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Bitcoin: The Encryption Standard

VISUAL CAPITALIST THE ENCRYPTION STANDARD HOW THE LARGEST DIGITAL CURRENCY IS USHERING IN A NEW MONETARY ERA 2200 WHAT SAFE HAVEN CURRENCY IS GREATLY OUTPACING GOLD PRICES, WHAT CURRENCY IS CASH LIKE BUT WHAT CURRENCY IS FEARED BY THE EUROPEAN CENTRAL BANK AS A THREAT TO FIAT MONETARY INSTITUTIONS? DIGITALLY TRANSMITTABLE ALLOWING FOR ULTIMATE ANONYMITY AND GLOBAL MOBILITY? UP 2200 IN LAST YEAR? 100 • GOLD 1600.35 O 7???? 1800 1760 80 1720 1680 40 1600 May July Sept Nov 2013 Mar THE ANSWER: BITCOINS A DIGITAL CURRENCY WHAT ARE BITCOINS? BITCOINS ARE A DIGITAL CURRENCY AND TRANSACTION NETWORK. THE BITCOIN FRAMEWORK I5: DECENTRALIZED: Not run by one company or organization - the network is fully distributed among its users. SECURE: Highly encrypted and virtually impossible to compromise. PUBLIC: There is a public ledger of transactions called the "block chain". The increasingly vast P2P server network While every transaction is public, the parties involved are anonymous. There is no underlying government "backing them as there is with fiat currency. checks every string of code for uniqueness by bruteforce comparison to ensure no coin is reproduced or double spent. ANONYMOUS: Anonymity and traceability are defined by the user. DIGITAL: Bitcoins are completely digital and therefore global. There is no underlying commodity "backing" them as there is with a gold standard. STABLE: The money supply is predetermined and embedded within the encrypted network, meaning that money cannot be "printed" or added to the system at any time. Even though transactions are public, they are not tied to anyone's identity. Rather they are backed by the compounding integrity of the ever growing network. THE MARKET FOR BITCOINS HAS EXPLODED Estimated Transaction Volume (Million USD) Market Capitilization: 50M 1.2B (April 2012) (April 2013) April May June ly Aug Sept Oct Nov Dec jan Feb Mar April 2012 Maximum Number of Transactions Per Day potential bitcoins (Thousands) 21,000,000 60 Current number of bitcoins -11,000,000 30 CRACKING THE CODE: HOW BITCOIN WORKS 01 SUPPLY Currently 25 bitcoins are created every 10 minutes. This rate sare created in the year 214O. The supply of bitcoin growth rate closely resembles the supply of gold over time. Bitcoin output have an advantage of being more halves every four vears until all coins a predictable and guaranteed lower growth over time, however. 10 Minutes Total Above Ground Gold Stock Total Bitcoins over time Mlons of Con The first half of the bitcoin supply was created in the first four years, the entire second half however will take another 127 YEARS 02 MINING FOR BITCOINS Operating Margin of Mining B The backbone of the network is the collective computing capability of bitcoin miners. A'miner" offers their processing power to verify transactions and maintain the network Miners' efforts are rewarded with newly created bitcoins at the predetermined rate in addition to voluntary transaction fees based on supply and demand In Dec 2012, the rate at which new bitcoins are mined halved as it does 03 SECURITY All bitcoin transactions are publicly shared as they happen which the network verifies down the chain of all bitcoins ever spent to ensure v The bigger the trusted network grows the harder penetrating its are validity ity before authorization chain verification will be. The difficulty of counterfeiting bitcoins is of comparable difficulty to gold alchemy. 04 DEMAND The properties of bitcoins have also made them a favored currency for illicit transactions. Bitcoins are highly sought after by those looking to lower transaction costs, preserve anonymity and transact globally on the net The silk road is an anonymous website on the darknet, which provides an open online marketplace, notably consisting of drugs and other iliegal materials. The estimated annualized sales for 2012 were $14.4 milion Some also consider bitcoins as a safe haven - a way to keep money safe from taxes and capital controls, like those recently issued in Cyprus 66 BITCOIN BUZZ 99 AI Gore (Politician) 1 think the fact that within the Bitcoin universe an algorithm replaces the functions of (the government) is actually pretty cool. Max Keiser (Host, Keiser Report) 1 do think that BTC's market cap will - on its way to much higher levels - surpass the market cap of silver." Gavin Andresen (Lead Developer of Bitcoin) "Bitcoin is an experiment. Treat it like you would treat a promising internet start-up company: maybe it will change the world, but realise that investing your money or time in new ideas is always risky loomb Bloomberg bomberg "An increase in the value of bitcoin, the world's largest Bloombe online currency, may fuel concerns that virtual money omberd could undermine the role of ce Acentral Paul Krugman (Economist) "Buying into [bitcoin] has, at least so far, been a good investment. But does that make the experiment a success? Um, no. What we want from a monetary system isn't to make people holding money rich; we want it to facilitate transactions and make the economy as a whole rich. And that's not at all what is happening in Bitcoin." THE POWER OF DIGITAL The Bitcoin market is now more valuable than 20 sovereign currencies around the world. The market is generally becoming more accepting of bitcoins - even a S400,000 house was recently put up for sale with bitcoins listed as the What is certain? Encrypted digital currencies have unique preferred payment. properties and have demonstrated immense potential. They could play a considerable role in the future - we are Bitcoin has experienced a boom in purchasing power and popularity over the last year. The question of sustainability remains. merely at the tip of the iceberg. O400,000 Visual Capitalist is ocommitted to providing independently researched content for educational purposes. Thank you to Gold.Net for covering the production costs of this project. Learn more at VISUAL CAPITALIST Educating a new generation of investors on resource investing and management VISUAL CAPITALIST

Bitcoin: The Encryption Standard

shared by visualcap on Apr 04
What currency is feared by the European Central Bank as a threat to fiat monetary institutions? What currency is cash like but digitally transmittable allowing for ultimate anonymity and global mobil...


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