On Monday, the opening of Coinbase Inc., the first licensed U.S. Bitcoin Exchange, brings new hope to Bitcoin owners. The startup has already been approved by 25 states and received serious money from the New York Stock Exchange (NYSE), venture firms, and bank groups.
NYSE invested in Coinbase $75 million, while other investors brought an additional $31 million. Coinbase Inc. said that it has insurance, so traders wouldn’t have to worry about their money vanishing as it already happened when the Japanese exchange Mt. Gox collapsed last year.
Cryptocurrency experts hope that the new exchange and the groups that back it would bring legitimacy to the currency, which isn’t issued by any central bank. Bitcoin supporters claim that this is the beauty of the virtual coin – it doesn’t belong to any state, it just get “mined” by random people anywhere around the globe.
However, to produce the currency people need very competitive computers that can process complicated mathematical algorithms at an incredibly increased rate. Mined coins are later digitally exchanged for currency, goods or services.
According to Coindesk, which monitors the currency, 82,000 online businesses currently accept Bitcoin as a means of payment, including Overstock and Expedia. The current value of all Bitcoins is estimated at $32 billion.
On the Internet, ownership and transaction of the cryptocurrency is recorded in a blockchain that reduces the risk of scams. However, the system couldn’t prevent last year’s collapse of Mt. Gox that resulted in loses of nearly half of billion dollars for its investors, and a security breach in the Slovenian Bitcoin exchange Bitstamp earlier this year.
In 2013, the value of the currency was around $1,200, but it has abruptly dropped to about $240.
“To have an organized exchange that has the backing of thoughtful venture capitalists and investors addresses one of the main problems with bitcoin: its extreme volatility. Bitcoin has been sorely in need of something like this,”
said Campbell R. Harvey, a cryptocurrency expert from the Duke University.
The founders of the first licensed U.S. Bitcoin exchange reassured investors that their startup has already been approved by half of the states, including New York and California. Additionally, Coinbase has more than 2 million consumer wallets and nearly 40,000 registered traders. The company also plans to operate in 30 countries by the end of 2015.
Brian Armstrong, CEO of Coinbase Inc., reported that his company’s goal was to become the world’s largest exchange.
Tom Farley, president of NYSE, recently stated that NYSE was keeping an eye on Bitcoin as it matured as a legitimate currency. Mr. Farley also added that any currency relies on acceptance, while the Coinbase exchange was an important step towards social acceptance.
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