Since 2011, a group of enthusiasts and collectors have been obsessed with the physical manifestation of Bitcoin.
At first glance, physical bitcoin seems to be a contradiction in terms of the key terms that define it, turning a trustworthy, instantly transferable virtual currency into a real coin that has all of the drawbacks of earthbound cash. But there are numerous benefits when it comes to privacy, storage, and ease of use – and they look pretty cool too.
“Lots of people know Bitcoin, but very few have Bitcoin. Even less physical Bitcoin, ”explains Bobby Lee, who has owned a 10 BTC coin since 2011 and designed and produced his own coins under the BTCC Mint brand until 2018. He added:
“Physical bitcoins are a rarity. They resemble the paintings by Picasso and Van Gogh back then. Nobody noticed how rare they were. I assume that these physical bitcoins will gain popularity and appreciation among connoisseurs around the world.”
Physical Bitcoin usually comes in the form of metal coins, with the private key hidden behind a tamper-evident holographic sticker. Although highly valued by collectors, the coins are also practical, according to Lee.
“The reality is that it is impossible for me to send Bitcoin to people when they are new to Bitcoin,” he said, referring to Digital Bitcoin’s steep learning curve to set up wallets and starting phrases. “Physical bitcoin, no permit required, I just give it to them. Recently my cousin got married in Toronto, Canada and I was able to give them bitcoin as a gift and they didn’t have to put up a wallet, I just mailed it to them.”
A piece of history
For the cryptonumist Elias Ahonen, author of the Encyclopedia of Physical Bitcoins and Crypto-Currencies, physical Bitcoin is also a marker of history. “These coins are the physical manifestation or artifacts of Bitcoin at any technical stage,” he says. “Everything that happened to miners from the early Bitcoin era can’t really be shown, but these physical coins we can and collectors find that personally meaningful and also something worth preserving.”
Ahonen was studying political science at Wilfred Laurier University in Waterloo when he first became interested in Bitcoin.
“I had just bought my first Bitcoin on an exchange and was technically not perfect. I was convinced that I would lose my private key for the wallet and be locked out of my bitcoin, “he said.” So I decided to buy the physical bitcoins that the private key was in instead. “
This turned out to be wise as he actually lost access to his original wallet, luckily with less than 1 BTC in it. And, of course, this led to an entirely new career as a bitcoin historian and coin broker. “It has taken me on all kinds of adventures where I picked up half a million dollars worth of coins from an airport cafe,” he said.
Multi-billion dollar industry
Exact numbers for the size of the industry are hard to come by, but nearly $ 3.25 billion worth of Bitcoin (at today’s prices) was minted between 2011 and 2013 under the original Casascius coin mark. More than 1.5 billion (or 44,000) BTC) remains unspent and in the wild.
One of the most valuable is the 1000 BTC coin, three of the five that are minted remain unopened. “It is actually the most valuable coin in the world,” said Ahonen. The $ 35 million face value alone would make it significantly more expensive today as an extremely rare collector’s item. This puts it ahead of its next main competitor, the “Flowing Hair Silver / Copper Dollar” from 1794, which was last sold in 2013 for 10 million US dollars.
Right now, you can buy a 2011 1 BTC Casascius coin on eBay for $ 130,000. If your budget doesn’t go that far, there’s a 2013 0.5 BTC coin that costs just $ 30,000 – and even an unfunded 1 BTC coin from BTCC Mint for $ 4900. At Crypto De Change, they are offering a 1 BTC “Titan One” silver coin for only $ 15,100 (sadly, you will only get a 404 error when you buy it).
Cloudy dark days of 2011
Physical Bitcoin goes back to 2011 when the computer scientist and Bitcoin employee Mike Caldwell from Utah came up with the idea as a teaching aid. “Bitcoin was very difficult to explain and in 2013 the average person just couldn’t care,” explains Ahonen, adding:
“The idea was that by taking this physical coin and actually putting the bitcoin in it, you can do a demonstration and say, here is a bitcoin that I am giving you and now that you have it, I am not check.”
Caldwell’s first plan was to print out the private key at 1 BTC on a piece of paper, tape it in the center of a washing machine, and seal both sides with tamper-evident stickers. He quickly gave this up in favor of something high-end and hired a company that made arcade brass tokens to make thousands of beautiful Casascius coins. They bear the Bitcoin logo, the year and the face value as well as the slogan Vires In Numeris or “Strength in Numbers”.
The coins became popular and Caldwell introduced 5, 10 and 25 BTC coins, followed by gold-plated bars of 100, 500 and 1000 BTC. When the price of Bitcoin spiked in 2013, smaller denominations below 1 BTC appeared.
“Crypto enthusiasts would buy these physical bitcoins from Casascius and give them as gifts to friends and family,” recalls Lee, whose brother Charlie is the founder of Litecoin. “And that’s exactly what my brother did.”
“That December (2011) he gave me 10 Bitcoin and paid about $ 50 for it. So it was relatively cheap. Obviously, it’s worth $ 100,000 now. “
By 2013, Caldwell had sealed 90,683.9 bitcoin in metal coins, about half of which was unspent in the form of around 21,000 physical coins.
“It was very much a hobby, I don’t think he ever made any money, or a significant amount of money selling it,” says Ahonen. “In all honesty, he was taking a huge personal risk by basically handling the private keys. He was actually worried that someone would come and hurt him (to steal her). “
The Feds Object
The whole exercise came to a shuddering halt in 2013 when the Financial Crimes Enforcement Network contacted Caldwell to accuse him of running an illegal money transfer business and he was forced to run it.
“It dampened the physical bitcoin thing,” Ahonen said. “This is where the rise of these buyer-funded coins came from, as well as other larger companies that actually have money-sending licenses.”
A number of different manufacturers, from boutique artisans to large corporations, sprang up and produced not only Bitcoin, but Litecoin, Dogecoin, and Ethereum as well. These included bhCoin, Lealana, Microsoul, Nasty Mining, Recalescence Coins, Ravenbit, Alitin Mint, Cryptmint, Titan Bitcoin and Satori Coin. Ahonen described the work of 50 different outfits in his 286-page encyclopedia in 2015 and used the contacts he made while writing to produce a new book called Blockland.
Bobby Lee’s BTCC Mint
The BTCC Mint was an offshoot of Lee’s exchange, BTCC, and produced some of the most sought-after physical bitcoin until the company changed hands in 2018. Lee designed the coins himself – “I see myself as the artist who created BTCC Bitcoin” – with the first coins released in early 2016.
“The idea was to use our BTCC mining pool to mine fresh, non-circulating coins into the physical bitcoins. In the three years we’ve been in the BTCC Mint business, we’ve minted physical bitcoins worth over 8,700 BTC. “
Lee and a select group of very trustworthy team members manually inserted the private keys into the coins. He added:
“I handled the private keys with the utmost care and properly deleted all private key data. As such, of course, no reports of loss or theft of funds from BTCC Mint products have been made public. I am very proud of this impeccable track record. “
This touches on a counterintuitive aspect of physical Bitcoin – it violates the crypto law: “Don’t trust, verify”. Ahonen points out that buyers must have complete confidence in the manufacturer and everyone in the production process as it is impossible to tell if the coin contains a private key at all or if the manufacturer is keeping a copy.
“Bitcoin is based on a certain philosophy that is not about your keys, but your Bitcoin. It is very contrary to the concept of trusting other people. However, with any type of physical bitcoin, you are effectively trusting that the person created does not have the private key. So there is this implicit paradox. “
Symbols of wealth
While BTCC Mint coins included a Bitcoin logo and the slogan “In Crypto We Trust,” other coins included works of art that attempted to capture the philosophy behind the cryptocurrency. “I would say that some of them have a very strong, very clear symbolism that is very philosophical,” explains Ahonen. “With others it will clearly be more difficult to decipher and can be personal to the Creator.”
There are many circuit boards, bulls, and rockets flying to the moon, as well as mining pools, Greco-Roman warriors, Buddhist imagery, famous figures like Adam Smith and Satoshi Nakamato, and historical events like the collapse of Mt. Gox and Bitcoin Pizza. “For me personally, the most noticeable one had a bank on fire that was on fire,” said Ahonen: “And the bankers cried on the steps as people pulled down the pillars of the bank with chains that were obviously blockchain.”
Not just keepsakes
Aside from collecting, there are some real-world uses for physical bitcoin as well. One is for inheritance planning. “Some of my buyers have actually been looking for physical bitcoin because they want to put it in a safe for inheritance purposes,” he said. “You have 100 individual coins and are going to split them evenly with the kids – this is much harder if you do Have Exchange Accounts or (BTC) on wallets or USB sticks. “
Physical coins are also the ultimate privacy coins as there is nothing to associate the owner with an address and they can be traded millions of times without ever leaving a record on the blockchain. In theory, of course, this would make physical bitcoin a very attractive way to launder money or pay for drug deals, hence the interest of the US authorities.
“I don’t know anyone who uses it that way specifically,” Ahonen said carefully. “But you can easily imagine someone doing this. It is extremely plausible.” He added, “It’s the same as with gold coins. You can hide them, you can do anything with them. Nobody can really track them.”
Where did all the manufacturers go?
Unfortunately, it seems like the best days of physical Bitcoin are behind it. One of the last commercial-scale manufacturers, Denarium, closed in July 2020 after producing more than 15,000 coins. Lee believes increasing regulations and the sky-high Bitcoin price have made logistics difficult.
“In the US, regulations do not allow you to sell physical bitcoins. Since bitcoin is very expensive, it is very inconvenient to send it through the mail,” he said. “There are many inherent risks, insurance needs, and so on.”
Ahonen added that there are still numerous hobbyists out there who do this as love work or as a side project: “It’s a niche thing, but they exist.”
Lee’s Ballet Wallet is probably the closest living relative – it’s a metal card with a QR code address and a scratch-off wallet passphrase. The wallets can be used by complete noobs without any technical knowledge and support 50 cryptocurrencies. Currently, more than $ 28 million worth of cryptocurrencies are stored.
“The inspiration for Ballet came in large part from how much customers liked the simple design of BTCC Mint’s physical bitcoins,” he said. Lee designed it to appeal to our various senses. You may find the design a relief and it has real weight as opposed to a plastic credit card.
“You can hear it too. I mean literally, when you tap the table, Bitcoin sounds. And we have a surprise feature where you can smell the QR code if you actually scratch it. “
He scrapes it from an empty wallet and holds it to my nose. It smells like perfume. But don’t bother licking it as Lee hasn’t come up with anything to taste.
Bank on the future
While the heyday of physical cryptocurrency seems to be over for now, what about the future? Is there any chance that after Bitcoin joins global reserve assets, 100 Satoshi banknotes will be used for daily shopping?
Lee thinks this is unlikely due to the need for trust: “Therefore, it is not very feasible to embed real Bitcoin in physical form and circulate 100 satoshi (coins) in the real world. I think physical Bitcoin will remain in the arts, limited Edition … collectors world, just like gold coins. “
But Ahonen sees a future for physical bitcoin outside of art and collecting: “I believe there is a future for physical bitcoins simply because they are such an easy way to hold and verify through an intermediary.” He added:
“I mean, Grandma can buy it and put it in her safe. It is not necessarily that feasible to do this with a USB stick with a program that is out of date. It’s pretty future proof and pretty foolproof. And I could see banks or some type of institution creating physical bitcoins in the future. “