For those who have not been following the saga of Crypto Currency, Bitcoin and Litecoin, it may come as a surprise that currencies with no intrinsic value remain a volatile commodity for investors. For those who have been keeping up with conversion rates for digital currency it is clear that the very volatility that has defined pseudo-currency is what is keeping investors interested in this field. Recent changes in the value of such currency as well as the private key wallet bankruptcy of one of the biggest platforms in the world exchanging Bitcoins has called into question the future of this digital money. However, experts reassure those who want to use Crypto Currency, Litecoin and Bitcoin that the “fad” that led to digital money is probably here to stay.
Bitcoin and other forms of pseudo-currency are used as payments for transaction fees, products and services. Bitcoins or Litecoins can be exchanged for “real” currency at a given rate. Experts were concerned that Bitcoins and other digital currency might be used for illegal activity as they are much easier to exchange and “launder” than other forms of money. Bitcoin use was implicated in an illegal drug website, for example, and there may also be other examples of illegal use that have not yet been reported.
The value of these currencies has also been the subject of debate. Bitcoin values rose 90-fold in 2013, creating a “Bitcoin bubble” that deflated quickly in 2014. The sudden drop in value by about 50 percent has led to speculation that the pseudo-currency field is dying and soon will go the way of the dodo. The recent bankruptcy of Mt. Gox, the Tokyo-based exchange for Bitcoin and the largest Bitcoin exchange platform in the world, took most investors by surprise. Even more puzzling was the news that the equivalent of $400 million worth of coin had gone missing.
However, even the disappearance of six percent of the total Bitcoins in the world does not seem to have slowed the giant currency down much. Bitcoin continues to battle certain companies such as Apple due to the perception that the currency may not be legal, but a growing number of apps and programs accept Bitcoin with no problem.
Some experts see the bankruptcy of Mt. Gox as a step forward for Bitcoin. The underlying software is unchanged and many vendors are eager to get into the business of buying and selling using the digital currency. Further, these vendors claim that Mt. Gox was the problem and that most of the illegal activities related to Bitcoin stemmed from this organization, not from legitimate vendors and customers.
ASCI or application-specific integrated circuit machines have arrived in the Bitcoin mining market. The first machine arrived at a miner’s home in late January and ever since reports have been trickling in of shipped ASCI machines finding their way into miner’s Bitcoin mining rigs. Since ASCI machines are designed specifically for the task of mining Bitcoin, they are highly effective machines at what they are designed to do. High end ASCI machines have a per second hash rate of over 1 million. A typical CPU running Bitcoin mining software has a per second hash rate of 1. 5.
Needless to say the shipment of ASCI machines have been a game changer in the Bitcoin world. CPUs are no longer even supported by Bitcoin mining software because a CPU running 24 hours a day would likely not see a Bitcoin for several years, even if it was mining in a pool. This trend favors those interested in mining who also happen to have thousands of dollars lying around to be used on expensive hardware, as well as the early adopters of Bitcoin mining who likely have made a hefty profit from their early mining efforts. Those early profits could be rolled into the latest and greatest hardware and rig setup to continue generating Bitcoins well into the future.
Those miner who are running relatively powerful GPUs are being hit the worst by the ASCI development. The difficulty in successfully mining a block of Bitcoin has increased to a level that may make the cost of electricity outweigh the payout a GPU miner will see in Bitcoin from year to year.
All of this speculation is tied heavily to the stability of the price of Bitcoin going forward. If Bitcoin stays around the current 30 usd level then innovation will continue to progress. ASCI in part has contributed to the rally that Bitcoin has seen over the last 2 months. The USD exchange rate for Bitcoin has soared from 10 usd to 30 usd. It is hard to find an investment with that kind of return anywhere on the planet, so it is natural for Bitcoin to be drawing attention in recent days. But will this attention last? And if so will it bring more scrutiny and volatility than stability on the young digital currency? In the long term relative stability is the one trait that Bitcoin must establish if it is to accomplish the original goal of being a viable and competitive currency on a world scale.