January 7th, 2014
by David Zeiler, Associate Editor, Money Morning
Just about everything that has to do with the digital currency Bitcoin is at least a little odd.
But there are some Bitcoin facts that are truly bizarre - things that could only happen in the universe of Bitcoin.
Bitcoin, which exists entirely in cyberspace, has attracted a lot of attention in recent months as the Bitcoin price has soared from less than $200 in September to more than $1,200 at the end of November. The world's leading "altcurrency" is trading for about $800 now.
Amid signs that Bitcoin is on the verge of going mainstream, there are a lot of crazy Bitcoin facts and stories that you'd never hear about a conventional currency like the dollar or the euro.
Like the saying goes, you can't make this stuff up...
Ten Weird Bitcoin Facts
- Odd Bitcoin Fact No. 1: Its Creator Is a Mystery
No one has ever seen the person who supposedly invented Bitcoin, Satoshi Nakamoto. All that is known is that someone (or some group) published a paper describing the system in 2009 and the Bitcoin software appeared shortly afterward. In the early days of Bitcoin, Nakamoto communicated with other software developers, but by 2010 all communication ceased. Many in the tech community have speculated on who Nakamoto really is, but no one knows for certain.
- Odd Bitcoin Fact No. 2: Nobody's in Charge
Whoever he/she/they were, the creators of Bitcoin designed it to be essentially autonomous once launched. No individual, group, company, or government controls Bitcoin. (This is why libertarians and anti-government types love Bitcoin.) The idea was to create a currency that avoids the meddling policies of a central bank like the U.S. Federal Reserve, which often tries to "fix" economies by printing more and more of their fiat currencies, thus devaluing existing units of the money.
- Odd Bitcoin Fact No. 3: The Priciest Pizza Ever
Back in May 2010, an early Bitcoin enthusiast, Lazlo Hanyecz, wanted to prove you could buy something with the digital currency. So he posted a challenge on a Bitcoin Internet forum, and four days later another user accepted. Hanyecz paid 10,000 BTC -worth just $25 total back then - for two "The Works" pizzas from Papa John's. Since then the skyrocketing value of Bitcoin has made those pizzas the most expensive snack of all time. At today's rate of $800 per Bitcoin, those pizzas would be worth a piping hot $8 million.
And we're just getting started...
- Odd Bitcoin Fact No. 4: What's in a Name?
As Bitcoin evolved and became better known, at least among tech types, people needed a place where they could buy and sell Bitcoin. One of the primary exchanges became Japan-based Mt. Gox. Peculiar name, right? Well, Mt. Gox didn't start out as a Bitcoin exchange, but as a place to trade online playing cards from the game "Magic: The Gathering." So the name actually is an acronym that stands for "Magic The Gathering Online eXchange."
- Odd Bitcoin Fact No. 5: Free Bitcoins for All!
Many Bitcoin enthusiasts also see themselves as evangelists for the digital currency, and so started setting up "Bitcoin faucets" on websites where people could input a Bitcoin wallet address to receive a very, very tiny amount of free Bitcoin. A typical amount is 20 satoshis, the smallest unit of Bitcoin, as in 0.00000020. To get an idea of how very small this is, if one Bitcoin were worth $1 million, 20 satoshis would be worth ... 20 cents. Still, it's free money!
- Odd Bitcoin Fact No. 6: Only 21 Million Will Ever Exist
The Bitcoin software is designed to dispense new Bitcoins at an increasingly slowing rate over time until 21 million are mined. At that point, no more will ever be created. Since 2009, more than half - over 12 million - already have been generated. But because of the way the algorithm works, the last batch of Bitcoins won't be mined until the year 2040 -26 years from now.
- Odd Bitcoin Fact No. 7: Don't Forget Where You Put It
One U.K. man, James Howells, had mined 7,500 Bitcoins on his laptop back in 2009, when such a feat was easy. Howells eventually tired of mining, and when he ruined the laptop by spilling lemonade on it, he dismantled it for parts. This past summer, Howells found the old hard drive - with the Bitcoin keys still on it - in a drawer. He tossed it in the trash, realizing only later that he'd thrown away a fortune - $6 million at today's prices. Unless the hard drive is found, and is still in a state in which the data can be retrieved, those Bitcoins are lost forever.
- Odd Bitcoin Fact No. 8: Bitcoin Accepted Where?
A lot of stories have been written about how some high-visibility places have agreed to accept Bitcoin as payment, such as a university in Cypress and a Tesla dealership in California. But people can spend Bitcoin on much stranger things, such as plastic surgery in Miami, Alpaca wool socks from Massachusetts, and dating site OKCupid.com.
- Odd Bitcoin Fact No. 9: To Catch a Thief
Bitcoin developed a tainted reputation early on because of its use by criminals on underground websites like Silk Road to buy illegal drugs and other contraband, supposedly because the digital currency is anonymous. All transactions are recorded and public, although names and other personal information are not included, giving criminals a false sense of security. In fact Bitcoin has turned out to be easier to trace than most thought - certainly easier than cash. Now law enforcement agencies like the FBI and DEA are actually using the information stored in the Bitcoin "blockchain" to catch criminals.
- Odd Bitcoin Fact No. 10: It's a Global Phenomenon
While more than 90% of Bitcoin trading occurs in U.S. dollars and Chinese yuan, people can exchange Bitcoin for at least two dozen other world currencies, including Argentine pesos, Swiss francs, Polish zlotys, Hong Kong dollars, Israeli shekels, Thai baht, Japanese Yen, Russian rubles, and South African rand. As Bitcoin gains traction in more and more countries, it draws closer to fulfilling its role as an international currency.
Many of the stories people are reading in the mainstream media are misinformed, or just plain wrong. With Bitcoin poised to become a bona fide alternative currency, investors need to be able to separate myth from reality. Here are the seven biggest Bitcoin myths debunked.
- Money Morning:
Why Virtual Currency Is Here to Stay - Bitcoin or No Bitcoin