“When people write the history of this thing, of bitcoin, they are not going to write the story of 6 million to a billion. What is truly remarkable is the story of zero to 6 million. It has already happened! And we’re not paying attention! That’s incredible. That’s what had one chance in a million, and it already happened.”– Wences Casares, Founder & CEO of Xapo
Worth Wray cliarifies the bitcoin:
Bitcoin is a peer-to-peer digital currency that trades on public exchanges and can be instantly transferred between any two people anywhere in the world with the speed of an email… and at FAR lower cost than for transactions processed through the trdaitional financial system.
While a lot of people have experimented with digital currencies in the internet age, Bitcoin’s mysterious creator, “Satoshi Nakamoto,” was the first person to solve the issue of “double spending” in a completely decentralized network, meaning that all transactions are made directly between parties, with no middlemen, yet in a way that is verifiable across the entire network and virtually impossible to counterfeit.
Much like the internet itself, the Bitcoin hive is essentially a distributed network of computers and people that are relying on a common technological process – the Bitcoin protocol – to confirm and validate every transaction made, using a unit of account called a “bitcoin” that can be broken down into fractions, thereby enabling previously impossible micro-transactions.
Bitcoin protocol is an element of the “blockchain” — a giant, globally shared ledger of every bitcoin and every transaction in the history of the network. Whenever two people follow through with a transaction, it is broadcast throughout the entire network, and the blockchain expands as that exchange is automatically lumped together with other transactions in a new “block.”
Bitcoins are created through a process called “mining,” which happens to be the same mathematical process that seals blocks of new transactions onto the blockchain by verifying that every exchange is valid and using real bitcoins. By rewarding “miners” with new bitcoin for devoting their time and computing power to maintenance of the blockchain, the Bitcoin protocol provides the incentive for the network to continue running in a completely decentralized manner.
In the early days, the mining process could be competitively and profitably run from a series of graphics cards linked to a home computer, but in recent years bitcoin mining has become a BIG business. Today, a lot of the mining is done on massive server farms in places like Iceland, where temperatures are cool and power is cheap.
There is an upper limit of 21 million bitcoins that can ever be minted, and the protocol is designed to release a “reward” of a new bitcoin every 10 minutes until every unit of the digital currency has been created. As of today, roughly 13.5 million bitcoins have been mined, with roughly 7.5 million to go.
The Possible Stages of Bitcoin’s Future:
- Experimentation phase (2009 – 2010)
No real value associated with Bitcoin. Hackers & developers playing around with the source code. Experimenting with Bitcoin as a medium of exchange.
- Early adopters phase (2011 – 2013)
Interest from investors and entrepreneurs started to grow with substantial press coverage in the wake of the Silk Road bust. First generation of Bitcoin-related companies (exchanges, merchant processors, wallet providers, etc.) started. Potential began to shine through poor management.
- Venture capital phase (2013 – present)
World-class VCs started investing in Bitcoin companies, and rapid ramp-up is already outpacing the early days of the internet. VCs poured more than $90 million into Bitcoin-related businesses in 2013 and are on track to invest more than $300 million in 2014 (compared to $250 million invested in internet-related businesses in 1995).
- Wall Street phase (2015?)
Institutional investors, banks, and broker-dealers begin moving money into Bitcoin. Rising price and volume (in addition to development of derivatives) become the catalyst for mass adoption as retail investment follows.
- Global consumer adoption phase (?)
Only happens if (a) companies continue to innovate and make it easier for consumers to buy, hold, and spend Bitcoin, (b) volume expands dramatically so that large merchants can start accepting payment in Bitcoin, and (c) Bitcoin awareness continues to rise with these developments.
