Interesting Bitcoin Charts

Cato Institute’s Steve Hanke provides some updates on bitcoin as well as his interpretation of the posted charts:

Bitcoin, the new digital currency, remains a mystery to many. There is no better way to lift the fog surrounding bitcoin than to let the data speak. And data speaks loudest through charts. Yes, topological analysis is often the best route to comprehension.

I have constructed – with my assistant, Mazin Al-Rayes – a series of charts that contain illuminating data about bitcoins and brief directions for use following each chart.

How to interpret: Currently there are 13.235 million bitcoins in circulation. The issuance of new bitcoins will halt when the total number of bitcoins “mined” (read: in circulation) reaches 21 million.

How to interpret: This chart shows the total revenue in USD of bitcoin miners (See: the formula at the bottom of the chart for the calculation). A bitcoin miner can be anyone with a computer and a connection to the internet. Miners lend their computers’ processing power to the bitcoin network and are compensated with new bitcoins.  Many miners use hardware designed specifically for mining, others simply use their home computers - pooling their processing power via the internet and sharing the rewards. 

How to interpret: This chart shows the estimated number of giga-hashes per second that the bitcoin network is performing. It’s clear that the processing power of the bitcoin network increased over time. The hash rate increased for a myriad of reasons: an increased number of miners, collaboration of miners in pools and hardware capacity.  

How to interpret: New bitcoins are created at a predictable rate. This rate is a function of both the difficulty level of a bitcoin miner’s mathematical operation and the processing power of a miner’s hardware. 

How to interpret: This chart shows the bitcoin market capitalization. This is calculated by multiplying the total number of bitcoins by the market price of a bitcoin in USD.

How to interpret: This chart shows the trade volume in USD from the largest bitcoin exchanges.

Read the rest here.

Bitcoin is a child of the information age. Bitcoin embodies deepening trends towards technology based decentralization. Bitcoin represents an alternative financial system from the current centralized framework. Bitcoin’s evolution will remain volatile as it faces resistance to change. Eventually though, despite sustained harassment from political authorities I expect bitcoin to become mainstream.

The charts above account for as manifestations of such a transition process.