8 Facts You Didn’t Know About Bitcoin
The cryptocurrency market is still young, and with the recent surge in popularity of bitcoin, it’s fair to assume that many people have just recently heard about the currency. Whether your only knowledge of bitcoin is a few recent headlines or if you’ve been following the digital currency for years, here are some things you may not know about bitcoin.
1. Bitcoin’s 1,400% gain in 2017 wasn’t its best annual performance
Bitcoin’s 2017 performance made many headlines, simply because of its surge in popularity and the large dollar value of the digital currency. However, on a percentage basis, 2017 wasn’t bitcoin’s best year — not even close. In 2011, for example, bitcoin rose from $0.31 to $6.18, a gain of 1,894%. In 2013, the rise from $13.44 to $751 represented a 5,488% gain. And in 2010, bitcoin rose from $0.0015 to $0.31, a staggering 20,566%.
2. Bitcoin’s true creator is unknown — and still owns a lot of bitcoins
Bitcoin was created by Satoshi Nakamoto. However, this is widely thought to be a pseudonym. Whoever the true creator of bitcoin is, he or she is estimated to own nearly 1 million bitcoins — enough to get them a spot on the Forbes list of the world’s richest people.
3. There can only be 21 million bitcoins ever
Here’s a simplified three-sentence description of how bitcoins are created. People use sophisticated computer hardware to solve complex mathematical problems and process bitcoin transactions, and whoever solves a problem is rewarded with a “block” of coins, which is released roughly every 10 minutes. Currently, each block contains 12.5 bitcoins, but this amount is cut in half about every four years, thereby reducing the new supply over time. Eventually, this halving will result in a total of 21 million bitcoins created, and the last will be created in 2140.
4. Bitcoin is not free to use
A big part of bitcoin’s initial appeal was that it could transfer money anywhere in the world, at minimal expense. And this used to be the case — the average bitcoin transaction fee was less than $0.10 for much of its history.
However, with the recent surge in popularity, this has changed. From mid-2017 until now, bitcoin transaction fees have regularly eclipsed $5.00, and peaked at $34 in mid-December. Since that time, the cost has fallen to about $1, but it’s important for novices to realize that bitcoin isn’t exactly free to use.
5. The majority of bitcoins mined have never been used
Of the roughly 17 million bitcoins that have been mined, or created, so far, 64% have never been used. Some of these are likely lost forever because of things like owners misplacing their “wallet keys,” and will never be used. So, although there are 21 million bitcoins that will eventually be mined, the actual number in circulation is probably millions less than that.
6. Most people who made money on bitcoin haven’t paid their taxes
In 2015, only 802 U.S. citizens listed bitcoin profits on their tax returns. However, that may not sound like too much of a stretch, since bitcoin only rose by about $150 for the year, a gain of about 53% at the time. In 2017, bitcoin rose by about 1,400%, but just 0.04% of tax returns filed as of mid-February have claimed bitcoin (or other cryptocurrency) income, according to data from Credit Karma. Bitcoin is considered a capital asset by the IRS and is taxed according to capital gains tax laws. In other words, if you make a profit from buying (or mining) and then selling bitcoin, it is the same tax implication as if you had bought and sold a stock for a profit.
7. Somebody once paid 10,000 bitcoins for pizza
This actually happened on May 22, 2010. By most accounts, this sum of bitcoins was worth well under $50 at the time. Today, if the person who sold the pizzas for bitcoin held on to them, it would be worth about $109 million. At least the buyer got two pizzas.
8. There are more than 1,500 other cryptocurrencies
Since bitcoin was created, it’s staggering how many other cryptocurrencies have come on the market in a relatively short time. As of this writing, there are 1,573 listed cryptocurrencies, according to investing.com, with new ones being created frequently.
To be fair, many of these are small, obscure currencies with little monetary value or practical purpose. However, some are serious competitors that aim to solve some of bitcoin’s shortcomings. For example, second-largest cryptocurrency Ethereum is worth $90.6 billion as of this writing. Third-largest cryptocurrency Ripple is worth $43.9 billion and has shorter transaction times and dramatically lower costs than bitcoin.
The cryptocurrency market is young and rapidly evolving, and while bitcoin was the first mover, it’s far from the only game in town anymore.
Originally published at www.fool.com on February 22, 2018.
