Advantages and future

The bitcoin to USD exchange rates at one of the exchanges

The USD price of a bitcoin reached an all time high of $230 on 9 April 2013, up from just $13 at the start of the year.Among the factors which may have contributed to this rise were the European sovereign-debt crisis—particularly the 2012–2013 Cypriot financial crisis—statements by FinCEN improving the currency's legal standing and rising media and Internet interest.

Bitcoin has no central issuing authority.Nodes on the network are programmed to increase the money supply according to a pre-determined schedule until the total number of bitcoins reaches 21 million.Operators of these miner nodes can then hold their new bitcoins, sell them on exchanges or trade them for other goods and services at their discretion.

Currently, 25 bitcoins are generated with each block found which occurs every 10 minutes on average. This amount, called the block reward, will be halved to 12.5 bitcoins within the year 2017 and again roughly every 4 years thereafter until a hard-limit of 21 million bitcoins is reached around the year 2140.As of March 2013 over 10.5 million of the total 21 million bitcoins had been created; the current total number created is available online.In November 2012, half of the total supply was generated, and by end of 2016, three-quarters will have been generated. By around 2140, all bitcoins will have been generated with the final years producing only fractional units.

Economics

Large fluctuations in the value of bitcoins have led to criticism of bitcoin's legitimacy as a currency.An April 2013 article in The Atlantic drew attention to bitcoin's deflationary bias which, unlike a regular currency, encourages hoarding.Forbes contributor Louis Woodhill suggested that, rather than money, bitcoins are "the cyber equivalent of rare postage stamps" or other collectibles.

Nevertheless, there is evidence that bitcoin is being accepted by mainstream businesses and hoarded by individuals,given the absence of transaction fees and Bitcoin's availability in countries not accepting PayPal.Bitcoins have gained traction in Argentina as an alternative to the official currency because of its double-digit inflation and strict capital controls.There is also growing awareness of their usage in black market transactions, frustrating bitcoin's promoters. Despite its volatility, bitcoin is currently being used on the black-market Silk Road website and by Iranians to evade foreign currency sanctions.

Large fluctuations in the value of bitcoins have led to criticism of bitcoin's legitimacy as a currency.An April 2013 article in The Atlantic drew attention to bitcoin's deflationary bias which, unlike a regular currency, encourages hoarding.Forbes contributor Louis Woodhill suggested that, rather than money, bitcoins are "the cyber equivalent of rare postage stamps" or other collectibles.

Nevertheless, there is evidence that bitcoin is being accepted by mainstream businesses and hoarded by individuals,given the absence of transaction fees and Bitcoin's availability in countries not accepting PayPal.Bitcoins have gained traction in Argentina as an alternative to the official currency because of its double-digit inflation and strict capital controls.There is also growing awareness of their usage in black market transactions, frustrating bitcoin's promoters. Despite its volatility, bitcoin is currently being used on the black-market Silk Road website and by Iranians to evade foreign currency sanctions.

Exchanges

Through various exchanges, bitcoins are bought and sold at a variable price against the value of other currency. Bitcoin has appreciated rapidly in relation to other currencies including the US dollar, euro and British pound.

In May 2013, one bitcoin traded at around $125. Taking into account the total number of bitcoins mined, the value of the money supply of the bitcoin network stands at over $1.4 billion USD.

According to Reuters, undisclosed documents indicate that banks such as Morgan Stanley and Goldman Sachs have visited Bitcoin exchanges as often as 30 times a day. Employees of international banks and major financial organizations have shown interest in Bitcoin markets as well.

Privacy

Bitcoin transactions are seen as relatively anonymous and are the medium of exchange used in the online black market website Silk Road.Some Bitcoin proponents are concerned that such associations may bring about negative perceptions of the currency.

The privacy of Bitcoin is the subject of active academic research.Because Bitcoin transactions are broadcast to the entire network, they are inherently public. Using external information, it is possible, though usually difficult, to associate Bitcoin identities with real-life identities through analysis of past Bitcoin transactions to reveal patterns that can unmask user identities.Unlike regular banking,which can preserve customer privacy by keeping transaction records private, loose transactional privacy is accomplished in Bitcoin by using many unique addresses for every wallet even though all transactions are published. However, according to the Mercatus Center's .

Primer for Policymakers (2013), after Bitcoin intermediaries comply with the same bank secrecy regulations required of traditional financial intermediaries, anonymity will be less protected because Bitcoin intermediaries will be required to collect personal customer data.