Disruptions: Betting on Bitcoin

pizza22 Dec 2013 / NY Times – This is the story of a $6 million pizza.

Two of them, actually.

It begins in 2010 — eons ago, in technology time — in Jacksonville, Fla. A software programmer named Laszlo Hanyecz had, to his happy surprise, persuaded someone to accept 10,000 Bitcoins in exchange for two pizzas from Papa John’s. And why not? By Mr. Hanycez’s reckoning, the Bitcoins he had been “mining” on his computer were worth about 0.003 cent apiece. He got his two pies for $30 of found money.

You probably know the rest. Bitcoin, the digital currency that has since captured attention around the world, exploded. By November, it had leapt from a fraction of a penny to $1,242, roughly the price of an ounce of gold.

It has been a wild, wild ride: up and down, down and up. Last week, Bitcoin fluctuated — again — as China clamped down. Everyone seems to be wondering what this crazy new thing might mean. The end of government control over money? The start of an international crypto-currency?

Mr. Hanyecz, 32, seems to be taking it all in stride. And he has no regrets about those pizzas.

“It wasn’t like Bitcoins had any value back then, so the idea of trading them for a pizza was incredibly cool,” Mr. Hanyecz told me. “No one knew it was going to get so big.”

The question now, of course, is whether digital currencies like Bitcoin will get even bigger — or collapse if the music stops.

A quick recap: Bitcoins are created, or mined, according to a set of algorithms. Essentially, computers solve some math problems and — presto! — generate Bitcoins. The coins are stored in, and traded among, digital wallets. You can buy real things with them, at least from people who accept them, or, as many people seem to be doing, sit on them in hopes the price will keep rising….. Read more


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