As bitcoin prices skyrocket, Bank of America awarded cryptocurrency patent

Bitcoin prices soared from $1,000 at the start of 2017 to recent levels near $13,000.

JAMES DUNN,

The price of one bitcoin soared from about $1,000 in January to nearly $13,000 in recent trading, an astounding run-up that makes the Gold Rush look tame. Then yesterday bitcoin leaped to $20,000 on Coinbase Exchange.

On Tuesday Dec. 5, Bank of America Corporation, which noted the currency’s “clear potential for growth”, was awarded a patent on an electronic currency exchange called a "cryptocurrency transformation system."

Bitcoin, a cryptocurrency based on a math formula, was created in 2008 and can be used in the North Bay at many online and physical businesses, including Whole Foods through Gyft cards, Overstock.com, Virgin Airlines, Expedia.com, OKCupid, Bloomberg and the New York Times. A few Bay Area restaurants accept bitcoin, such as Cups & Cakes Bakery in San Francisco, Ocean Beach Deli, Ramen Underground and Curry Up Now, also in the city. Tandoori Nights, in Roseville, also takes bitcoin.

Overstock.com started accepting bitcoin in 2013. In its first day accepting the currency, Overstock took in about $126,000 in sales.

There are nearly 16.5 million bitcoins in existence. The formula behind the cryptocurrency governs the deliberately slow expansion in the number of total bitcoins. The maximum number of bitcoins caps at 21 million, expected by about year 2040 at current mining rates. At today’s prices, if the total possible number of bitcoin were in circulation, the market would be worth about $273 billion (based on $13,000 apiece).

The sharp rise in bitcoin prices this year could be compared to rapidly rising prices for each acre of land in Sonoma and Marin counties. Like bitcoin, both those markets have a maximum number of acres that will ever be available.

Until a few years ago, bitcoin had been associated with drug sales and other illegal transactions. But Bank of America in a Dec. 5, 2013, research report predicted that bitcoin would become “a major means of payment for ecommerce” and a “serious competitor to traditional money-transfer providers.”

BankAmerica had its headquarters in San Francisco until it moved after a 1998 merger with NationsBank in Charlotte, NC, its current headquarters.

“As a medium of exchange,” bank analysts said in the report, “bitcoin has clear potential for growth.” They also warned of a possible bitcoin bubble. In October 2013, the year the bank issued the report, bitcoin prices were about $140 then climbed to $1,000 by Nov. 27, driven by interest from Chinese investors.

The U.S. Patent and Trade Office granted a patent to Bank of America Corporation based on its application filed in June 2014.

The value of bitcoin rose nearly 2,000 percent in 2017, a rate of volatility that would alarm many bankers. That BofA report no longer appears to be available online.

Bitcoin, an online currency, allows users to make payments, much as they use credit cards and PayPal accounts. The cryptocurrency is hard to track, so there’s no easy way to determine who owns large amounts of it.

Bitcoin was created in 2008 by a computer programmer under the name Satoshi Nakamoto. No one has found such a person who acknowledged creating the cryptocurrency.

Bitcoin miners use supercomputers to solve the complex math problems that restrict generation of new bitcoins. The formula grows more complex as the number of bitcoins rises, so the challenge mounts. The lure of bitcoin riches is compelling enough that some programmers worked on a specialized computer chip that is geared specially to solve the bitcoin formula.

James Dunn covers technology, biotech, law, the food industry, and banking and finance. Reach him at: james.dunn@busjrnl.com or 707-521-4257