Buying Stuff with Bitcoin

After buying some bitcoin -- as outlined in The Bitcoin Price and its follow-up posts -- my next question was 'What can I do with it?' If you click to my Google+ profile on the navigation bar to the right, you'll see that most of my online writing is focussed on chess. That gives me the natural question, 'What can I do with bitcoin in the chess world?'

A search on 'chess bitcoin' uncovers a number of resources, of which the first is a FAQ-style page on Chess.com: Can I purchase a membership with Bitcoin?

You can now pay for your Chess.com membership using Bitcoin! We have partnered with Coinbase to accept payments.

It appears that the option has been available for almost two years: Chess.com Now Accepts Bitcoin! (November 2013). Since my own bitcoin is on Coinbase, this would be an easy place for a starter transaction, but I'm already a Chess.com Platinum member and am happy with that. What else is there?

How about this: Chess.com Has a Bitcoin Sister Platform Called Gambit.com (Cryptocoinsnews.com; October 2014)? The introduction to the article explains,

Gambit.com is the name of an up and coming Bitcoin gaming website created by Jay Severson, one of the internet entrepreneurs who took Chess.com from a small business webpage to one of the most frequented online gaming websites (bigger than Zynga) in the world. Users that go to Gambit.com are able to play familiar games against each other in classic PvP internet arcade style; however, there is one featured twist that spices things up quite a bit: real-time betting. Users can choose to wager Bits, Bitcoin bits, or Points, virtual points that are nonredeemable for Bitcoin.

That's nice to know, but although I like to go to a casino once in a while, I'm not much of a gambler and I'm not interested in online gambling. There's also the important issue of whether I can legally do it. I've had several offers from parties who wanted to place ads for online gambling on my web site and I've always thrown them in the digital trash.

How about using bitcoin to buy a chess set? I didn't notice any possibilities while I was researching this post, but I didn't put any effort into it either. I'll look at that for my next post.

OKCoin Not OK?

While researching the post on Bitcoin Bid/Ask and Arbitrage, I discovered an interesting resource for tracking global bitcoin prices. A sample display is shown below, with bitcoin exchanges listed in descending order of 'volume'.

bitcoincharts.com/markets

The green and red colors show the current price trend on the exchange, while 'Colors will fade to black slowly depending on how long ago the last trade happened.' OKCoin, the first exchange listed, shows a volume nearly six times the volume of the second exchange listed (it might even be more than all of the other exchanges combined), although the data is from '3 days 3 hrs ago' and is shown in black. The Wikipedia entry for OKCoin says,

OKCoin.com is a Chinese digital currency trading platform and exchange based in Beijing. OKCoin was founded in June 2013 and by 2014 had grown to become the largest Bitcoin exchange in China. As of June 2014, the company has over 80 employees.

Coindesk.com has a news page for the exchange -- OKCoin Bitcoin Exchange News -- where the most recent entry says, 'OKCoin Restricts Bitcoin Deposits for US Customers' (31 Aug 2015). That doesn't explain the entry in black. Is it a public holiday period in China or is there a technical problem? To be continued...

The Bitcoin Price Peak

A couple of weeks ago, in The Bitcoin Price, I noted,

The peak was $1145 on 30 November 2013.

What was the reason for the peak? I found a neat chart that answers this question and many others.

Source: Bitcoin Price Chart with Historic Events
(bitcoinhelp.net)

The site's explanation is

2013-11-29 - Exchange Rate Peaks at $1,242 on Mt. Gox • Rapidly growing Bitcoin investment from China steadily drives prices higher and higher, reaching a peak on November 29th. Subject to strict controls concerning the movement of money across the country's borders, Chinese citizens embrace the freedom provided by Bitcoin with open arms, seeking an alternative to the state's inflating official currency, the Renminbi. [...]

and

2013-12-05 - Chinese Government Bans Financial Institutions From Using Bitcoin • Putting its first restraints on Bitcoin's surging popularity, the People's Bank of China declares Satoshi Nakamoto's novel invention not to be a currency. The policy change prohibits any financial institution to trade, insure, or otherwise offer services related to Bitcoin. [...]

This was confirmed in a report from The Motley Fool, Making Sense of Bitcoin Since the Latest Crash:-

On Dec. 5, China's central bank issued a warning about the usage of Bitcoin as a currency against the country's own yuan. As part of this warning, Chinese Bitcoin exchanges such as BTCChina were required to stop all deposits in yuan to their exchanges, making it nearly impossible for newcomers to Bitcoin to be able to invest their yuan into the cryptocurrency. This statement by China's central bank was seen as a major blow to the confidence of Bitcoin and comes with continuing skepticism for the coins.

From this and other stories, I'm starting to understand that the success of bitcoin depends heavily its success in China.

Bitcoin Bid/Ask and Arbitrage

In my previous post, The Bitcoin Price, I bought a small quantity of bitcoin on Coinbase and then wondered, 'How was that price determined?' I started searching for bitcoin bid/ask quotes and found dozens of them on Bitcoin Markets [bitcoincharts.com], sorted in descending order by 'Volume'. Since Coinbase wasn't shown, I checked that site (I could have done that first) and found the question, Why is the price on Coinbase different from other websites?

The price of bitcoin on Coinbase is based on the average of a variety of exchanges, so sometimes our price differs from any one particular exchange. As the price between different exchanges stabilizes, our price will be naturally self-correcting.

That answer implies that some sort of arbitrage is active. I started searching for that and found Bitcoin Price Arbitrage Explored [cryptocoinsnews.com; dated '04/11/2014' (11 April or 4 November? I really dislike dates written like that)]. The essence of the article is simple.

Pure arbitrage in the Bitcoin exchange market is not viable because of the slow transaction mechanism imposed by the blockchain.

I found similar conclusions on other pages. Putting it all together, the price on Coinbase is whatever they say it is.