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After the Bust, Are Bitcoins More Like Tulip Mania or the Internet?
SAN FRANCISCO — When you talk to tech industry insiders about where Bitcoin is heading, two vastly different comparisons are inevitable: the tulip bulb and the internet.
Bitcoin’s critics say the digital tokens are like the tulip bulbs of 17th-century Holland. They generated a wild, speculative rush that quickly disappeared, leaving behind nothing but pretty flowers and wrecked bank accounts.
Bitcoin believers, on the other hand, want us to think about cryptocurrencies as if they were the internet: a broad technology category that took some time to reach its potential, even though expectations got ahead of reality in the early years. If that’s true, last year’s crash in Bitcoin prices was like the dot-com bust; a temporary setback before the big ideas come to fruition.
After following Bitcoin for several years, I think neither of these comparisons quite works. Bitcoin is neither an irredeemable flop nor an economic miracle.
So what is it? We are still a few years from any sort of clarity about where this technology will fit in the world. If we want to imagine where it might be going, we need to look beneath the gyrating price to understand how it is being used today and who is using it.
Speculators, drug dealers and the oppressed: How cryptocurrencies are used right now
At the most basic level, Bitcoin has introduced a new way to hold and send around value online. Anyone can open a Bitcoin wallet and receive money from a friend or a stranger. The system works without any central authority, thanks to a network of computers that is not unlike the network of computers supporting the internet.
Even after last year’s bust, Bitcoin users are generally sending somewhere between $400 million and $800 million worth of Bitcoin across the network every day, according to data from the blockchain, the public ledger on which all Bitcoin transactions are recorded.
That daily volume is less than half the daily average of the payment service PayPal. But it is much more activity than the network handled before the price spiked in 2020.
As the proponents of the tulip bulb version of Bitcoin will tell you, most of the transactions today are speculative: people buying and selling Bitcoin in the hope that it will be worth more in the future. A more generous viewpoint would compare Bitcoin to gold, a scarce commodity that goes up and down in value and provides an alternative to national currencies.
Speculative transactions accounted for roughly 60 to 80 percent of all transactions on the blockchain, according to Chainalysis, a start-up that does analysis of the blockchain for big companies and governments. Most of those transactions are Bitcoins moving between cryptocurrency exchanges around the world.
There is still quite a bit of mystery about what accounts for the other 20 to 40 percent of the transactions. No one can force Bitcoin users to register their identity, so Chainalysis and other firms are in the dark about many transactions. But they have identified some useful chunks.
When Bitcoin was introduced in 2009, it was described as a new way to make payments online, without the fees that credit card companies charge. Chainalysis estimates that last year, companies handling Bitcoin payments accounted for 0.3 percent of all Bitcoin transactions, or $2.4 billion.
This is a healthy dose of apparently legal commerce, but it was not a good sign for Bitcoin that it was shrinking for most of last year when the price of Bitcoin was going down, according to Chainalysis data.
Many if not most Bitcoin advocates I’ve encountered will admit it doesn’t offer much of an improvement over traditional electronic methods of payment. In several ways, it’s worse. Paying with Bitcoin requires you to become a speculator on its volatile price for the time you are holding on to tokens and waiting to pay.
The payment data leads to the question of where this technology might gain momentum, beyond speculation. The most compelling use that Bitcoin fanatics talk about is its value to people in repressive countries that have currencies that are even more volatile than Bitcoin.
In Venezuela, for example, Bitcoin can offer a way to move savings out of the inflating bolívar. Because of the open nature of Bitcoin, Venezuelans can buy it without the government stopping them.
There are stories of Venezuelans using Bitcoin to rescue their savings. Venezuelans bought over $230 million in Bitcoin last year on the most popular platform for sales, LocalBitcoins, according to the data analyst Matt Ahlborg. Those purchases were growing even as the price of Bitcoin was falling.
But it caught on with only a tiny sliver of Venezuelans. And there are reasons to wonder how many of these transactions were really just corrupt government officials or wealthy Venezuelans who had other means of getting their money out of the country.
People who have traveled to Venezuela have told me that most ordinary people they spoke to would prefer to have their money in dollars instead of Bitcoin.
The bigger problem facing Bitcoin is that the practical and legal uses have struggled to outpace illegal or clearly unethical activity.
The list of ways that Bitcoin has proved useful to criminals keeps growing, from the ransom payments on locked-up computer files — or even hostages — to illegal drug sales.
Many of these misdeeds are hard to quantify, but Chainalysis has managed to put numbers on Bitcoins used to buy drugs on the so-called dark net. Chainalysis numbers show that drug purchases rose last year, even when the price of Bitcoin was falling.
The total dark net transactions in 2020, around $620 million, were more than twice the amount that Venezuelans bought on LocalBitcoins.
Bitcoin fans will tell you that this is a drop in the bucket compared with how much the dollar is used to buy drugs. But all the data I’ve seen suggests that drug purchases account for a much larger proportion of the Bitcoin economy than their proportion of the dollar economy. And Bitcoin has enabled new kinds of deadly drug traffic, like the synthetic opioids that have flowed from China to small towns in the United States.
Illegal activity, and especially pornography, played an important role in the early internet, but nothing like what we’ve seen from Bitcoin in its early days.
Bitcoin is accessible to anyone — not so different from the internet. The problem is that, other than speculation, none of its legitimate uses have taken hold at anything like the pace of the illegal activity.
Ethereum, Dapps and Facebook: Looking to the future
That the technology hasn’t gained traction with ordinary people does not mean it won’t someday. There are still plenty of areas where, smart entrepreneurs think, the open nature of cryptocurrencies could be useful.
Many venture capitalists have made bets on Ethereum and EOS, alternative cryptocurrency networks that can be programmed for more sophisticated applications, like financial contracts, than Bitcoin’s software allows.
Programmers have already built thousands of so-called decentralized applications, or Dapps, that use the EOS and Ethereum tokens. Many of them can be used today. These Dapps can move money around and record ownership of digital goods, like items in video games, without a central company keeping the records.
But a majority of these Dapps still focus on legal gray zones, like gambling. The most prominent use of Ethereum so far has been by companies, many of them scams and frauds, that wanted to raise money without complying with securities regulations, through so-called initial coin offerings.
I have seen little indication that any of the more legitimate uses have worked easily enough to have any appeal beyond cryptocurrency fanatics.
Perhaps the biggest thing that cryptocurrencies have going for them is that serious people still want to fix the flaws. The value of digital tokens — however volatile they may be — has created incentives for people to work on them.
The latest big cryptocurrency player is Facebook, which is said to be working on its own digital tokens. So are several other big messaging companies.
I can’t predict the future of cybercurrencies any more than the holdout dreamers and the naysayers. But with the serious money still finding its way into the market, it is far too early to write the whole thing off.
7 Ways Bitcoin Will Make You Rethink Money Forever
There’s a persistent rumor in the cryptocurrency space that even the Queen of England wanted to get on board. Apparently, it didn’t go too well…
Thinking more deeply about this joke, a big factor in why we can spend the money that’s in our wallet actually is whose face is on it. Or which flag. You and I agree that the $1 bill with George Washington on it has a certain value and hence, we can use it as currency. If you now offer to sell me a pretzel for one dollar and I agree that that’s a reasonable substitute compared to what else I could get for Mr. Washington’s face, then we can make that trade.
Bitcoin is about to change ALL of that. And that’s why we’re here.
The memory of my first trip down the cryptocurrency rabbit hole is still very fresh. I’ve spent countless hours clicking, scrolling, and reading, never knowing what to believe. Hopped up on caffeine, I vibrated in my chair, anxious about where to put my money and whether I’d ever see it again. And yet I came home with only more questions.
At The Crypto Times, I hope to spare you at least some of that trouble. In 1668, Thomas Hobbes wrote in Leviathan that “knowledge is power.” That’s precisely why it’s such a great weapon to deal with curiosity, skepticism and fear. The key to understanding anything, whether that’s a natural disaster, historic event, or huge price action of a new currency, is to learn what lies behind the facade that’s in the news.
That’s why I want to show you seven core features and themes of Bitcoin and cryptocurrencies. It’s a short introduction for beginners to make crypto feel a little less cryptic.
This is the first and by far biggest buzzword you’ll come across in this space, all the time. “We’re doing a decentralized X” is the new claim to fame. It’s the slogan of most new blockchain companies, after which they go on to explain why making their product decentralized is the best thing since sliced bread.
Decentralized is just a fancy word for “without middlemen.”
If you and I meet in the park, I give you a dollar and you give me an apple, then we just made a trade, one-on-one. Another fancy word for this is peer-to-peer. We didn’t need a bank to secure or guarantee the transaction, because, well, we were both there. That’s what decentralized means and Bitcoin is just that for exchanging money.
You can transfer this idea to basically anything. Decentralized housing? That’s AirBnB without the company. Decentralized ride sharing? Uber without the app. And so on. The question that remains for us to answer is: Where does it make sense?
One of the most popular arguments old financial institutions and important figures in the traditional finance space make against Bitcoin is that people will abuse it for money laundering, buying drugs, and financing wars. But wait, what could criminals have used before 2008, when Bitcoin wasn’t around? Oh, that’s right, the money we have now.
Crime is a subset of society, not currency. Criminals will choose whatever economic tools make the most sense. That doesn’t mean they’ll stop being criminals if one suited tool disappears. If anything, Bitcoin is a great opportunity to prevent money from being used for such causes, because it’s actually transparent.
A history of all transactions is stored on the blockchain, which is public, available to everyone in the network, and easy to understand. This way, even you and I can see any account’s entire balance history, where their money went and where it came from. Of course addresses are encrypted, but with according measures, special security agents — think a sort of Bitcoin police — could be granted access to that data in suspicious cases. The same goes for traditional security agencies.
Then again, I know a few people who don’t seem particularly interested in a transparent financial system: those at the top of the block-less chain. I wonder why.
Think about how often you spend cash and don’t automatically get a receipt. At least in Germany it’s common practice. At the bar. At the restaurant. At the dry cleaner’s. That’s kinda sketchy, isn’t it? No confirmation of payment whatsoever. Maybe that’s why credit card fraud is a $200 billion per year “industry.”
Aside from the public transaction history that’s built into Bitcoin and all other cryptocurrencies, which makes tracking your money easier, the way this transaction history is created is also a lot more secure than trusting a stranger with your money or credit card info.
All transactions in the Bitcoin network are added into blocks, which are chained together. Hence the name blockchain. Each block references the previous block with a unique, mathematical fingerprint, that’s calculated using a complex algorithm. This makes it impossible to cover up your transactions or spend more money than you actually have.
Therefore, Bitcoin will not just help us keep a much better overview of where our money goes, it’ll also make our use of money more secure. And that’s a good thing.
If your bank sees your balance declining too much, or you have a couple of weeks in the red, they freeze your account. When PayPal’s algorithm flags one of your transactions, they freeze your account. And if eBay doesn’t like how much profit you make, they freeze your account.
With Bitcoin, no one but you controls your money.
You’re the only one who holds the keys to your account. As long as you keep your Bitcoin safe — you can even store it offline — and make backups of your passwords that you store in a physical location, no one can limit how much you spend and earn.
That’s a lot more responsibility, but it comes with a lot more freedom too.
Since anyone with an internet connection can participate in a blockchain network like Bitcoin, the system is limitless. It knows no physical, national or geographical boundaries. It’s always liquid and always available. There are no exchange rates, very low fees and very little chances of a total system failure. After all, you’d have to shut down the entire internet!
Imagine being able to send money to your relatives far away directly, or straight to someone who needs it in a third world country, without conversions and banks taking forever to process your transfer.
That’s one of the most powerful features of cryptocurrencies and it’ll slowly transform how we use money forever.
Another buzzword you’ll often see is “store of value.” It’s often used when people say Bitcoin is “digital gold.” It indicates that one of the primary uses of Bitcoin is to maintain the value of your money. So far it’s been a great way to not just “store” your value, but to greatly increase it.
Interest rates around the world have been close to zero for almost a decade. If you put your money into a savings account, it won’t even outpace inflation, leaving you with less buying power than you’ve had before. Some banks even have negative interest rates, forcing you to pay money to keep yours in their safe. That’s insane!
Since Bitcoin’s supply is limited, it will never exceed 21,000,000 coins, its increase in value is likely to continue, at least in the long term. The community is a bit divided as to whether it should be like this, or if a more liquid, currency-like Bitcoin is the way to go. In theory, both are possible.
Until now, it has proven to be a great way to save for the future, whether you want a comfy retirement, a college fund for your kids, or just a Lambo
The quote is often misattributed to Einstein, but it’s interesting nonetheless:
“Compound interest is the eighth wonder of the world. He who understands it, earns it. He who doesn’t pays it.”
Whoever said it, they’re right. And compound interest is just one of the many design flaws in our monetary system that rarely make it fair. Bankers, sports stars, and movie celebrities are paid astronomical sums without taking on any risk. Meanwhile, doctors, nurses, political decision-makers, and teachers often walk away with a lot less while carrying way more responsibilities.
That’s not fair. And while Bitcoin’s governance mechanism is far from perfect, it’s taken more steps in the right direction than traditional politics have for years. Take the way Bitcoins are created, for example: mining. In this process, whoever commits a lot of computing power to forming, maintaining and updating the blockchain is rewarded with newly minted coins. This is called “Proof of Work” and while it’s still environmentally wasteful, it’s a move towards meritocracy. A move away from printing money at will and towards rewarding people for their efforts, not their status.
Again, it’s far from perfect, but it looks like continuing down this path can bring a lot of fairness into a really broken system.
Something Larger Than Ourselves
Here’s what Naval Ravikant, one of crypto’s premier thinkers, said about the subject in his first periscope:
“Once you figure it out, it’s hard to think about anything else. It’s hard to think that there’s any other thing that’s going on that’s as important. Now, of course it’s probably not true; it’s a big and complicated world and there’s lots and lots of important things going on. [But] anyone who’s interested in the intersection of politics, economics, technology, [and] finance will just find cryptocurrency and blockchains to be this really interesting rabbit hole.
I think humans have created something that’s larger than ourselves. It’s like when we first invented markets. When you invent something that big, it’s hard for anyone to figure out how it works. We are all now collectively trying to figure out how to describe it and what its properties are. It almost feels like there’s this organism larger than ourselves that we’re all working on co-evolving.”
It all takes a while to settle, but once the gears start clicking into place in your head, your eyes will slowly open to the massive potential of this technology and why it’s important that you understand it. Regardless of which side you take, or how much you’re interested in investing.
Maybe one day, even the Queen will get the memo.
How Many Bitcoins Are There?
All data/stats on this page are real-time.
How Many Bitcoins Are There Now in Circulation?
There are currently bitcoins in existence. This number changes about every 10 minutes when new blocks are mined. Right now, each new block adds 12.5 bitcoins into circulation.
Total Number of Bitcoins
The maximum and total amount of bitcoins that can ever exist is 21 million.
How Many Bitcoins Are Left to Be Mined?
There are bitcoins left to be mined.
How Many Bitcoins Are Lost?
There’s no exact answer. One recent estimate guess that about 3-4 million bitcoins are lost forever.
How Many Bitcoins Are Mined Everyday?
144 blocks per day are mined on average, and there are 12.5 bitcoins per block. 144 x 12.5 is 1,800, so that’s the average amount of new bitcoins mined per day.
Because many miners are adding new hashpower, over the last few years blocks have often been found at 9.5 minute intervals rather than 10. This creates new bitcoins faster, so on most days there are actually more than 1,800 new bitcoins created.
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How Many Bitcoins Have Been Mined Already?
Since bitcoins can only be created by being mined, all the bitcoins in existence are all bitcoins that have been mined. The total is BTC.
How Many Bitcoin Blocks Are There Today?
There have been blocks mined.
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How Many Bitcoins Does Satoshi Have?
Some estimate Satoshi has around 900,000 bitcoins (BTC). This number is heavily debated, though, as some claim he has around 300,000 BTC.
How Many Bitcoin Have Been Stolen?
It’s unclear exactly how many bitcoins have been stolen.
850,000 BTC were stolen in the Mt. Gox hack, which was the largest Bitcoin hack ever. Another 120,000 BTC were stolen from Bitfinex in 2020. Together, that adds up to about 970,000 BTC.
Stolen BTC, however, does not mean lost BTC. It’s likely these stolen coins are still circulating, and may not even be in the hands of the original thieves.
How Many Millionaires Were Made From Bitcoin?
It’s impossible to know exactly. With some quick math, however, we can estimate the max number of people who are Bitcoin millionaires.
With Bitcoin’s price at $ , you’d need bitcoins to be a Bitcoin millionaire in dollars. Since there are BTC in circulation, there are a maximum of people holding bitcoins.
In all likelihood, the number is much lower than that and probably around 30,000-60,000 people with more than $1 million worth of bitcoins.
How Many Bitcoin Miners Are There?
Slushpool has about 200,000 miners. They have 12% of the network hashrate. Assuming all pools have similar numbers, there are likely to be over 1,000,000 unique individuals mining bitcoins.
What Happens When All 21 Million Bitcoins Are Mined?
Right now, miners earn most of their income via the block reward. When all 21 million bitcoins are mined, there won’t be a block reward to pay to miners.
When a Bitcoin user sends a BTC transaction, a small fee is attached. These fees go to miners and this is what will be used to pay miners instead of the block reward.
How Many Bitcoins Will Be Mined Before The Next Halving?
There are BTC left to be mined until the next block reward halving.
How Many Bitcoin Billionaires Are There?
With Bitcoin prices hitting around $10,000, there may not be many Bitcoin billionaires. The Winklevoss twins are Bitcoin billionaires while the price is above $10,000, since they own more than 100,000 BTC.
How Many Coins Copied Bitcoin?
Most coins are exact copies of Bitcoin’s source code. Bcash is a fork of Bitcoin with a few things taken out. Litecoin is also a fork of Bitcoin with the block time and mining algorithm changed.
How Many Litecoin Are There?
At the time of writing, there are a little over 57 million litecoin (LTC) in existence. The Litecoin block halving is projected to be in August 2020.
Is Bitcoin Issuance Similar to Gold?
Gold’s supply has historically increased at around 2% per year. Bitcoin’s supply will increase less than 2% starting at the 2020 halving, and will eventually go to less than 1% a year after the 2024 halving. Bitcoin vs gold will be a big debate in the coming few years.
How Many Ethereum Are There?
There are a little over 100 million ether (ETH) in existence.
How Long Does it Take to Mine a Bitcoin?
New bitcoins are mined every 10 minutes. The amount of time it takes a miner to mine a bitcoin will depend on how much mining power he has.
Who Has the Most Bitcoins?
As discussed above, it’s likely that Satoshi has the most bitcoins of anyone.
How Long Has Bitcoin Been Around?
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