Early investors celebrate as bitcoin turns 10

SEVEN years ago, Marshall Hayner gave his grandfather 1 bitcoin, worth about US$30. On the paper wallet he fashioned to commemorate the gift, the US entrepreneur and software developer wrote: “Do not open until US$100,000.”

It made Hayner’s grandparents laugh, and indeed bitcoin has not come anywhere near that level. But it is worth more than 200 times what it was in 2011 when Hayner made the gift.

Investors who took a chance on the fledgling currency and stuck with it have been on a roller-coaster ride — but are optimistic that they are still onto a winner.

“I have seen these run-ups and drops in bitcoin and I did not even flinch,” said 34-yearold Hayner, who started mining bitcoins in 2009 when the granddaddy of all cryptocurrencies was worth nothing.

Bitcoin yesterday celebrated 10 years since Satoshi Nakamoto, bitcoin’s mysterious founder, released a white paper outlining the need for an Internet currency that could be used as payment without going through a third party like a bank.

One bitcoin is now worth around US$6,200.

That is a steep 70 percent fall from its all-time high of near US$20,000 in December last year, hurt by a more intense regulatory scrutiny around the world, as well as the rise of cryptocurrency crime including hacking, but a substantial boost for any early investors who bet on it.

“If the price goes down, I am happy because I was able to sell some,” said Israeli entrepreneur Daniel Peled, who has bought since late 2013 and believes another record peak is a few years away. “And if it goes up, I am happy too because I am still holding some.”

Peled’s optimism is partly based on his waiting for bitcoin’s next “halving,” which has constrained its supply and has caused its spike as demand increased.

Bitcoin relies on so-called “mining,” computers that validate blocks of transactions by competing to solve mathematical puzzles every 10 minutes.

In return, the first to solve the puzzle and clear the transaction is rewarded new bitcoins.

Bitcoin technology was designed in such a way that it cut the reward for miners in half every four years, a move that was meant to keep a lid on inflation.

The next halving is scheduled in 2020 and the following year should be a good year for bitcoin, Peled said.

Some investors, however, have become disillusioned, arguing that bitcoin has been held back and not reached its expected potential by taking off in the real world.