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Acceptance of, use of, and interest in bitcoin rising strongly, CoinDesk report says

17th Jul 14, 5:41pm by Gareth Vaughan

<a href="http://www.shutterstock.com/">Image sourced from Shutterstock.com</a>

Bitcoin's price rose 39% in the three months to June 30, boosted by a seemingly stabilising regulatory situation in China, and interest from big name companies such as Expedia and Apple, according to a report on the virtual currency.

The State of Bitcoin Q2 2014 from CoinDesk takes a detailed look at the world of bitcoin. CoinDesk describes itself as an independent publisher covering news, prices and information on bitcoin and other digital currencies. The report acknowledges that although bitcoin's price rose 39% during the June quarter, it's still down 16% year-to-date.

The report comes with MyBitcoinSaver, which describes itself as the simplest way to acquire bitcoin, holding a New Zealand launch party on Friday, and the Australian-based igot.com, which says it's the number one digital currency platform in New Zealand based on trade volume, announcing US entrepreneur and co-founder of Tremor Video, Jesse Chenard, as a "major" investor and advisor.

The CoinDesk report says US$240 million has now been invested in bitcoin startups since 2012, with US$150 million, or 63%, of this in 2014.

CoinDesk also notes about 63,000 businesses now accept bitcoin, and says there are 5.3 million bitcoin wallets, up from 765,039 a year earlier. It also points to the use of 136,152 unique bitcoin addresses used per day up from 41,271, and 48 venture capital based start-ups versus seven a year earlier.

On the regulatory front the report notes a May Reuters report on a task force of US state regulators working on the first bitcoin rule-book.

The report also notes there are now 250 bitcoin apps on Android and 340 iOS (Apple) apps. CoinDesk says bitcoin represents 93% of the total cryptocurrency market capitalisation (at US$8.3 billion), and cites the likes of bitcoin-linked debit cards and insured wallets as making the currency easier to be used and trusted.

CoinDesk also suggests bitcoin is 4,070 times cheaper on a US$200 transaction than a typical remittance transaction, based on World Bank remittance prices, at less than half a US cent versus US$16.28.

In a speech earlier this month Reserve Bank deputy governor and head of operations, Geoff Bascand, said low cost virtual currencies such as bitcoin could ultimately replace cash if key attributes of trust and anonymity can be reliably and sustainably attained.

Bascand's speech followed the Financial Action Task Force (FATF), an inter-governmental body established by the Group of Seven that sets policies and standards on anti-money laundering and combating terrorist financing, highlighted the money laundering and terrorism financing risks of virtual currencies. FATF did also say, however, that virtual currency has the potential to improve payment efficiency and reduce transaction costs for payments and fund transfers.

The charts below are taken from the CoinDesk report.

The full report can be viewed here.

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22 Comments

by Andrewj | 17th Jul 14, 6:42pm 1405579320

"In physics you’re playing against God, and he doesn’t change his laws very often. In finance you’re playing against God’s creatures, agents who value assets based on their ephemeral opinions. They don’t know when they’ve lost, so they keep trying."

Thanks for the article Gareth, I try and keep up with virtual currencies.

This troubles me

http://www.businessinsider.com.au/today-bitcoins-doomsday-scenario-arri…

http://www.mercurynews.com/business/ci_25978855/bitcoin-miners-dominant…

by cowboy | 17th Jul 14, 8:10pm 1405584635

As soeone who has been kicking around the cryptocurrency for a few months, I'd just like to take a moment to remind the curious, cryptocurrencies are _very_ much caveat emptor.

Much of the cryptocurrency world plays by rules a bit different to those that keep you safe in the fiat currency world, do your research carefully, don' take anyones' word for anything.

The biggest value property behind the crypocurrencyies is _Promotion_ (aka spin), so just be very careful of what you read and who you believe.

by Joshua Lumley | 18th Jul 14, 7:06am 1405624009

I was an early bitcoin adopter, but kept my money at Mt Gox figuring it would be safer than keeping it on my computer which could be lost. Naturally Mt Gox collapsed taking my money with it. I am finished with bitcoin.

by dtcarter | 18th Jul 14, 10:58am 1405637915

Why don't you backup your computer to dropbox etc?

by Joshua Lumley | 18th Jul 14, 11:33am 1405639996

coulda, would, shoulda everybody is expert after the fact, and i am not tired about reading how it is my fault for trusting Mt Gox.

by Flatcap | 18th Jul 14, 9:50am 1405633857

I am reasonably techno-literate but this bitcoin mining malarchy makes absolutely no sense to me!

by steven | 18th Jul 14, 12:25pm 1405643123

When you can earn $16USD over several monthsby running your PC 24/7/365 "mining" for a cost of electricity in the order of $120 for the same period. Well you are not alone in thinking it makes no sense.

if nothing else what "good" does it actually produce? nothing...a string of 1s and 0s backed by nothing but some ppl think are valuable.

OMG....

regards

by Brendon | 18th Jul 14, 12:58pm 1405645108

I have some tulip bulbs anyone want to buy them..........

by Chairman Moa | 18th Jul 14, 1:32pm 1405647178

Couple of years ago, I knew some IT guys at my old work, they spent several thousands on highend PCs for bitcoin mining, after months all they got was almost half of a bitcoin.

by dtcarter | 18th Jul 14, 2:26pm 1405650404

how do you mine half a bitcoin? Were they part of a larger pool? Currently you get 25 coins for a block.

by cowboy | 18th Jul 14, 8:08pm 1405670881

You mine in "pools". A bit like people taking office pool lottery tickets.

you can get more lines/tickets, but you have to share the winnings.

Normally there's a central computer or computers which run a system/program known as "Stratum"

Stratum works out what speed you're processing, and sends out pieces of blocks to each users' computer to chew on. The faster your own processing, the bigger the blocks and the faster you can get them, but slower machines get smaller blocks, so most of them finish in a similar time frame, so less duplicates. The faster guys tend to hit more often with the odds in their favour, and there's usually a bonus for hitting paydirt, but at least the smaller machine still gets a small share...and a small chance of actually hitting a winning combo.

the combined processing power is so impressive that they have had to significantly increase the difficulty of the matching process (they pad the target hash with "0"'s, the more bits, the longer the target hash, the mroe combinations the computers have to churn through to find the hidden successes, the longer it takes.) That's how they control the speed of coin introduction - otherwise a few fast computers would solve the majority of the hashes in hours or days (inctead of several years) and thus be rewarded all the coins straight away. By trickling in the rate of which coins are allocated, it gives value in their trade.

Also many of the earlier algorythms have been coded into specialist chips (ASIC's). So only by investing thousands of fiat currency into a specialist machine does a miner have any chance of reasonable return.

Recent alternative coins (aka altcoins) try to deliberately use code and algorythms that are prohibitively difficult to program into those specialists chips. That means there's a wider (if shallower) pool of miners and traders using modern computers. although the self-adjusting difficulty level kind of offsets much advantage in extreme equipment

The pools, and share of the prize; plus fractions intrduced during trading, that creates parts of coins.

Although to be truthful, there is only ever 1 "coin". It's hard coded into the algorythm from the start when the develop that coins code. They say there's ... eg 100,000,000,000 interestco coins. but all that is really, is that in the total number of possible cycles, the system will insert a "lottery ticket" new coin nounce , and payout is a fraction of that 100,000,000,000 available.

by dtcarter | 18th Jul 14, 2:20pm 1405650056

The real money is made by mining on custom ASIC chips, lots of them. There the power cost of the host computer is offset against a larger number of chips each of which mine at much greater efficiency.

by Flatcap | 18th Jul 14, 3:03pm 1405652624

Real money but unreal money

by Chairman Moa | 18th Jul 14, 11:53am 1405641219

One good/bad factor about bitcoin is; There is very little rules and regulations to govern it. If someone has the knowledge and know-how they can start another version of bitcoin (there are already a handful of them)

by Chairman Moa | 18th Jul 14, 3:55pm 1405655729

Watchout kimy, some department (or politicians) will decide enough is enough and introduce a raft of CGT, stamp duty, land tax, landlord tax, local council tax, etc.. You should take your profit on your investment properties and run (to some tax-free island. ie. Vanauatu)

by Chairman Moa | 18th Jul 14, 4:53pm 1405659200

Don't count you chickens just yet, two months in politic is a long time and anything is possible. At this rate, Russell could be the PM and David Cunliffe will be his deputy.

by dtcarter | 18th Jul 14, 4:43pm 1405658580

how do you "invest" in a currency? Do you mean day trading? Profits all declared to IRD and tax paid i hope.

by cowboy | 18th Jul 14, 8:22pm 1405671779

yes, and always. If they can keep the rates down, then it works out better for everyone to pay up

by dtcarter | 21st Jul 14, 1:17am 1405862279

that question was more for kimy and his imaginary $160K profit from bitcoin trading.

by cowboy | 21st Jul 14, 7:37am 1405885048

oh, ok. apologies.

I wonder when and where such a tax liability arises. He hasn't profited in fiat currency, so does he/she owe 28% BTC to IRD?

by dtcarter | 21st Jul 14, 11:00pm 1405940439

sure he has profited in fiat currency, what has he been trading in exchange for the bitcoin?

I don't see how it's any different to trading in stocks and shares, or used furniture on trademe, i might not be holding any fiat currency at any given point in time, but that doesn't mean i haven't made a profit or loss on each transaction.

buy 100 bitcoin for 60000, sell for 60500, wait for it to drop, buy again 100 for 59900... at this stage you have NZ$500 profit. Do day traders have to pay tax on unrealised gains? Like if the current market value is 61000 for that 100 coin i bought for 59900

by cowboy | 22nd Jul 14, 8:41pm 1406018469

The bticoin, like the metals I have, don't show a NZD profit. The price could go to 1 million NZD, and yet it's the same code or metal. The profit only arises only if I realise it (and which point it would be USD or NZD...and fiat and taxable with known value), or if I find someone who is willing to accept it as security but then it's dubious whether it has actually gained value.

That's why I disagree with charging profit on unrealised shares.

It's why I do pay tax on the equity change per annum on my forex trading. (it's clear fiat cash).

One of the difficulties with Bitcoin (BTC) or with intrinsic/commodity valuemetal, is to actually pay tax on it, or do _anything_ with it, you have to actually find a trader who will accept it. Even the gold I have, which is tender in NZ, doesn't have a set value; so the person does have to accept it in payment for a debt by law, but they don't have to agree on my valuation, or even my assay ! (and they do have the right to pass on postage and assay and interest costs) so while the "market" might say your 100 BTC coin is worth 61,000 NZD, it is very likely you'll never get that for it, certainly not in an on-demand/to-the-market sale...so jsut how much should you be paying taxes on? Some theoretical value? or the real value? Keeping in mind, no-one is ethically out of pocket if you don't pay until realisation.

Also not sure what he paid for his cryptocoin. If he got in early enough, he could have just mined it.