The price of one bitcoin has plunged so far this year and is around 50% lower than it was in December 2013, when it traded at around $1150 per coin. This has led to traders to question the future of the currency.
Others claim problems of security and stability are inevitable when setting up any new financial product. Here are 6 facts about bitcoin you might not know.
Guest post by FXTM
Beginnings in 2008
By any stretch of the imagination, bitcoin is a new thing and is only just being noticed by the masses. However, it was in fact first mentioned in a paper published by Satoshi Nakamoto (pseudonym) back in 2008. Then, in 2009, the first open source wallet was created and the first bitcoins were issued.
Lower transaction fees
One of the big things going for bitcoins is that they offer an alternative to traditional paper currencies run by governments and nations.
The other big benefit is that bitcoin transactions are typically cheaper than the 2%-3% charges imposed by credit card companies.
Blocks are added every ten minutes
Bitcoins are mined in blocks using computer algorithms. It’s not exact, but approximately every ten minutes, another block will be added to the public ledger called the ‘block chain’. As the supply of blocks increase, the relative value of each bitcoin goes down.
Accepted by 36,000 merchants
As of November 2013, bitcoins were being accepted by around 35,000 online merchants and just over 1,000 brick and mortar establishments. While brick and mortar shops have been less quick to accept bitcoin as a form of payment, those that have, have been primarily based in the United States.
Legitimate financial service
While many nations have expressed concern over Bitcoin, (most notably China who have prohibited bitcoins being used by financial institutions) a US Senate committee informed senators that virtual currencies were a legitimate financial service. This led to the price of bitcoins soaring past $900, in November last year.
Links to crime
One of the biggest concerns to policy makers is the use of bitcoins to pay for illegal services and goods. In 2012, it was estimated that between 4.5% to 9% of all bitcoin transactions were involved in purchases for drugs via the online black market, Silk Road.
Silk Road has since been shut down by the FBI and the bitcoin price has dropped substantially.
Security breaches
As well as being used for illicit purposes, bitcoins have come under attack for their security flaws. Hackers have been able to steal bitcoins on a number of occasions. Japanese based bitcoin exchange, MtGox, has recently applied for bankruptcy after having reported thefts of over $300 million in bitcoins.
Further reading: A Quick Guide To Bitcoins
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