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Bitcoins, a type of virtual currency, are gaining popularity and value, but mainly among speculative traders, report Wang Ying and Wu Yiyao from Shanghai Aresidential project in Shanghai’s Pudong New Area is accepting bitcoins from apartment buyers, taking the currency a step closer to acceptance in China.self storage Domestic online game developer Shanda Interactive Entertainment Ltd, the developer of the property project, announced on Oct 26 that homebuyers can use bitcoins. Shanda anticipated that the project, in Zhangjiang near a high-tech industrial park, would attract many young, computer-savvy people. It bet that some of these workers would be open to using a totally new kind of currency. So far, though, no one has taken advantage of this novel form of payment. Perhaps because the cybercurrency has become so costly and hard to obtain, it’s more likely to be traded by speculators than spent on real things. Bitcoin — a distributed, peer-to-peer digital currency — was born in a paper published by Satoshi Nakamoto, which is assumed to be a pseudonym, in November 2008. The virtual currency, believed to have been inspired by the culture of cyberpunk, has become the most popular among dozens of such imaginary monetary units. As bitcoins can be “mined” only by solving extremely difficult cryptographic math problems, or bought from other owners, the currency avoids inflation risks. Bitcoin: Virtual currency’s boom comes with risk, reward “Many young people were excited about the innovative way of paying for apartments, and promised to come and buy the next day. “But no one showed up, maybe because the bitcoin’s value has surged recently,” said Wang Feilang, vice-president at Shanda Tiandi, a cultural property development arm under the Shanda Group. Wang noted that in recent weeks, the bitcoin’s value versus the Chinese currency has risen from 1,000 yuan ($164) to a peak of 4,500 yuan as of Wednesday. Most apartments in the project have an area of 42 to 81 square meters and cost 23,000 yuan to 28,000 yuan per sq m, according to a salesman surnamed Shi. He said that up to 90 percent of the 400 available apartments have been sold, and a few buyers said they would collect enough bitcoins to pay for the property. But none has done so yet. Growing rate The residential project announces a daily exchange rate based on the previous trading day’s closing level. For Wednesday, it was a record 4,500 yuan per bitcoin. “It’s a pity that there haven’t been any deals made by using bitcoins. I am afraid people are betting on further appreciation of the virtual currency, instead of using them to buy a home,” said Wang. The cybercurrency, which isn’t backed by any physical assets, trades 24/7. There are no limits on how much the value can change or how large the transaction volume can be. The lack of constraints has attracted a growing number of speculators from around the world hoping to profit from its extreme volatility. “The value of one bitcoin was more than 8,000 yuan on Tuesday,” said the chief executive officer of Yibite, who only gave his nickname as Shenyu (literally, “magic fish” in Chinese). Shenyu runs the digital assets website, and he’s also a senior bitcoin miner. According to Shenyu, in recent months, the Chinese market has moved to center stage in the bitcoin world because of its surging trade volume. “Since August, more than 100,000 bitcoins were traded every day in China, accounting for up to 40 percent of the global total,” said Shenyu. Another change is that the mainstream traders of bitcoins in China, who have so far been mostly 20-somethings, are being replaced by older and richer investors, said Shenyu. The rising value of the bitcoin has also had an impact on Changjia (a nickname)迷你倉 founder of 8btc, a bitcoin content forum. Changjia said he used to pay authors 0.15 bitcoin for every original story published on his website, and 0.1 bitcoin for a translated piece, but the currency’s recent value surge has driven up his fees for content providers by 500 percent. Bitcoins are appreciating even faster than property in China, driving holders of the virtual currency to find more valuable things to do with it than buy a property, Wang said, explaining the absence of bitcoin-based apartment deals. Real risk In China, when bitcoins are actually used to buy something, it’s usually in coffee shops, pizza restaurants, digital appliance stores and other outlets selling low-priced products or services. But Shenyu used bitcoins to buy a laptop from an e-commerce platform in the United States. The price was 20 bitcoins, worth 6,000 yuan at the time of payment. “The value surge of the bitcoin has exceeded the expectations of most people. Who could have imagined that the currency could reach such a high value, while back in 2011, one bitcoin was worth less than a dollar,” he said. The bright side, he said, is the increase in value will enhance the bitcoin’s acceptance among manufacturers, traders and consumers, even though its legitimacy hasn’t verified by the government. There are rising calls for governments to step up supervision of digital currencies to preclude illegal activities. These currencies, after all, operate totally outside the control of any government or central bank. Chen Sheng, vice-president of the China Real Estate Data Academy, said a property price denominated in bitcoins is so far just an example of successful marketing. But he said that eventually, a real deal will be sealed using bitcoins. “Only a real deal can prove the feasibility of bitcoin payments. There will be quite a few questions surrounding such a deal, for example, government recognition of it,” said Chen. Chen Ye, a Shanghai-based wealth manager at Industrial Bank Co Ltd, said it is risky to pay for an apartment with a “nonstandard” currency. “For homebuyers, the risk lies in obtaining the invoice and receipt. As far as I know, there is no authorized receipt in China recognizing payment in bitcoins. “For sellers, calculating and declaring income and taxes based on bitcoin payments may be something they need to figure out before they accept such payments,” said Chen. Mining for value Usually, a bitcoin owner acquires a coin through “mining”, which involves a complicated process of calculations with many partners. “I mine a bitcoin with 10 other co-miners, I gain only 10 percent or less, so I can collect only 0.1 coin. “If I want to collect eight coins, equivalent to about 36,000 yuan, it may take years under current mining conditions,” said Shenyu. The cost for mining a bitcoin is about $180 each at the moment, far less than what it would cost to buy one in the market, according to the current bitcoin exchange rate for the dollar. But the complex and difficult requirements for mining mean most people can obtain bitcoins only through trading. According to a Forbes report, the digital currency has gotten an official nod in the United States, in the form of a primer out of the Federal Reserve Bank of Chicago. Francois R Velde, senior economist at the Chicago Fed, called the young currency a “remarkable conceptual and technical achievement, which may well be used by existing financial institutions.” Contact the writers at wang_ying@chinadaily.com.cn and wuyiyao@chinadaily.com.cn Only a real deal can prove the feasibility of bitcoin payments. There will be quite a few questions surrounding such a deal, for example, government recognition of it.” chen ye wealth manager, industrial bank co ltd mini storage

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