Norwegian Man Makes Bitcoin Fortune from $27 Investment
October 31, 2013 12:53 PM
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This afforded him a nice apartment in Toyen
You always hear stories about people who tuck old comics or toys in the attic for years and later find out how valuable they've become. Some guy from Norway just did that with
, Kristoffer Koch bought 5,000 bitcoins in 2009 for only 150 kroner ($26.60 USD). Years later, that investment unexpectedly grew into a little nest egg.
Koch originally bought the bitcoins writing a thesis on encryption. After that was complete, he forgot about them.
But when the media started heavily covering bitcoin in April 2013, Koch was reminded of his and decided to take a peek at his encrypted wallet containing those original 5,000 bitcoins. He found out that by today's rates, those 5,000 bitcoins are worth NOK5m ($886,000 USD).
This afforded him a nice apartment in Toyen, which is a wealthy area in the Norwegian capital.
tends to fulctuate a lot, and Koch happened to see his value at the right time. In April 2013, bitcoin value peaked at $266. Then it fell to a low of $50 soon after.
In fact, it hit a high of $197 just this month.
For those who are unfamiliar, bitcoin is a peer-to-peer digital currency that is encrypted. It's bought with traditional currency from a bitcoin exchanger and later change them back for cash or other purchases.
But bitcoin has
had some problems
in the recent past. In August, the feds questioned the legality of cryptocurrency and considered banning it or at least putting heavier restrictions on it. At that time, the bitcoin industry's largest advocacy/trade group the Bitcoin Federation met with federal regulators from the
U.S. Department of Homeland Security
(DHS), Federal Reserve,
Department of Treasury
Federal Deposit Insurance Corp.
Office of the Comptroller of the Currency
Internal Revenue Service
Federal Bureau of Investigation
Earlier this month, the FBI shut down Silk Road, which was a website designed that enabled its users to buy and sell illegal drugs and other unlawful goods and services anonymously. New York U.S. Attorney Preet Bharara seized $28 million in bitcoins that belonged to Ross Ulbricht, the alleged owner of Silk Road.
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The Von Matrices
The Von Matrices
10/31/2013 10:41:23 PM
Mining won't end any time soon. We are only in the 4th reward era, and the rewards for mining exponentially decline as more blocks are found. Found blocks in 2012 used to yield 50 BTC, now they yield 25BTC and will continue declining by half every 4 years. The current estimate is that all blocks will be found in the year 2140, which is too far away to worry about.
Yes, Bitcoin at the moment rapidly deflates, which I agree is one of its current biggest hindrances toward its use as a currency. But as Bitcoin catches on, its value will increase and its deflation rate will decrease to a point only slightly more than zero. At that point there will be little incentive to hoard coins.
The biggest advantage of Bitcoin is that it isn't government controlled. Your assets will change in value based on their fiscal merits rather than how an economist thinks the world should work.
However, there is still one hurdle I worry about that Bitcoin has yet to overcome. The block size of 1MB is too small to hold all the transactions as the currency becomes more popular. Very soon more than 1MB of transactions will occur before the next 1MB block is mined, and a queue of overflow transactions will begin to form waiting to write to the next block. This will result in transaction processing requiring more and more time to occur, and the inability to complete transactions could kill the currency.
I am hopeful that a revised protocol will form and the majority of miners will adopt this protocol thus making it the standard, but this won't happen until it is too late and a crisis forces it to be done (there is a tragedy of the commons, no individual has any incentive to avert the crisis). This crisis will result in the currency dipping in value as people try to unload their coins but can't because they have to wait for their transaction to process.
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