a cheap way of moving money around the world.
Even sceptics accept that the price could continue to soar before any flaws in the concept become apparent.
“It’s a massively multiplayer online game,” said Jim Angel, professor at Georgetown University. “If you can guess where the crowd is going to go tomorrow, you can have some fun gambling here.
“But as a store of value it fluctuates too much and as an alternative to traditional payments systems it has got a lot of competition. There is also huge technology risk here. All it takes is one hack and, puff, it goes down to zero.”
Bitcoin was created in 2009 by an unknown computer scientist and transfers of ownership of the currency are recorded in software stored across a network of computers.
In depth
Increased trading in the decentralised virtual currency has begun to attract the attention of regulators
It is not backed by any central authority, so its value is derived only from speculators’ expectations of its future utility. A number of small businesses have begun accepting Bitcoin as payment, but usually convert the money back into government-run currency.
Regulators in the US and in China, the twin centres of speculative Bitcoin activity, have in recent weeks shown their willingness to let the experiment continue, as long as Bitcoin exchanges and brokers comply with anti-money laundering rules.
Jeremy Liew, partner at Lightspeed Venture Partners of San Francisco, which has an investment in the largest Bitcoin exchange in China, said that the currency might have particular use in emerging markets with under-developed banking technology.
And he added that a Chinese penchant for speculation has been playing a part in Bitcoin’s exponential price rise. “It is no accident that Macau has a larger gaming industry than has Las Vegas,” he said.
$8.2 million worth of Bitcoins lost with hard drive
NEWPORT, Wales, Nov. 29 (UPI) -- A Welsh man said he threw out a laptop hard drive and later realized it held $8.2 million worth of the online Bitcoin currency.
James Howells said he threw away the hard drive while cleaning during the summer and last Friday he realized the part was where he had stored the 7,500 Bitcoins he created in 2009, when the currency value of Bitcoins was considerably lower, The Guardian reported Friday.
"You know when you put something in the bin, and in your head, say to yourself, 'That's a bad idea?' I really did have that," Howells said. "I don't have an exact date. The only time period I can give -- and I've been racking my own brains -- is between 20 June and 10 August. Probably mid-July."
The Bitcoins were worth about $818,000 when he threw the hard drive away during the summer, but the price has since soared, with the worth of a single Bitcoin surpassing $1,000 Wednesday.
The actual contents of the hard drive was the cryptographic "private key" needed to access and spend the Bitcoins, Howells said. He said the currency is lost without the key.
Bitcoins were popularized by black market websites specializing in anonymous purchases and have since become accepted currency for online sites including OKCupid and Reddit. Virgin announced it will accept Bitcoins to purchase flights with Virgin Galactic.
James Howells said he threw away the hard drive while cleaning during the summer and last Friday he realized the part was where he had stored the 7,500 Bitcoins he created in 2009, when the currency value of Bitcoins was considerably lower, The Guardian reported Friday.
"You know when you put something in the bin, and in your head, say to yourself, 'That's a bad idea?' I really did have that," Howells said. "I don't have an exact date. The only time period I can give -- and I've been racking my own brains -- is between 20 June and 10 August. Probably mid-July."
The Bitcoins were worth about $818,000 when he threw the hard drive away during the summer, but the price has since soared, with the worth of a single Bitcoin surpassing $1,000 Wednesday.
The actual contents of the hard drive was the cryptographic "private key" needed to access and spend the Bitcoins, Howells said. He said the currency is lost without the key.
Bitcoins were popularized by black market websites specializing in anonymous purchases and have since become accepted currency for online sites including OKCupid and Reddit. Virgin announced it will accept Bitcoins to purchase flights with Virgin Galactic.
Banking on Bitcoin
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If a small city state had adopted Bitcoin as its national currency, it would now be in the grip of deflation as foreign speculators siphoned away its supply of the virtual currency. Money would be scarce, and prices would fall dramatically. Authorities might try to lift prices but they would lack one of their most powerful tools. Central bankers can create money at will, by printing notes or creating deposits. Bitcoin is based on digital tokens, which are generated at an unalterable rate by cryptographic algorithms running on the computers of volunteers, making it impossible to match supply to demand.
This is an improbable fantasy. But Bitcoin’s undulating value makes it unsuitable for all but the most limited purposes. Speculators are the keenest acquirers of the currency. For some, it is a way of stashing wealth where authorities cannot find it. Others want to make purchases without leaving an obvious trace. Silk Road, the online contraband emporium that was closed by authorities last month, was one of the few businesses to insist on payment in Bitcoin. But many prices were pegged to the dollar; the virtual money served merely as a way of disguising the flow of hard currency.
More
ON THIS STORY
E-gold founder backs new Bitcoin rival
Bitcoin must learn from past failures
The Short View Gold’s hold is beginning to loosen
Speculators push Bitcoin above $1,000
Christopher Caldwell The Bitcoin mystery is all about trust
ON THIS TOPIC
Silicon Valley catches Bitcoin fever
Alderney to hold talks on Bitcoin plan
Island seeks self-sufficiency with Bitcoin
Royal Mint explores plan to make Bitcoins
EDITORIAL
EU must improve its aim on energy
Britain needs a cautious statement
Red line over China
Editorial City needs strong walls
Still, if Bitcoin’s applications are limited, its emergence as a workable means of exchange nonetheless reveals something surprising. Friedrich Hayek argued that the government should cede its monopoly over the money supply, leaving consumers free to choose between competing currencies. It turns out that they were already freer than they thought. Authorities have so far tolerated the virtual currency. Yet the product of the state-owned incumbent has proved more attractive than Hayek expected.
The experiment is an indication of how monetary systems might change in future. Many believed it impossible to create a form of electronic cash that did not rely on a bank to keep tabs on account balances. Bitcoin proved them wrong. But many are uneasy about reversing the technological accident that has made financial transactions more traceable in the era of electronic banking.
If a small city state had adopted Bitcoin as its national currency, it would now be in the grip of deflation as foreign speculators siphoned away its supply of the virtual currency. Money would be scarce, and prices would fall dramatically. Authorities might try to lift prices but they would lack one of their most powerful tools. Central bankers can create money at will, by printing notes or creating deposits. Bitcoin is based on digital tokens, which are generated at an unalterable rate by cryptographic algorithms running on the computers of volunteers, making it impossible to match supply to demand.
This is an improbable fantasy. But Bitcoin’s undulating value makes it unsuitable for all but the most limited purposes. Speculators are the keenest acquirers of the currency. For some, it is a way of stashing wealth where authorities cannot find it. Others want to make purchases without leaving an obvious trace. Silk Road, the online contraband emporium that was closed by authorities last month, was one of the few businesses to insist on payment in Bitcoin. But many prices were pegged to the dollar; the virtual money served merely as a way of disguising the flow of hard currency.
More
ON THIS STORY
E-gold founder backs new Bitcoin rival
Bitcoin must learn from past failures
The Short View Gold’s hold is beginning to loosen
Speculators push Bitcoin above $1,000
Christopher Caldwell The Bitcoin mystery is all about trust
ON THIS TOPIC
Silicon Valley catches Bitcoin fever
Alderney to hold talks on Bitcoin plan
Island seeks self-sufficiency with Bitcoin
Royal Mint explores plan to make Bitcoins
EDITORIAL
EU must improve its aim on energy
Britain needs a cautious statement
Red line over China
Editorial City needs strong walls
Still, if Bitcoin’s applications are limited, its emergence as a workable means of exchange nonetheless reveals something surprising. Friedrich Hayek argued that the government should cede its monopoly over the money supply, leaving consumers free to choose between competing currencies. It turns out that they were already freer than they thought. Authorities have so far tolerated the virtual currency. Yet the product of the state-owned incumbent has proved more attractive than Hayek expected.
The experiment is an indication of how monetary systems might change in future. Many believed it impossible to create a form of electronic cash that did not rely on a bank to keep tabs on account balances. Bitcoin proved them wrong. But many are uneasy about reversing the technological accident that has made financial transactions more traceable in the era of electronic banking.
Bitcoin breaks through the $1,000 barrier
Bitcoin, the internet currency that has surged in popularity this year, has broken through the $1,000 barrier for the first time, marking a fivefold increase since the start of the month.
Based on trading on the Mt Gox exchange, Bitcoin rose from around $960 at midday on Wednesday to a high of $1,030 as of 15.15.
This comes despite concerns about its security and volatility, although Bitcoin has lost some of its stigma following the closure of the Silk Road, the online drugs marketplace that used it as a currency.
Last week, the currency jumped in value after US senators heard that Bitcoin is "a legal means of exchange".
“We all recognize that virtual currencies, in and of themselves, are not illegal,” Mythili Raman, acting assistant attorney general at the Justice Department’s criminal division, said at the hearing.
Supporters of Bitcoin point to the fact that it is not controlled by a central bank and has a limited supply, unlike traditional currencies whose value has been diluted by quantitative easing.
It surged in popularity in April as Cyprus's banks teeteered on the brink of collapse, with some pinning the rise in Bitcoin's value on investors looking for a safer place to put funds.
Based on trading on the Mt Gox exchange, Bitcoin rose from around $960 at midday on Wednesday to a high of $1,030 as of 15.15.
This comes despite concerns about its security and volatility, although Bitcoin has lost some of its stigma following the closure of the Silk Road, the online drugs marketplace that used it as a currency.
Last week, the currency jumped in value after US senators heard that Bitcoin is "a legal means of exchange".
“We all recognize that virtual currencies, in and of themselves, are not illegal,” Mythili Raman, acting assistant attorney general at the Justice Department’s criminal division, said at the hearing.
Supporters of Bitcoin point to the fact that it is not controlled by a central bank and has a limited supply, unlike traditional currencies whose value has been diluted by quantitative easing.
It surged in popularity in April as Cyprus's banks teeteered on the brink of collapse, with some pinning the rise in Bitcoin's value on investors looking for a safer place to put funds.
Bitcoin Black Friday: US online retailers attempt to stir up an online shopping frenzy
Bitcoin is continuing to elbow its way into the mainstream consciousness, with a gang of US online retailers attempting to give their own boost to the digital currency by co-opting America’s biggest ‘retail event’: Black Friday.
‘Bitcoin Black Friday’ will launch on 29 November with “hundreds of merchants selling everything from web hosting to organic beer [offering] special deals to anyone paying in Bitcoin”.
“Bitcoin has so much potential to make the world a fairer and more prosperous place. But it needs our help,” read the description from the site. “Because Bitcoin challenges such powerful industries, it will face serious political opposition-- especially in the U.S. where those industries are strongest. This amazing new technology will only be politically safe once millions of people rely on it every day.”
Participating retailers will no doubt be hoping to replicate the frenzied scenes that traditionally accompany the physical Black Friday, where shopping can become so competitive that there is even a Black Friday Death Count, currently recording four deaths and sixty-seven injuries since 2006.
In the US the unofficial holiday occurs on the Friday following Thanksgiving and marks the start of the Christmas shopping period. The name originally referred to the point in the calendar at which retailers began to turn a profit (going from the red side of the balance sheet to the black) although modern shopping giants now become profitable much earlier in the year.
‘Bitcoin Black Friday’ will launch on 29 November with “hundreds of merchants selling everything from web hosting to organic beer [offering] special deals to anyone paying in Bitcoin”.
“Bitcoin has so much potential to make the world a fairer and more prosperous place. But it needs our help,” read the description from the site. “Because Bitcoin challenges such powerful industries, it will face serious political opposition-- especially in the U.S. where those industries are strongest. This amazing new technology will only be politically safe once millions of people rely on it every day.”
Participating retailers will no doubt be hoping to replicate the frenzied scenes that traditionally accompany the physical Black Friday, where shopping can become so competitive that there is even a Black Friday Death Count, currently recording four deaths and sixty-seven injuries since 2006.
In the US the unofficial holiday occurs on the Friday following Thanksgiving and marks the start of the Christmas shopping period. The name originally referred to the point in the calendar at which retailers began to turn a profit (going from the red side of the balance sheet to the black) although modern shopping giants now become profitable much earlier in the year.
Internet money: What you need to know about Bitcoins
The crypto-currency made headlines again this week after James Howell, an IT worker from Newport, Wales, discovered he accidently threw out a hard drive containing 7,500 bitcoins -- now worth almost $8 million.
Howell obtained the bitcoins in 2009 for almost nothing. When he discarded his hard drive last July -- now buried in a Newport landfill the size of a soccer field -- the bitcoins were worth nearly $900,000.
Today, the value of one Bitcoin has soared to over $1,000.
Here are a few things to know about the virtual currency:
What is Bitcoin?
Bitcoin is a decentralized peer-to-peer digital currency and payment network. It is completely based on the belief that Bitcoin has value.
Hoss Gifford of OneMethod Inc. explains that “unlike traditional currencies, it’s not tied to any one country or any bank.”
“Unlike a traditional currency, it doesn’t have a reserve; there is no big vault underground somewhere with a lot of gold,” he says.
Instead, Bitcoin relies on a sort of honour system, and is traded on the web.
According to the Bitcoin website, Bitcoin is free from the highs and lows of inflation, interest rates and market fluctuations, and its value is determined by the number of bitcoins in circulation. The total number of Bitcoins is capped at 21 million.
How does Bitcoin work?
According to the Bitcoin website, “Bitcoin is nothing more than a mobile app or computer program that provides a personal Bitcoin wallet and allows a user to send and receive bitcoins with them.”
Bitcoins are typically bought through an exchange. The process involves setting up an account, then transferring funds into the account in order to start buying bitcoins. Bitcoins can also be exchanged in physical form through the Casascius coin -- each is worth one digital Bitcoin.
Individuals can acquire bitcoins through:
Payment for goods and services
Purchasing them at a Bitcoin exchange
Exchanging bitcoins with other individuals
Earning bitcoins through competitive mining (a process whereby users create money through computing: users donate their computer power to Bitcoin so it can be used to solve complex mathematical problems required to validate transactions. When a problem is solved, bitcoins are issued).
The world’s first Bitcoin ATM went live in a downtown Vancouver shop in October, allowing people to exchange cash for the digital currency. Approximately 20 businesses in Vancouver now accept Bitcoin.
In November, British billionaire Sir Richard Branson’s commercial flight company Virgin Galactic announced it is now accepting the digital currency for its Virgin Galactic flights to space. And on Nov. 28, University of Nicosia, Cyprus’ largest private university said it will start accepting Bitcoin for tuition fees -- the first university to do so.
What are the advantages?
Efficiency: Money can be sent and received instantly anywhere in the world, at any time, without a bank or middleman.
Low fees: Payments are processed with either no fees or very small fees.
Privacy: Transactions do not contain users’ personal information, offering stronger protection against identity theft.
Control: Users are in full control of their transactions.
Transparency: All information on transactions is available in the database.
Howell obtained the bitcoins in 2009 for almost nothing. When he discarded his hard drive last July -- now buried in a Newport landfill the size of a soccer field -- the bitcoins were worth nearly $900,000.
Today, the value of one Bitcoin has soared to over $1,000.
Here are a few things to know about the virtual currency:
What is Bitcoin?
Bitcoin is a decentralized peer-to-peer digital currency and payment network. It is completely based on the belief that Bitcoin has value.
Hoss Gifford of OneMethod Inc. explains that “unlike traditional currencies, it’s not tied to any one country or any bank.”
“Unlike a traditional currency, it doesn’t have a reserve; there is no big vault underground somewhere with a lot of gold,” he says.
Instead, Bitcoin relies on a sort of honour system, and is traded on the web.
According to the Bitcoin website, Bitcoin is free from the highs and lows of inflation, interest rates and market fluctuations, and its value is determined by the number of bitcoins in circulation. The total number of Bitcoins is capped at 21 million.
How does Bitcoin work?
According to the Bitcoin website, “Bitcoin is nothing more than a mobile app or computer program that provides a personal Bitcoin wallet and allows a user to send and receive bitcoins with them.”
Bitcoins are typically bought through an exchange. The process involves setting up an account, then transferring funds into the account in order to start buying bitcoins. Bitcoins can also be exchanged in physical form through the Casascius coin -- each is worth one digital Bitcoin.
Individuals can acquire bitcoins through:
Payment for goods and services
Purchasing them at a Bitcoin exchange
Exchanging bitcoins with other individuals
Earning bitcoins through competitive mining (a process whereby users create money through computing: users donate their computer power to Bitcoin so it can be used to solve complex mathematical problems required to validate transactions. When a problem is solved, bitcoins are issued).
The world’s first Bitcoin ATM went live in a downtown Vancouver shop in October, allowing people to exchange cash for the digital currency. Approximately 20 businesses in Vancouver now accept Bitcoin.
In November, British billionaire Sir Richard Branson’s commercial flight company Virgin Galactic announced it is now accepting the digital currency for its Virgin Galactic flights to space. And on Nov. 28, University of Nicosia, Cyprus’ largest private university said it will start accepting Bitcoin for tuition fees -- the first university to do so.
What are the advantages?
Efficiency: Money can be sent and received instantly anywhere in the world, at any time, without a bank or middleman.
Low fees: Payments are processed with either no fees or very small fees.
Privacy: Transactions do not contain users’ personal information, offering stronger protection against identity theft.
Control: Users are in full control of their transactions.
Transparency: All information on transactions is available in the database.
World’s first Bitcoin ATM exceeds $1M in transaction volume within one month
So far, so good for the world’s first Bitcoin ATM.
On its 29th day of operation at the Waves Coffee House in Vancouver B.C., Robocoin’s Bitcoin ATM exceeded $1,000,000 CAD in volume from 1,576 transactions.
Interesting to note that more than 50 percent of people who bought Bitcoin — instead of exchanging Bitcoin for CAD — were from first-time buyers of the digital currency.
Operated by Las Vegas-based Robocoin and Vancouver-based Bitcoiniacs, the ATM scans your palm and allows you to exchange cash for Bitcoin, or do the reverse. Customers can make up to $3,000 worth of Bitcoin exchanges per day.
On its first day, the ATM saw 81 exchanges totaling $10,000. After one week, Robocoin’s transactions hit $81,000 in volume, already surpassing the company’s first-month goal of $50,000 by $31,000.
If you haven’t heard of Bitcoin, it’s the emerging decentralized, virtual currency gaining popularity lately in light of the FBI shutting down Silk Road, the online marketplace for illegal drugs and illicit services. Bitcoins exist only online, can be transferred right away and are not controlled by a central authority like the Federal Reserve.
On its 29th day of operation at the Waves Coffee House in Vancouver B.C., Robocoin’s Bitcoin ATM exceeded $1,000,000 CAD in volume from 1,576 transactions.
Interesting to note that more than 50 percent of people who bought Bitcoin — instead of exchanging Bitcoin for CAD — were from first-time buyers of the digital currency.
Operated by Las Vegas-based Robocoin and Vancouver-based Bitcoiniacs, the ATM scans your palm and allows you to exchange cash for Bitcoin, or do the reverse. Customers can make up to $3,000 worth of Bitcoin exchanges per day.
On its first day, the ATM saw 81 exchanges totaling $10,000. After one week, Robocoin’s transactions hit $81,000 in volume, already surpassing the company’s first-month goal of $50,000 by $31,000.
If you haven’t heard of Bitcoin, it’s the emerging decentralized, virtual currency gaining popularity lately in light of the FBI shutting down Silk Road, the online marketplace for illegal drugs and illicit services. Bitcoins exist only online, can be transferred right away and are not controlled by a central authority like the Federal Reserve.
Could Bitcoin affect the 2014 midterm elections?
The next big thing in campaign fundraising is being pioneered by a politician you’ve never heard of.
Mark Warden, a state representative from New Hampshire, is the first sitting U.S. elected official to accept bitcoins as campaign contributions.
"I run in a lot of libertarian circles, so I'd already heard of Bitcoin," said Warden, now in his second term, reflecting on his 2012 campaign. "But then one of my staffers, who set up my website, he asked to be paid in Bitcoin. So I said sure. Then he recommended setting up a wallet and accepting campaign donations that way."
What happened next came as a shock to both Warden and his staffers. In his 2012 election campaign, Bitcoin donations came pouring in at an astonishing rate—and from surprising locations. Chatter on message boards devoted to the open-source currency led to a spike in donations from around the world, so much so that the novelty of the idea turned into a temporary panic, prompting serious accounting concerns.
Warden raised $1,600 in Bitcoin, and with it, a slew of difficult-to-answer questions about the future of the currency and its role in politics. Today, those campaign contributions would be worth an estimated $120,000.
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Created in 2008, Bitcoin is an electronic currency that exists outside of any governmental body. It’s created, or “mined,” by users whose computers solve complex math problems in exchange for newly minted coins. Due to its anonymous nature, Bitcoin first became popular on the Deep Web—the sites hidden on the Tor browser—but it’s gained major momentum around the world recently.
In the last few months, Bitcoin has found favor around the world, from Germany, where it’s considered a legal currency, to the island of Cyprus, where a local university allows students to major in the subject. In Canada, the world’s first Bitcoin ATM recently opened for business.
Closer to home, the unprecedented surge in Bitcoin’s value—it’s currently trading at a record-high $812—has forced politicians to take note, especially considering some have speculated that it could become the “weapon of choice for tax evaders,” due to its anonymous nature and the ease with which it’s transferred.
Warden was way ahead of the Bitcoin curve when he started accepting donations in 2012. For many, it was a symbolic move.
"I know [the campaign contributors] were supporting Bitcoin more than me personally as a candidate," Warden told the Dot.
But as Warden quickly learned, accepting bitcoins in the form of a digital wallet is the easy part. Figuring how to do so without running afoul of U.S. election laws, however, proved challenging.
The campaign had to shut down its donation pipeline to confer with the state's top election official, the secretary of state, which set up reporting guidelines to make sure the Bitcoin values and the identity of donors were reported consistently. It was decided that all Bitcoin donations would be converted into cash within 24 hours to keep their values from fluctuating too much, and Warden was forced to return all the overseas donations to keep from running afoul of U.S. election laws.
The issues Warden (and Vermont State Senate candidate Jeremy Hansen) faced in local 2012 elections are now being played out on a national level ahead of next year's midterms, potentially opening up political donations to a whole new sector of the voting public.
That’s thanks in part to the work of Dan Backer, an attorney with the Conservative Action Fund, a political action committee that’s asked the Federal Elections Commission (FEC) to lay down some ground rules for Bitcoin donations ahead of next year's campaigns.
"It's important to get all the guidelines set before next year," Backer said. "There is a lot of interest from candidates out there, but there's also been a lot of questions."
Indeed, the emergence of Bitcoin on the political scene creates a number of wrinkles in the already complex world of campaign finance laws. It’s unclear how the value of the rapidly fluctuating currency should be calculated or how to properly record donor contributions.
The FEC deadlocked last week on Backer's request, saying more time would be needed to study the issues associated with Bitcoin donations. The decision was split 3-3 along party lines, with Democratic members of the commission opting not to let Bitcoin be used in campaign donations.
It was an abrupt turn around for those watching the issue unfold. Draft opinions from the FEC issued earlier this month indicated that commissioners were ready to allow Bitcoin donations, as long as they were treated as "in-kind contributions." Essentially, bitcoins would have be treated the same way as donations of stocks and bonds, meaning campaigns have to convert them into dollars before spending it or depositing it into campaign coffers.
Bitcoin breaks $1,000 barrier for first time
Bitcoin continued its stellar rally on Wednesday, breaking above $1,000 for the first time and marking a rise of over 7,600 percent so far this year.
Many analysts and investors have labeled bitcoin's unfettered rise a bubble, yet greater awareness of digital currencies and relief following last week's U.S. senate hearing have paved the way for fresh gains.
Getty Images
Bitcoin traded as high as $1,030 on the Mt. Gox exchange, up 7,661 percent year-to-date from its December 31 close of $13.27.
Digital currencies cleared a major hurdle when U.S. authorities signaled a willingness to accept them as legitimate payment alternatives at a November 18 U.S. Senate hearing on virtual currencies. The outcome allayed concerns that the government would take steps that could undercut mainstream adoption.
Many analysts and investors have labeled bitcoin's unfettered rise a bubble, yet greater awareness of digital currencies and relief following last week's U.S. senate hearing have paved the way for fresh gains.
Getty Images
Bitcoin traded as high as $1,030 on the Mt. Gox exchange, up 7,661 percent year-to-date from its December 31 close of $13.27.
Digital currencies cleared a major hurdle when U.S. authorities signaled a willingness to accept them as legitimate payment alternatives at a November 18 U.S. Senate hearing on virtual currencies. The outcome allayed concerns that the government would take steps that could undercut mainstream adoption.
n Vermont, Users of "Cryptocurrency" Bitcoin Are Few But Committed
Last week, in a small, subterranean workspace near downtown Burlington, a group of tech-savvy Vermonters held an open forum on a topic that’s attracted a great deal of attention lately: Bitcoin. Early adopters of the “cryptocurrency” believe it has the potential to upend the entire global economy.
Economic policy and the future of currency may seem like pretty dry subjects for a weekday evening meeting, but everyone in attendance was as enthusiastic as Sunday-afternoon football fans. Beers were drunk and slang was slung, even as the discussion turned to such topics as fiduciary decentralization and the effects of arbitrage on currency stability.
Those who are keen on Bitcoin are really keen on Bitcoin, and that includes several of the members of Laboratory B, the “community hackerspace” that hosted the discussion. Also in attendance at the event were a number of other locals who had personal or professional interests in Bitcoin.
It was clear that everyone present viewed Bitcoin as a “disruptive technology,” perhaps even the epitome of an internet-era game changer. If Bitcoin really takes hold — and it’s been showing signs of strength lately — then it has the potential to impact the economy at nearly every level, from buying a cup of coffee to reporting taxable income to facilitating international transactions.
Economic policy and the future of currency may seem like pretty dry subjects for a weekday evening meeting, but everyone in attendance was as enthusiastic as Sunday-afternoon football fans. Beers were drunk and slang was slung, even as the discussion turned to such topics as fiduciary decentralization and the effects of arbitrage on currency stability.
Those who are keen on Bitcoin are really keen on Bitcoin, and that includes several of the members of Laboratory B, the “community hackerspace” that hosted the discussion. Also in attendance at the event were a number of other locals who had personal or professional interests in Bitcoin.
It was clear that everyone present viewed Bitcoin as a “disruptive technology,” perhaps even the epitome of an internet-era game changer. If Bitcoin really takes hold — and it’s been showing signs of strength lately — then it has the potential to impact the economy at nearly every level, from buying a cup of coffee to reporting taxable income to facilitating international transactions.
CLAIM: Bitcoin Is Basically For Criminals
There is a great op-ed in the Baltimore Sun that argues Bitcoin is useful mostly for criminals. E.J. Fagan, the deputy communications director at Global Financial Integrity, a research organization dedicated to studying illicit financial flows, argues that the only people who really need completely anonymous financial transactions are criminals.
If you're a non-criminal, you don't need anonymous, untraceable financial transactions, Fagan says. Or you could use cash, which is still almost completely anonymous.
But criminals have a different problem when it comes to cash. Once your criminal business becomes successful, say from dealing drugs or running sex slaves or poaching rhinos, then the cash really starts to pile up. Although criminals in movies like to put cash into paper bags and fancy briefcases, this becomes very impractical, very quickly.
Criminals need banking services, basically.
But criminals hate banks, because banks tell things to the police. Bitcoin basically solves the banking problem for criminals, Fagan argues:
By largely eliminating intermediaries, bitcoin allows individuals to conduct transactions without being subject to anti-money laundering controls, which makes it an attractive currency to criminals — particularly those who prey on the weak.
... Criminals need bank accounts, cross-border transactions, and — mostly importantly — anonymity, to execute large-scale transnational crime. Bitcoins essentially allow criminals to make peer-to-peer cash transactions at enormous scale.
... [Anonymous online currencies is] help criminals launder massive amounts of money. More girls will be sold as sex slaves, more rhinos will be poached, and every other large-scale transnational crime that you can name is going to become a lot easier if criminals have a way to transfer very large amounts of money completely anonymously.
There is anecdotal evidence to back this up. The Bitcoin exchange market has become rife with hackers and "bank" robbers. And Ross Ulbricht, the alleged master of the Silk Road market for criminals, amassed a fortune of $20 million in Bitcoin, which he was using to pay hit men to assassinate his enemies, prosecutors claim.
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If you're a non-criminal, you don't need anonymous, untraceable financial transactions, Fagan says. Or you could use cash, which is still almost completely anonymous.
But criminals have a different problem when it comes to cash. Once your criminal business becomes successful, say from dealing drugs or running sex slaves or poaching rhinos, then the cash really starts to pile up. Although criminals in movies like to put cash into paper bags and fancy briefcases, this becomes very impractical, very quickly.
Criminals need banking services, basically.
But criminals hate banks, because banks tell things to the police. Bitcoin basically solves the banking problem for criminals, Fagan argues:
By largely eliminating intermediaries, bitcoin allows individuals to conduct transactions without being subject to anti-money laundering controls, which makes it an attractive currency to criminals — particularly those who prey on the weak.
... Criminals need bank accounts, cross-border transactions, and — mostly importantly — anonymity, to execute large-scale transnational crime. Bitcoins essentially allow criminals to make peer-to-peer cash transactions at enormous scale.
... [Anonymous online currencies is] help criminals launder massive amounts of money. More girls will be sold as sex slaves, more rhinos will be poached, and every other large-scale transnational crime that you can name is going to become a lot easier if criminals have a way to transfer very large amounts of money completely anonymously.
There is anecdotal evidence to back this up. The Bitcoin exchange market has become rife with hackers and "bank" robbers. And Ross Ulbricht, the alleged master of the Silk Road market for criminals, amassed a fortune of $20 million in Bitcoin, which he was using to pay hit men to assassinate his enemies, prosecutors claim.
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Podcast: Bitcoin and the Bubble
The price of one bitcoin crossed above $1,200 Friday, up from less than $14 at the beginning of the year.
Clearly that’s good news for speculators betting on its rise, but is it also a troubling sign for the virtual currency as it tries to become more mainstream?
Also, on this week’s podcast: A wave of consolidation has swept the cable industry this year and Time Warner CableTWC +1.04% is the latest target attracting suitors. But will a deal materialize?
Heard on the Street’s Liam Denning and Miriam Gottfried join host Stephen Grocer to discuss. Grab a set of headphones and take a listen to MoneyBeat Week.
Clearly that’s good news for speculators betting on its rise, but is it also a troubling sign for the virtual currency as it tries to become more mainstream?
Also, on this week’s podcast: A wave of consolidation has swept the cable industry this year and Time Warner CableTWC +1.04% is the latest target attracting suitors. But will a deal materialize?
Heard on the Street’s Liam Denning and Miriam Gottfried join host Stephen Grocer to discuss. Grab a set of headphones and take a listen to MoneyBeat Week.
Here’s who (probably) did that massive $150,000,000 Bitcoin transaction
One of the unique things about Bitcoin is that every transaction on its network is publicly available for anyone to examine. Any time a user sends a payment to another user, that transaction is reflected in the "blockchain," a global, permanent ledger of Bitcoin transactions.
You can examine every Bitcoin transaction that has ever occurred at a site called blockchain.info. And that site says that a truly massive Bitcoin transaction occurred yesterday:
Those long strings of seemingly random letters and numbers are Bitcoin addresses. Each is associated with a secret encryption key that allows the owner of that address to transmit the bitcoins to another address. In this particular transaction, bitcoins from 15 different Bitcoin addresses were consolidated and sent to address "12sENwECeRSmTeDwyLNqwh47JistZqFmW8." The size of the transaction? 194,993 bitcoins. Given that one bitcoin is worth around $800 right now, the transaction is valued at more than $150 million.
Who was responsible for the transaction? I asked Sarah Meiklejohn, a computer scientist at the University of California, San Diego, for her thoughts. She's the author of a recent paper demonstrating that sophisticated analysis can reveal a lot of information about who is responsible for Bitcoin transactions. She has compiled a large database of Bitcoin addresses tagged with their likely owners.
While she says she can't be sure, Meiklejohn says that that 194,993-bitcoin transaction was probably done by Bitstamp, the world's second-largest exchange for trading dollars for bitcoins:
About half of the transactions sending bitcoins to this 12sENw address between August 29 and November 14 were from addresses we had associated with Bitstamp. This could be true for a lot of reasons (a heavyweight user withdrawing their bitcoins, for example), but there were a few other weird things I saw that made me think otherwise.
For example, a lot of the bitcoins that flowed out of the 12sENw address went to one of two other addresses: 1Drt3c8 and (especially recently) 1HBa5. The former of these addresses we have tagged as Bitstamp, and the latter is often within one hop of a known Bitstamp address (e.g., it has also sent a lot of bitcoins to 1Drt3c8).
So, while a lot of things could explain many bitcoins being received from Bitstamp, it seems like fewer of them could be explained by many bitcoins flowing from Bitstamp and then back to Bitstamp in a small span of time which is what leads me to think this is an internal shuffling of some kind.
Of course, I could also be completely wrong! For example, I should definitely mention that, for the direct transaction of interest, I don't have any of the input addresses tagged (i.e., they might or might not belong to Bitstamp), so that my inferences are really just going on the past behavior of this small handful of addresses.
So this probably isn't a case of one Bitcoin user sending $150 million to another user. Instead, Bitstamp was perhaps reshuffling its own funds, just as a bank might move stacks of $100 bills from one vault to another. Presumably, most of those 194,993 bitcoins belong to Bitstamp users who have deposited them with Bitstamp to facilitate currency exchanges.
You can examine every Bitcoin transaction that has ever occurred at a site called blockchain.info. And that site says that a truly massive Bitcoin transaction occurred yesterday:
Those long strings of seemingly random letters and numbers are Bitcoin addresses. Each is associated with a secret encryption key that allows the owner of that address to transmit the bitcoins to another address. In this particular transaction, bitcoins from 15 different Bitcoin addresses were consolidated and sent to address "12sENwECeRSmTeDwyLNqwh47JistZqFmW8." The size of the transaction? 194,993 bitcoins. Given that one bitcoin is worth around $800 right now, the transaction is valued at more than $150 million.
Who was responsible for the transaction? I asked Sarah Meiklejohn, a computer scientist at the University of California, San Diego, for her thoughts. She's the author of a recent paper demonstrating that sophisticated analysis can reveal a lot of information about who is responsible for Bitcoin transactions. She has compiled a large database of Bitcoin addresses tagged with their likely owners.
While she says she can't be sure, Meiklejohn says that that 194,993-bitcoin transaction was probably done by Bitstamp, the world's second-largest exchange for trading dollars for bitcoins:
About half of the transactions sending bitcoins to this 12sENw address between August 29 and November 14 were from addresses we had associated with Bitstamp. This could be true for a lot of reasons (a heavyweight user withdrawing their bitcoins, for example), but there were a few other weird things I saw that made me think otherwise.
For example, a lot of the bitcoins that flowed out of the 12sENw address went to one of two other addresses: 1Drt3c8 and (especially recently) 1HBa5. The former of these addresses we have tagged as Bitstamp, and the latter is often within one hop of a known Bitstamp address (e.g., it has also sent a lot of bitcoins to 1Drt3c8).
So, while a lot of things could explain many bitcoins being received from Bitstamp, it seems like fewer of them could be explained by many bitcoins flowing from Bitstamp and then back to Bitstamp in a small span of time which is what leads me to think this is an internal shuffling of some kind.
Of course, I could also be completely wrong! For example, I should definitely mention that, for the direct transaction of interest, I don't have any of the input addresses tagged (i.e., they might or might not belong to Bitstamp), so that my inferences are really just going on the past behavior of this small handful of addresses.
So this probably isn't a case of one Bitcoin user sending $150 million to another user. Instead, Bitstamp was perhaps reshuffling its own funds, just as a bank might move stacks of $100 bills from one vault to another. Presumably, most of those 194,993 bitcoins belong to Bitstamp users who have deposited them with Bitstamp to facilitate currency exchanges.
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