How Exactly Did We Arrive At This Bitcoin Phenomenon?
How exactly did we arrive at this bitcoin phenomenon? Bitcoin has doubled in value over the last three months. David L. Ryan/The Boston Globe via Getty Images Silicon Valleys obsession with cryptocurrencies requires no more evidence than the incredible rise of bitcoin, the alternative currency that crossed $10,000 in value on Tuesday in what is a watershed moment for the nine-year-old cash substitute. Bitcoin has now doubled in value over the last three months a run fueled by new interest from institutional investors like venture capital firms but also old passion from longtime enthusiasts for a once-niche payment platform. China, however, remains a looming threat. Youre seeing a wall of capital moving in and if youre looking at the fundamentals, its pretty stable underneath, said Miko Matsumura, who founded a cryptocurrency exchange and has invested in several funds and startups centered around bitcoin. You cant have the phenomenon without both sides. Behind its rise is also a desire by global investors to insulate themselves against their own currencies depreciating in value. People who are nervous about money backed by a central bank with unclear controls such as Chinas have become attracted to bitcoin, an open source currency that is less influenced by the state of the economy or any looming geopolitical risk. But to say concerns about a bubble persist would be a massive understatement. It has crashed hard several times before, thanks usually to new crackdowns from China. Bitcoins pace of growth plus the mere fact that as a digital currency it is not backed by a government or an army makes more than a few analysts worry that this craze is due for another crash. For now, though, its on a warpath worth some awe. Sign up for our Recode Daily newsletter to get the top Continue reading >>
The Bitcoin Phenomenon: How Cryptocurrencies Gain Value
A Google search for Bitcoin returns$738.99 USD as the current value of 1 BTC. So how did Bitcoin become the biggest cryptocurrency in the world within 6 years? Initially conceived in Japan by Satoshi Nakamoto, Bitcoin was designed as an open source peer-to-peer cryptocurrency. Nakamoto designed the Bitcoin system to generate its own digital currency. Through a process called mining, users could obtain new Bitcoins in exchange for computational power. But nocurrency canbe unlimited. As more Bitcoins were procured, the mining process became exponentiallyharder. However, this did not deterred users: miners have invested millions of dollars into mining farms, facilitieshousing thousands of computers dedicated to harvesting Bitcoins. In order to explain the growth of Bitcoin, we must first establish the value of currency. By itself, cash has no intrinsic value. It is only because society as a whole accepts cash as amedium of exchange for actual goods that we place any faithinto the green papers in our wallet. Some currencies are more stable in value than others, such as the American dollar, which is constantly regulated by system such as the Federal Reserve, over nations whose currencies fluctuate in value due to unstable economies. Here we see the obvious presenceof direct-benefit effects: the American dollar sustains its value because the American people trust in its stability. Not surprisingly, Bitcoins rise in value was also driven by network effects. At its inception, Bitcoins were practically worthless due to the small community of people who used them. However, as soon as the first legitimate organization (Wikileaks) began accepting the cryptocurrency, Bitcoin experienced a surge in popularity. In the eyes of the people, these endorsements for Bitcoin indicated poten Continue reading >>
Why Does Bitcoin Have Value And How Is The Price Determined?
Why does Bitcoin have value and how is the price determined? As a growing number of people become aware of and interested in Bitcoin --especially when the price tends to increase -- we often get asked: Many people find it difficult to grasp how something which only exists digitally can have any value at all. The answer to this question is rather simple and it lies in basic economics: scarcity, utility, supply and demand. By definition, if something is both rare (scarce) and useful (utility) it must have value and demand a specific price, with all other things being equal. Take gold, for example. Why does gold cost as much as it does? Put simply, it is relatively expensive because it is rare, hard to find and limited in supply (scarcity). Gold also has some uses to which consumers derive satisfaction from (utility). The combination of these two elements creates value by which price is determined based on the markets supply and demand. So what does this all have to do with Bitcoin? Like gold, Bitcoin is also scarce: its supply is limited. There are currently just over 16.2m Bitcoin in circulation and the maximum that will ever exist is capped at 21 million. This set cap is well known, making its scarcity transparent. However, to have value, Bitcoin must also be useful. Bitcoin creates utility in a number of ways. Like gold, Bitcoin is perfectly fungible (one Bitcoin is similar to another), it is divisible (you can pay someone a small fraction of Bitcoin, should you want to) and easily verifiable (via the Blockchain). Bitcoin is not just scarce, it also has utility Bitcoin also has other desirable properties. It is fast, borderless and decentralised with the potential to change the financial world for better. Not only does it currently have value as a payment system, but Continue reading >>
Faq - Bitcoin
Find answers to recurring questions and myths about Bitcoin. Bitcoin is a consensus network that enables a new payment system and a completely digital money. It is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen. From a user perspective, Bitcoin is pretty much like cash for the Internet. Bitcoin can also be seen as the most prominent triple entry bookkeeping system in existence. Bitcoin is the first implementation of a concept called "cryptocurrency", which was first described in 1998 by Wei Dai on the cypherpunks mailing list, suggesting the idea of a new form of money that uses cryptography to control its creation and transactions, rather than a central authority. The first Bitcoin specification and proof of concept was published in 2009 in a cryptography mailing list by Satoshi Nakamoto. Satoshi left the project in late 2010 without revealing much about himself. The community has since grown exponentially with many developers working on Bitcoin. Satoshi's anonymity often raised unjustified concerns, many of which are linked to misunderstanding of the open-source nature of Bitcoin. The Bitcoin protocol and software are published openly and any developer around the world can review the code or make their own modified version of the Bitcoin software. Just like current developers, Satoshi's influence was limited to the changes he made being adopted by others and therefore he did not control Bitcoin. As such, the identity of Bitcoin's inventor is probably as relevant today as the identity of the person who invented paper. Nobody owns the Bitcoin network much like no one owns the technology behind email. Bitcoin is controlled by all Bitcoin users around the world. While developers are improving the s Continue reading >>
Where Did Bitcoin Get Its Value? : Bitcoin
Do not use URL shortening services: always submit the real link. Begging/asking for bitcoins is absolutely not allowed, no matter how badly you need the bitcoins. Only requests for donations to large, recognized charities are allowed, and only if there is good reason to believe that the person accepting bitcoins on behalf of the charity is trustworthy. News articles that do not contain the word "Bitcoin" are usually off-topic. This subreddit is not about general financial news. Submissions that are mostly about some other cryptocurrency belong elsewhere. For example, /r/CryptoCurrency is a good place to discuss all cryptocurrencies. Promotion of client software which attempts to alter the Bitcoin protocol without overwhelming consensus is not permitted. Trades should usually not be advertised here. For example, submissions like "Buying 100 BTC" or "Selling my computer for bitcoins" do not belong here. /r/Bitcoin is primarily for news and discussion. Please avoid repetition /r/bitcoin is a subreddit devoted to new information and discussion about Bitcoin and its ecosystem. New merchants are welcome to announce their services for Bitcoin, but after those have been announced they are no longer news and should not be re-posted. Aside from new merchant announcements, those interested in advertising to our audience should consider Reddit's self-serve advertising system . Do not post your Bitcoin address unless someone explicitly asks you to. Be aware that Twitter, etc. is full of impersonation. Continue reading >>
Why Is Bitcoins Price So High?
Zelda expansion, Death Stranding and other titles hyped at The GameAwards Bitcoins price has risen stratospherically, a fact that leaves many minor players in the market with massive gains and many bigger players millionaires. But is this a bubble? Are the gains real? And are the bitcoin whales in for a sad Christmas? First we must understand what drives bitcoin price and, in particular, this boom. The common understanding for current growth leads us back to institutional investors preparing for the forthcoming BTC futures exchanges. The primary theory about the astonishing rally being put forward by investors on social media is that bitcoin will soon benefit from big institutional money injections via the introduction of the first BTC futures products. CBOE Global Markets and CME Group are launching new futures contracts on December 10 and December 17, allowing investors to go long or short on bitcoin. This ability makes bitcoin far more palatable to big investors who are currently flooding the market to make profits if and when the bitcoin price falls. This move also legitimizes bitcoin in Wall Streets eyes, an important point considering cryptocurrencies are still suspect. Further growth comes from the bitcoin as a store of value crowd. This group of enthusiasts bought and held bitcoin and will not sell it at any current price. More and more bitcoin fans are entering into this group and they are driving up demand increases. In a world where people expect bitcoin to be worth $1 million soon this sort of activity whether rational or irrational is quite popular. We see a common thread between these points: hype and news. All cryptocurrency movements are based on domain specific media and conversations between traders. Bitcoin traders, it can be said, are now akin to th Continue reading >>
Why Bitcoin Has Value
January 13, 2017, 11:17:25 AM EDT By Bitcoin Magazine We all have what feels like an intrinsic understanding of value, though it is actually learned as we come to know our world. A gold bar has value, an empty soda can, not so much. When we encounter new things its usually fairly easy to assess what kind of value they might hold, but Bitcoin is a different beast. Bitcoin is harder to define and understand, and for many beginning Bitcoiners the question of value is one of the most puzzling. So why does Bitcoin have value? To begin, we really need to understand why anything has value. Fans of post-apocalyptic fiction will often point out that in the end, the only things of real value are those that sustain and defend life. Perhaps theyre right on one level, but with the rise of civilized societies things got a bit more complex, because the things that sustain and defend those societies also gain a certain degree of value. It is in this context that all monies, Bitcoin included, gain their value. Since our societies rely heavily on trade and commerce, anything that facilitates the exchange of goods and services has some degree of value. Imagine, for example, a pre-money marketplace where the barter system is king. Perhaps youre a fisherman coming to market with the days catch and youre looking to go home with some eggs. Unfortunately for you, the chicken farmer has no use for fish at the moment, so you need to arrange a complex series of exchanges to end up with something the egg seller actually wants. Youll probably lose a percentage of your fishs value with each trade, and you also must know the exchange rate of everything with respect to everything else. What a mess. This is where money saves the day. By agreeing on one intermediate commodity, say, silver coins, two is Continue reading >>
Why Did Bitcoin First Start To Gain Economic Value?
Why did Bitcoin first start to gain economic value? I am really having difficulty answering this: Why does a bitcoin have an economic value, such that there are people willing to trade US$ (or any other traditional currency) for these virtual numbers? What did the creator of Bitcoin do at the start to give it economic value? my question is more to historical perspective, about what the creator do at the first launch of bitcoin to give an incentive to people to trade their money to the bitcoin uray Mar 15 '12 at 16:16 From historical perspective, Bitcoin was worthless until Laszlo decided to give 10000BTC for one pizza. Some crazy restaurant keeper accepted the deal, and in that very moment 1BTC=pizza/10000. Then, the trust raised and also the value. Davide C Feb 25 '16 at 17:59 Allowed users to trust transactions without having to trust any single entity. Opened it up so that anyone could participate and exchange computation power for Bitcoins. Is designing with a fixed size (21 million Bitcoins), he created an incentive for users to get involved early while Bitcoins are relatively cheap to generate; there is less risk of future inflation reducing the value of early adopters. Bitcoins have value because they are useful. They have useful properties. As for what the author wrote in the very beginning, you can read the announcement of Bitcoin v0.1 . Bitcoin was worth very little for the first year. In this thread , written 16 months after Bitcoin's launch, you can read the conversation leading up to a guy buying 2 large pizzas for 10,000 BTC. I want to downvote this because it doesn't really answer my (or OP's) actual question - how did Bitcoin start to become valuable? The answer may be somewhere in the links, but it would be great to see it here. On the other hand, the Continue reading >>
Commentary: Bitcoin's Value Explained | Fortune
Bitcoin is a different kind of beast that can be difficult for people to understand. New things usually are. And while Bitcoin is nearly nine years old, it represents a completely new type of asset. Let’s break down what I perceive to be the three major components of Bitcoin’s value: As investors near the Bitcoin iceberg, the first thing they see is payments—after all, it’s a cryptocurrency, right? Currencies are used for payments and so Bitcoin must be all about payments. It’s true: Bitcoin is certainly used for payments, and this is an important part of its value. However, it’s not widely used for payments and, while it may be increasingly important over time, it isn’t the most important component of Bitcoin’s value today. Why don’t people use Bitcoin for payments more often? Simply put, people don’t like to spend appreciating assets. Given the choice of payment methods, people like to spend in the “currency” that is likely to be worth the least tomorrow. At this point, that’s not Bitcoin. Furthermore, most people don’t buy Bitcoin for payments. That’s simply not why they acquired it. Even if you could, very few investors would pay for their coffee with Apple (AAPL) stock because that’s simply not the reason they bought Apple stock in the first place—same with Bitcoin. Lastly, people don’t generally use Bitcoin for payments because goods aren’t broadly priced in BTC terms. Goods aren’t broadly priced in BTC terms because, if they were, the price would have to update several times each minute just to maintain a consistent revenue for the seller. In short, the major drawback to using Bitcoin for payments is that it is volatile, which is neither a great ingredient for payments (medium of exchange) nor the pricing of goods (unit of Continue reading >>
A Cryptocurrency Primer: Why Does Bitcoin Have Value?
A Cryptocurrency Primer: Why Does Bitcoin Have Value? Since it’s not government-backed and doesn’t have any assets behind it, it's natural to wonder why people think bitcoin is worth so much -- or anything. In the realm of economics, there are plenty of terms that might confuse the layperson, but most of us probably know what the word "money" means. "Cryptocurrency," by contrast, can be baffling. It's money, but not government-backed money? It gets mined almost magically by a process that does nothing else of value? How does that work? Given the level of investor interest in cryptocurrencies, for this episode of Motley Fool Answers , Alison Southwick and Robert Brokamp brought in Motley Fool analyst Aaron Bush to give their listeners the lowdown. In this segment, they consider one of the most fundamental questions about this peculiar asset: What gives bitcoin its value? This video was recorded on Nov. 21, 2017. Alison Southwick: I feel like proponents tend to brush off the concern about it, but where does the value come from? Because they'll be like, "Well, for any currency we agree that a dollar is worth a dollar." But then I'm like, "No, but then so does the most powerful government in the world." They also agree that the dollar is worth a dollar. Let's move into the value. How is the value of bitcoin even determined? Aaron Bush: I think bitcoin is, in some ways, its own case study. It's not representative of all cryptocurrencies. Bitcoin originally was just a peer-to-peer payment platform, but increasingly it's becoming the reserve currency for all other cryptocurrencies, and that means it's also becoming a store of value. And when something becomes a store of value [like gold], the most important metric is the number of believers. To what extent all this news Continue reading >>
How Much Is Bitcoin Really Worth?
I write about building wealth and achieving financial freedom. Opinions expressed by Forbes Contributors are their own. I'm sitting at my kitchen table at 6:31 p.m. ET on Friday, December 1, 2017. The price of Bitcoin is $10,790.58. PARIS, FRANCE - DECEMBER 05: In this photo illustration a man holds a visual representation of the digital Cryptocurrency Bitcoin. (Photo by Chesnot/Getty Images) It's here that I'm reminded of something Warren Buffett's often said. Price is what you pay, value is what you get. So what value does a Bitcoin buyer get in exchange for $10,790.58 ofhis or herhard earned U.S. dollars? That's what I'm going to attempt to answer in this article. Before we can attempt to value Bitcoin, we first must agree on what it is. That turns out not to be so easy. Describing Bitcoin as a currency seems like a natural place to begin. After all, I'm told some retailers accept Bitcoin as a method of payment. On closer inspection, however, comparing Bitcoin to a currency is like comparing lightening to a lightening bug (apologies to Mr. Clemens). As the WSJ has noted , Bitcoin is the hottest currency that nobody is using. As Jeffrey Dorfman here at Forbes pointed out, there are two problems with Bitcoin as a currency. First, it's too unstable. Who wants to accept something for payment that could drop in value by 25% before you have time to pour a cup of coffee? Put another way, would you accept Bitcoin as payment for a car you were selling if you had to wait 60 days to convert it to dollars? I doubt it. Continue reading >>
I Bought $250 In Bitcoin. Here's What I Learned
I bought $250 in bitcoin. Here's what I learned by Seth Fiegerman @sfiegerman December 8, 2017: 11:24 AM ET Where's the skepticism as bitcoin keeps soaring? Some people kill time at the airport by browsing duty-free shops. I decided to shop for bitcoin. But first, there are two things you should know about me: I tend to be almost as afraid of losing money investing as I am of flying. On some level, I figured one fear might cancel out the other. So last Thursday, while waiting for a flight to Nashville, I pulled up a popular application called Coinbase that can be used to buy and sell bitcoin. The virtual currency had hit $10,000 for the first time a couple days earlier, before retreating somewhat. News of bitcoin's rapid rise was everywhere, including on CNN . For 15 minutes at the airport, I refreshed the price of bitcoin over and over, watching as it gained and lost hundreds of dollars in a matter of minutes. I called out the price fluctuations breathlessly to my wife, who gently encouraged me not to be an idiot, before returning to her magazine. She was in good company. JPMorgan Chase CEO Jamie Dimon recently called bitcoin a "fraud" and suggested people who buy it are "stupid." Warren Buffett called bitcoin a " mirage " in 2014 and warned investors to "stay away." Are you trading Bitcoin? We want to hear from you . And yet bitcoin has climbed more than tenfold since Buffett's warning. Earlier this month, one college friend casually told me over drinks he'd made tens of thousands of dollars investing in another cryptocurrency. He said he hoped it would be worth enough one day to buy a house. When I saw the price of bitcoin fall to $9,500, I pressed buy, defying the wisdom of two finance titans and my wife. One hundred dollars, or 0.0101 bitcoins. (A few days later, Continue reading >>
Bitcoin Explained: What Is It, What Is It Worth, Will The Bubble Burst?
Bitcoin explained: Its history, why is it so valuable, and will the bubble burst? With one bitcoin worth $10,000, 2017 has seen this cryptocurrency go stratospheric. But what exactly is it? Bitcoin has been around since 2009, but cryptocurrencies as in, a digital currency that operates outside of a central bank have suddenly shot up in value, leaving many wondering if a solid investment could reap thousands. Recently, Bjork encouraged fans to buy her Utopia album with Bitcoin, Litecoin, Dashcoin or AudioCoin . This looks far from being a digital fad, and many who invested several years ago are on the brink of being millionaires. So heres a quick guide to the currency, why its all the rage, and whether the bitcoin bubble will burst. Bitcoin first went online in 2009 as open-source technology, invented by a mysterious, anonymous individual going by the pseudonym Satoshi Nakamoto. Its a digital currency, used to pay for items online without any additional bank charges, or government control. Companies and people can buy or sell items using bitcoin as payment. In 2017, these companies include Microsoft, Virgin Airlines, WordPress and Subway. Hard, real-life currencies such as the Pound sterling or US dollar are managed by a central bank (in this case the Bank of England and US Federal Reserve), which steadies rates and manages supply and demand. Bitcoin has no overall regulation, but it relies on the activity of miners. This is the complicated part. The currencys quantity can only be increased if it is mined a process which involves computers collecting pending bitcoin transactions and turning them into a complex mathematical equation. The first miner to solve this puzzle then chains together a block of transactions (called a blockchain), and they are then rewarded with ne Continue reading >>
Skeptics Say Bitcoin Has No Value. Heres Why Theyre Wrong
On Tuesday, it was trading at $11,943 , a decline of 12 percent, according to CoinDesk. As bitcoin's popularity surges and its price rises and falls, more and more people are asking the same question: How does bitcoin , something that's essentially invisible and intangible, have value? In economics, something has value if it checks the following two boxes: scarcity and utility. Scarcity just means that something has a finite supply. In the case of bitcoin, the cryptocurrency has a set cap of 21 million bitcoins. Many analysts note that this set cap makes bitcoin more desirable than other assets, even gold. That's because unlike with gold, there's no need to worry about a digital Gold Rush. A treasure trove of bitcoin won't ever be "discovered," causing the crypto's price to crash with an influx in supply. "There are potentially millions of times more gold underground than actually has been extracted," said Tom Lee, head of research at Fundstrat Global Advisors. Lee was chief equity strategist at J.P. Morgan before co-founding Fundstrat in 2014. Ben Yu, a blockchain expert living in San Francisco, says technological advances are also making gold easier to mine. "Today we mine gold at four times the rate that we did just 100 years ago," Yu said. So if bitcoin has scarcity, what about its utility? Many believe the cryptocurrency's utility lies in its potential to be a more efficient commodity than we already have. Proponents of bitcoin like it for a number of reasons. First, bitcoin is decentralized, meaning no government, bank or single person has control over it; it can't be toppled by corruption at the top. It's also trivially divisible, meaning you can buy a small item like a doughnut with it as easily as you can buy a house or even a mansion. And finally, the code it Continue reading >>
Why Do Bitcoins Have Value?
Bitcoin was launched in 2009 as the world's first decentralized, private digital currency. Because it has no physical denominations , Bitcoin only exists inside of an interlinked computer network system. This is not entirely unique, as much of the U.S. dollar supply only exists in digital account balances instead of as actual green pieces of paper. Bitcoins are generated, or " mined ," through a sequence of complex mathematical formulas run through computers. The anonymous creator of Bitcoins set a cap on total Bitcoin volume. Once that number hits 21 million, no more Bitcoins can be generated. These digital coins can then be bought or sold with other currencies and used as an investment or money to buy goods from any sellers who accept them. Economics teaches society that values are subjective; items have economic value because people desire them for one reason or another. Currencies, or mediums of exchange, serve several different and crucial functions in an economy. For one, they make trade easier; money currencies trade for nearly any good or service. For example, suppose a person has 5 units of lumber and wishes to purchase a dog. Without currency, his only option is to find a lumber-wanting dog owner. With currency, like U.S. dollars, he can sell the lumber to anyone who wants it and then use the money to purchase a dog. Currency also provides a universal measurement for accounting purposes. For instance, without currency, it is difficult to compare companies that sell different goods. Currency is used as a store of value , which makes saving, investing and banking easier. Some currencies, like gold, have value because they are useful as a commodity. Government fiat currencies, like the U.S. dollar, have value because governments grant them legal tender status an Continue reading >>