Bitcoin is not successful merely because it is a great invention, rather it is successful because a significant bunch of the world embraces it.
Today Bitcoin is a ubiquitous word. The digital currency is going to celebrate its 10th anniversary on January 3rd, 2019 and, as David Olarinoye says in the quote above, Bitcoin is now part of the daily lives of many people around the world. However, it hasn’t been widely adopted as the payment method of choice for consumers and businesses worldwide yet. I am hopeful though that Bitcoin will become what its creator(s) designed it to be.
The founder(s) of Bitcoin – Satoshi Nakamoto – is still a mystery waiting to be solved. In the summer of 2017 Alexander Muse, an entrepreneur and writer, suggested that the NSA had successfully identified Satoshi Nakamoto using stylometry – the application of the study of linguistic style, usually to written language. Six months later, he stated:
Many readers have asked who Satoshi is and I’ve made it clear that information wasn’t shared with me. Based on my conversation I got the impression (never confirmed) that he might have been more than one person… Somebody commented on this post that Satoshi was actually four people. Again, I have no idea.
Laszlo Hanyecz, a developer who worked on Bitcoin early on and exchanged hundreds of emails with the person or team known as Nakamoto in 2010, told Business Insider in May 2018:
People love a man of mystery, but I try to steer people towards the fact that it doesn't matter who made it; he could be a psycho killer. People like to identify with heroes or villains, but in the crypto sphere, your code has to speak for itself. Charisma and being an interesting person only gets you so far when you're a developer. Ultimately, you'll be judged on the quality of your code and your idea.
Whoever created Bitcoin, they knew what they were doing. Back in the summer months of 2017 Arvind Narayanan, an Assistant Professor of Computer Science at Princeton University, and Jeremy Clark, a Bitcoin researcher at Concordia University in Canada, published a paper entitled ‘Bitcoin’s Academic Pedigree’. They concluded that the concept of cryptocurrencies is built from forgotten ideas in research literature:
Nearly all of the technical components of Bitcoin originated in the academic literature of the 1980s and '90s. This is not to diminish Nakamoto's achievement but to point out that he stood on the shoulders of giants. Indeed, by tracing the origins of the ideas in Bitcoin, we can zero in on Nakamoto's true leap of insight – the specific, complex way in which the underlying components are put together. This helps explain why Bitcoin took so long to be invented.
The document is a fascinating study that I recommend everyone to read. There are many technical concepts and terms mentioned in the paper, which might be difficult to understand for the average reader. Nevertheless, every Bitcoin aficionado should give it a try.
One of the most discussed topics in relation to Bitcoin for the past year was its volatile price fluctuations. On October 13th, 2017, a Bitcoin was worth around $5,600. The cryptocurrency market had just recovered from the news of China’s ban on companies from raising money through initial coin offerings (ICOs). A bull run in the following months saw one Bitcoin reaching the all-time high price of $19,783.06 on December 17th, 2017.
In January 2018 Xoel López Barata, a data scientist and fullstack developer, presented a method to simulate the Bitcoin price until the end of the year. He used a ‘Monte Carlo’ simulation on the daily returns of Bitcoin’s USD price. It was made ‘just for fun’ as the author stated in a disclaimer in the beginning of his blog. The mathematical experiment produced a rather bullish results:
It appears the most likely price (of Bitcoin by December 31st, 2018) is somewhere between $24K and $90K.
At the time of putting together the pieces of this post (October 14th, 2018) one Bitcoin was worth $6,336.
Plenty of room to grow, right?
No one can predict the future and history doesn’t repeat itself, but it does influence the future.
In February 2018 Joe McCann, a technologist, trader and game theorist, who is quoted above, published a blog entitled ‘Predicting the rise and fall of Bitcoin’s price with math’. At the end of it, he presented a ‘Fibonacci Retracement’ chart which indicated where Bitcoin may stop declining and start its upward climb again. Joe McCann elaborated:
A Fibonacci retracement is used in technical analysis to identify areas of support (price stops going lower) or resistance (price stops going higher). Fibonacci retracement levels use horizontal lines to indicate areas of support or resistance at the key Fibonacci levels before the trend continues in the original direction. These levels are created by drawing a trend line between the high price (in Bitcoin’s case, $11,775) and the low ($5,873) and then dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%
In the chart, you can see $10,382 as the first Fibonacci support level (23.6% from the high of $11,725) which was breached today, February 22nd, 2018. The next support level is $9,520 (38.6%), followed by $8,824 (50%), $8,127 (61.8%) then $7,136 (which is actually 23.6% above the low of $5,873) and then finally a full retracement back to the low of $5,873 itself (100%).
At the time of putting together the pieces of this post (October 15th, 2018) one Bitcoin was worth $6,335.
In June 2018 Kevin Werbach, an author of 'The Blockchain and The New Architecture of Trust', proposed a new look at the state of Bitcoin in his blog. He suggested what we have witnessed in the cryptocurrency market isn’t the burst of the Bitcoin bubble:
Unlike 2013, it didn’t (burst). It deflated in a relatively orderly way.
His post was focused on an interesting chart from Morgan Stanley that shed new light on what Bitcoin sellers have been exchanging it for. Kevin Werbach argued that ‘all the market shifts are there’ in the chart.
In August 2018 Tuur Demeester, an economist and investor, published a blog and described the remaining months of 2018 as a time of ‘more sideways and downside potential in the Bitcoin price due to sluggish retail demand, hesitation from institutions, and a current market cap that seems too high relative to on-chain activity’. He added:
Many investors and advisors are on record stating that $5,700 was the bottom in Bitcoin for this year, and that higher prices lie ahead. While we are very bullish on Bitcoin’s long term prospects, we do heed caution for more short term price optimism.
Besides Bitcoin prices, mining was another hot topic in the last 12 months. The ‘bitcoin mining’ phrase is currently one of the top 10 search queries for the digital currency in Google.
According to data from Tuur Demeester’s post, the hashrate (aggregate computations per second made to secure the Bitcoin network) has tripled since January 2018. Mining of bitcoins is highly unprofitable for the single miner, yet, more individuals are actively looking for legitimate cryptocurrency mining tools and services.
Argo, a platform that enables customers to mine Ethereum, Ethereum Classic, Bitcoin Gold, Zcash and Horizen, has recently offered Bitcoin mining packages ($50 per month for 7.5 TH/s) which were reserved almost immediately. When I asked about availability via email, an Argo representative replied back the following:
We were overwhelmed by the demand for Bitcoin mining packages and they sold out very quickly. Our goal now is to increase capacity to be able to offer more packages to more people.
In March 2018 Miguel Cuneta, a co-founder at Satoshi Citadel Industries, published a blog and compared the difficulties of comprehending the technology behind Bitcoin today with the difficulties of grasping the technology behind Email in 1984. He argued that both technological innovations shared common misunderstandings by the public in the early days, and concluded:
In the near future, we will be sending money to each other using the Bitcoin protocol, with a swipe of a finger, without needing to understand how it works. Explaining it then will be as unnecessary as explaining Email today. It just works.
I hope Miguel is right.
