20 interesting insights about bitcoin

Below are some insights about bitcoin, at least some of which are hopefully new or surprising to you. A source is included where available.

You can find me on Twitter @kgao. I’ll be tweeting these out one at a time in the coming days too.

Insights about bitcoin and cryptocurrency

1. Bitcoin is not just 1 protocol but 3 protocols: network, transaction, and consensus (Tezos whitepaper)

2. Satoshi Nakamoto still “owns” 1M coins and has never touched them (YouTube)

3. Bitcoin’s trading volatility is equivalent to a mid-cap stock (ARK whitepaper)

4. Instead of thinking about it as 21M bitcoin only, think of it as 210 trillion satoshi (a Greg Maxwell Reddit comment)

5. Panelist thinks ~25% of bitcoin are out of circulation, mostly through loss of private keys (Future of Money Summit 2014)

Personal note: I’ve seen estimates as high as 40% and as low as 10% (but rarely less than 10%)

6. Bitcoin does have intrinsic value: “1 satoshi to write to a global notary public” (Balaji Srinivasan)

7. Bitcoin’s mining supercomputer has more processing power than Google, and it consumes more power too (Balaji Srinivasan)

8. Bitcoin’s velocity (the rate at which bitcoins are spent) is 10x higher than US dollar (YouTube)

9. In 2014, 6% of the wallets had 93% of bitcoin’s value (An Empirical Analysis of the Bitcoin Transaction Network)

…and this: 78% owned by 1% of users, at that time ~2800 users (Bitshares)

Personal note: I assume these analyses include Satoshi’s wallet

10. During The Silk Road’s peak, it accounted for ~10% of bitcoin’s price – this was back in 2012, when bitcoin was trading at $50/coin (YouTube)

11. The strongest use case for bitcoin today is as a store of value, as compared to transactions, which accounts for only 5% of usage on Xapo (Wences Casares)

12. U.S.-based bitcoin exchanges traded approximately $35 million of notional value daily through the six months ending December 1, 2016, compared to a self-reported daily notional trading volume of almost $1 billion across all worldwide Bitcoin Exchanges. (COIN ETF S-1)

Personal note: there is some skepticism about the trading numbers reported by Chinese exchanges

13. The modern web browser was what caused TCP/IP as a protocol to see explosive growth, what is bitcoin’s browser app? is it simply speculation? (Pantera Capital)

14. The right analogy for bitcoin is not TCP/IP, since bitcoin is inefficient and not scalable in its present form, but rather SMTP (very good for one task, sending email) (Vitalik Buterin)

15. Milton Friedman correctly predicted we were missing some form of e-cash in the late 90s, and also recommended a fixed rate of increase to the money supply, both central elements of bitcoin (Pantera Capital newsletter and Ben Edelman)

16. For all our complaining about Bitcoin’s transaction fees, M-Pesa (the dominant digital money in Kenya) has a 9% fee per transaction (YouTube)

17. In 2012, developed countries sent $401B in remittances to developing countries, and the average global fee was 9% (Jerry Brito)

18. The biggest benefit of digital cash is its transnationality (Tatsuo Tanaka)

19. Charlie Munger called bitcoin “rat poison” (Mark Williams)

20. Data propagates very quickly through the Bitcoin network. The average transaction gets to over half of the network nodes in <2 seconds. The average block takes <5 seconds

If you enjoyed this essay, here’s a list of the assets I own and the ones I’ve researched. Find me on Twitter and signup on the right to receive an update when I publish a new essay.