Bitcoin boom: 'breakthrough moment' or billion-dollar bubble?

[Marc]

Has anyone used Bitcoin yet?

As the financial system in parts of the world crumbles, the decentralised digital currency Bitcoin has rocketed to a market capitalisation of almost $1.2 billion in what some believe is a sign the boom will soon turn to bust.
Bitcoin is an attempt to create a decentralised, crypto currency with no governments or central banks in control (see video). Transactions can be virtually anonymous, and the currency can be bought and sold at online exchanges.
One bitcoin is at the time of writing worth $A110 or $US115 - up from around $US50 in mid-March and below $US15 in January. There are almost 11 million bitcoins in circulation.

Read more: http://www.smh.com.au/digital-life/d...403-2h68h.html

[cube]

No, and at this stage I don't think I will.

In relation to the to the discussions around 'what is money', and bitcoin is very much on the side of 'whatever someone else will accept in exchange for good and services' category, but the secrecy surrounding who owns most (alledgedly 1/2 to 3/4 of all bitcoins produced are still owned by the mysterious founders) and stories of bitcoin markets being hacked put it in to the 'too risky' category for me.

Technically, the difference between bitcoin and a fractional reserve currency is probably very small (they both exist only because we trust everything will be fine), but when something is tagged as the currency of the dark-net, it kinda puts me off!

[Marc]

Yeah I agree - must be my old age but I don't trust anything I cannot physically see or feel.

[Marc]

Bitcoin InfoGraphic

Here is an infographic on bit coin

http://www.visualcapitalist.com/bitcoin-the-encryption-standard

[cube]

5/4/2013

Hack attacks hit Bitcoin exchange rates

Online services and exchanges dealing in Bitcoins have been hit by hack attacks that led to a drop in the value of the virtual currency.

Trading on the MTGox exchange, which handles most trades in Bitcoins, was sluggish yesterday as the site fought off an attack.

The attack helped to force a swift fall in the price of Bitcoins.

In addition, the Instawallet website - where people store Bitcoins - is offline indefinitely after an attack.

[Marc]

Yep - as with all tech - it breaks easy.

Cold hard assets that you can feel and see is my preference.

[Bob Kane]

Bitcoin is an attempt to create a decentralised, crypto currency with no governments or central banks in control

Why would anyone want to use Bitcoin?

[donna]

From Wiki

Bitcoin is the most widely used alternative currency^[3][14] and accepted by various merchants and services internationally.

Hedge funds

Financial laws can limit the type of assets institutional investors can buy, including alternative assets like bitcoin. However, assets stored in a licensed product can usually be bought by regulated entities. Exante Ltd., a Malta-based investment firm, launched a bitcoin hedge fund marketed towards institutional investors and high net-worth individuals. Bitcoin shares are currently traded through the Exante Hedge Fund Marketplace platform and authorized and regulated by the Malta Financial Services Authority. As of March 2013, Exante holds $3.2 million (2.5€ million) in bitcoin assets.^[53]

cheers,

Donna

[muppet]

Hacker currency Bitcoin crashes

• From: AP
• April 12, 2013 7:51AM

Watch
What is Bitcoin?

A short animated introduction about BitCoins from Youtube/WeUseCoins.com

Play

The notorious Winklevoss twins claim to own 1 per cent of all Bitcoins in existence.



IT'S a promising form of electronic cash free from central bankers and beloved by hackers. It - Bitcoin - may also be in trouble, registering catastrophic losses that have sent speculators scrambling.

Although the cybercurrency has existed for years as a kind of Internet oddity, a perfect storm of developments have brought it to the cusp of mainstream use.
As currency crises in Europe piqued investors' interest, a growing number of businesses announced they were accepting bitcoins for an ever-wider range of goods and services. The value of a single bitcoin began racing upward amid growing media attention, smashing past the $US100 ($94.9) mark last week before more than doubling again in just a few days.
Then came the crash.
The price of Bitcoin has imploded, falling from around $US266 on Wednesday (US time) to just above $US40 on Thursday, according to bitcoincharts.com, which tracks trades across the Internet. The best-known exchange, Tokyo-based Mt. Gox, has suspended trading for what it described as a 12-hour "market cooldown." By late Thursday, the currency was back up to just more than $US100.

This is bad news for the notorious Winklevoss twins, who claim to own 1 per cent of all Bitcoins in existence according to the New York Times.

“An array of speculators have now bid up the price of the Bitcoin to the point where the outstanding supply of the digital money was worth $US1.3 billion at last count. The Winklevii — as they are popularly known — say they own nearly 1 per cent of that, or some $US11 million.”
Nicholas Colas, chief market strategist for the ConvergEx Group, said it was a "great question" whether the currency could survive the wrenching ups and downs.
"At this point I would say yes, since it has before," Colas wrote in an email. But he noted that, unlike previous oscillations, Thursday's collapse was taking place in the full glare of international media attention.
"A lot more people know about Bitcoin than during the prior problems," he said.
To its supporters - tech-savvy libertarians, currency geeks, and online speculators - Bitcoin has enormous promise.
Bitcoins are created, distributed, and authenticated independently of any bank or government. The currency's cryptographic features make it virtually immune from counterfeiting, and its relative anonymity holds out the promise of being able to spend money across the Internet without fear of censors, regulators or nosey officials.
The linchpin of the system is a network of "miners" - high-end computer users who supply the Bitcoin network with the processing power needed to maintain a transparent, running tally of all transactions. The tally is one of the most important ways in which the system prevents fraud, and the miners are rewarded for supporting the system with an occasional helping of brand-new bitcoins.
Cryptographers argue over whether bitcoin is well-designed, but the true test of any currency is whether it can be used to buy anything.
Increasingly, Bitcoin is passing the test. From hard drugs to hard currency, songs to survival gear, cars to consumer goods, many retailers have welcomed the money, whose unofficial symbol is a dollar-like, double-barred B.
Atlanta-based BitPay handles Bitcoin transactions for more than 4,500 companies, taking payments in bitcoins and forwarding the cash equivalent to the vendor involved, which means that its clients are insulated from the cybercurrency's volatility.

More at http://www.couriermail.com.au/money/...-1226618761314

[Marc]

Thanks muppet - good read.

[Marc]

Zuckerberg's nemeses revealed as Bitcoin moguls

Zuckerberg's nemeses revealed as Bitcoin moguls.

In the past six months, the 31-year-old identical twins have amassed what appears to be one of the single largest portfolios of the online currency that has caused such a stir in financial and technology circles.
The perils of investing in it have been obvious over the past two days, as bitcoin has gone through its most volatile stretch ever, sinking from a high of $US260 ($A247) a bitcoin, to a low of $US105, before ending Wednesday around $US175. On Thursday it was down again to $US120 when one of the major online exchanges called a 12-hour halt on trading. The volatility has raised questions about whether bitcoin can even be called a currency.

Read more: http://www.smh.com.au/money/investin...412-2hp5h.html

[Marc]

The bubble bursts on e-currency Bitcoin

My bold in quoted text.

Many saw it coming, but that didn't stop the Bitcoin bubble from bursting: after rising to dizzying heights, the digital currency suffered its first true crash this week.

The price of the virtual "geek" currency had soared through the stratosphere in recent weeks, trading for a high of $266 on Wednesday -- only to come hurtling back to Earth in just three days.

By Friday, a single Bitcoin was worth just $54, according to the Mt. Gox platform, which manages 80 percent of the Bitcoin transactions and had to briefly shut down trading Thursday.

"There was a LOT of short-term speculation happening" from people who wanted to earn a buck from the soaring prices and cash out before the fall, Bitcoin Foundation chief scientist Gavin Andresen told AFP.

"Wild price swings are not good for Bitcoin."

But Andresen predicted the crash would not spell the end of the Internet-era currency, which was created in 2009 in the wake of the global financial crisis by an anonymous programmer who wanted a currency independent of any central bank or financial institution.

"We believe that as the value of Bitcoin grows, and the infrastructure around it grows and matures, the price relative to other currencies will get more stable," he said.

"That will take a few years," he cautioned, "and I expect continued chaos and drama in the meantime."

Read more: http://uk.news.yahoo.com/bubble-burs...064917207.html

[cube]

Hope they are well defended:

Cyber thieves target bitcoin owners

Owners of bitcoins have also become the target of cyber thieves keen to cash in on the boom in the digital currency.

A phishing gang posted a message to the discussion forum of a website used by many bitcoin traders saying MTGox was about to start trading "litecoins" - an alternative to bitcoins. In the message was a link that supposedly connected to an official MTGox chat site.

[muppet]

Virtual Bitcoin Mining Is a Real-World Environmental Disaster



Here's a puzzle: How can a virtual currency, existing in digital form on computer hard drives, demand real power and real fuel, and have real-world environmental costs? If you're struggling to think of an answer, welcome to the world of "Bitcoin mining."

http://www.bloomberg.com/news/2013-04-12/virtual-bitcoin-mining-is-a-real-world-environmental-disaster.html

[Moses Opondo]

This was an interesting read.Thanks for sharing