Bitcoin Update: Fall 2013

Sir Barken Hyena writes:

Last June I posted about Bitcoins and why I was buying them. Six months on, it’s time to take stock of where we are.

First things first, my return on investment. I bought my coins, never mind just how many, over May and June this year at an average of $102.50 each. As of this writing, we’re looking at $206.90 per. How’d the rest of you do in real estate or the stock market over that time, eh?

Gloating aside, there are good reasons for that price increase. Bitcoin’s position and future potential have never been better. In fact, an important hurdle to adoption appears to have been passed, along with those price milestones.

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Ask people about Bitcoin and if they’ve heard of it at all they’ll say “oh that drug trafficker stuff” or something similar. Like most media distortions, it has a basis in fact. Or at least it did until the FBI seized the main internet purveyor of illegal goods, the website Silk Road. The total taken was staggering, something north of 170,00 BTC, worth 10’s of millions in dollars. But some the methods used to apprehend the criminals were revealing of a critical and poorly understood feature of Bitcoin, the public transaction ledger, called the “blockchain”.

Bitcoin is money but it’s more than that, it’s a complete accounting system. But all the accounts are public! Every single transaction in the blockchain from inception to present is publicly viewable. For example, let’s look at the last 100 largest Bitcoin transactions:

https://blockchain.info/largest-recent-transactions

All those funny numbers are encrypted addresses that show the sender and the receiver of the transaction. True, it doesn’t say “Joe Blow” but there are lots of ways to link a person to a bitcoin address.

Think about that though, does anyone think a drug trafficker wants his transactions visible to the entire world? Bitcoin is terrible for criminals, they’ve just been able to operate unobserved. Not anymore, that cat is out of the bag. The Bitcoin price dropped on the Silk Road news, but then rebounded in a few days and has since sustained about a 50% increase from there.

Also driving that price rise is China. An announcement by Baidu, a sort of Chinese Google, that a division will accept payment by bitcoin, plus the US budget jitters, seems to have put it above $200, maybe for good. This was on massive Chinese trading volume. In addition lately I’ve seen a few articles giving a favorable gloss to investing in bitcoin, which is a new thing to me.

What next? A lot of venture capital has flowed to start ups exploring various services, and some of that fruit is starting to show up. Expect many more announcements in the next 6 months. Also there are major upgrades coming to Bitcoin-QT, the server software. Supported will be charge back and identity features that will help merchants, escrow accounts, asset titles and similar features.

So expect more good new for Bitcoin.

About Sir Barken Hyena

IT professional and veteran of start ups. Life long musician and songwriter. Voracious reader of dead white guys. Lover of food and women.
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3 Responses to Bitcoin Update: Fall 2013

  1. Thanks for keeping us up to date about Bitcoin. Interesting times. My own mind boggles when I try to make sense of it. What’s your feeling — will the system really never be cracked or hacked? And is it your hunch that Bitcoin is the sharp end of the wedge where the coming-apart of government control over money goes?

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  2. Scott says:

    Interested to know if you locked in any of your gains by selling.

    The total taken was staggering, something north of 170,00 BTC, worth 10′s of millions in dollars.

    I read somewhere that this makes the US Gov the biggest holder of Bitcoins. I’ve also read that the cat who started the whole thing is the biggest holder. I don’t know if either of those data points mean anything or if either is even in the neighborhood of factual.

    I remain convinced that the USG will strangle this somehow.

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  3. Sir Barken Hyena says:

    PR: It think It will never be hacked. They’ve done their worse already, and besides, it’s an ongoing project and open source has the best reputation for dealing with these kind of things. Linux is more secure then Windows.

    I don’t think Bitcoin will be a wedge against government, it’ll come apart of it’s own accord. I see it more as a life raft for wealth.

    Scott, yes I did, just a bit to test out my instincts for timing the selling. I did two small sells and both turned out to be on minor peaks when it brushed $225, so it was a success. One was a straight cash sell but the other was a WalMart gift card that a cash strapped family member (me) needed, which you can get for Bitcoins at eGifter.

    If it really shoots up in a way that seems like a bubble I might try to do that more aggressively. I have split my coins into portions: 3/4 for long term holding, the rest for trading.

    As far as holdings, the FBI is now one if the largest, it’s true. The creator Satoshi Nakamoto is thought to have a massive holding but then nobody is really sure if he exists. He ought to though.

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