Growing Bitcoin Circulation

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By Marcelina Hardy

Thursday, October 24th, 2013

Bitcoin, a virtual currency, is gaining in popularity. Investors everywhere are starting to buy Bitcoins or invest in Bitcoin investment funds. And there are still plenty of ways for you to get in on this latest investment rage.

Bitcoin was developed anonymously in a 2008 paper published by someone going by the name Satoshi Nakamoto.

Simply put, its virtual money. You cant hold it, but you can use it to buy things. Websites like WordPress.com and OKCupid have started to accept it as currency.

And Bitcoins are acquired through process called mining, but theres a limit to this. Theres only 21 million Bitcoins available. They cant be created, so once all of them are mined, that fixed amount will remain in circulation. But there have only been about 11.7 million mined so far.

The value of Bitcoins rises and falls just like currency. And its become much more valuable recently. Its now around $135, which is 10 times higher than just a year ago.

Mining for Bitcoins

Mining Bitcoins is quite different from the way courageous miners work to find precious metals. Actually, all of the work is really done by equipment.

Decentralized network of computers have the job of solving algorithms. The computers keep track of all of the solutions, or transactions. As puzzles are completed, Bitcoins are awarded.

Since the mining of Bitcoins isnt possible without powerful machines, its boosted the market for this equipment. Some of them are costing more than $20,000. Of course, the more sophisticated the equipment, the better able it is to bring in Bitcoins.

The most popular companies for Bitcoin mining equipment are Butterfly Labs, CoinTerra, KnCMiner AB, and Robocoin Technologies. Butterfly Labs sells equipment for more than $22,000. Jeff Ownby, vice president of marketing and e-commerce for the company, says its revenue has tripled each year. And CoinTerra recently sold a machine for $140,000.

As popularity grows, these companies are bringing in big profits. There are about 1 million Bitcoins being mined every year, and as more people get involved, that number will grow.

The Alternative to Mining

But you dont have to mine to invest in Bitcoin mining. You can always invest in funds, such as the Havelock Investments Mining fund. This company has mining equipment doing the mining, and when you invest, you are basically buying Bitcoins from them. You make money off the price of Bitcoin, as it is volatile.

Bitcoins value dropped 33 percent when the U.S. Federal Bureau of Investigation shut down Silk Road Hidden Website, an online marketplace for drugs and other illegal items. But value has rebounded and continues on a positive path.

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How to Get Started

The first thing you need to decide on is if you want to use the equipment to mine Bitcoins or go the easy, less profitable route of investing in a fund. Keep in mind, the equipment isnt small, nor is it cheap. Its rather large, it makes a lot of noise, and it produces a great deal of heat. It also uses massive amounts of electricity.

But people continue to use them because they are making money much more than they invested in the equipment and electricity to run it. Some people even have multiple machines.

If you decide to sink your money into funds, keep in mind you wont get as much of a profit as you would with mining. There are fees attached to buying the Bitcoins and with selling them when you want to make a return.

With mining, you have the option of using Bitcoin in two ways. You can either use it as currency to buy things online, or you can sell it someday for market value, since it will surely rise over the years. When you invest in funds, you have one option: selling when prices rise. But that wont be a bad bet either.

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