LONDON 2016 could prove to be the year that the price of bitcoin surges again.Not because of any dark-web drug-dealing or Russian ponzi scheme, but for an altogether less sensational reason - slower growth in the money supply.Bitcoin is a web-based "cryptocurrency" used to move money around quickly and anonymously with no need for a central authority.But despite being championed by some as the digital money of the future, it is often dismissed as a currency that is too volatile to invest in.The reason 2016 looks set to be different is that bitcoin's price is likely to be driven in large part by similar factors to a traditional fiat currency, following the age-old principles of supply and demand.Instead of being controlled by a central bank, bitcoin relies on so-called "mining" computers that validate blocks of transactions by competing to solve mathematical puzzles every 10 minutes.In return, the first to solve the puzzle and thereby clear the transactions is currently rewarded with 25 new bitcoins, worth around $11,000 BTC=BTSP.

But when it was invented in 2008 by the mysterious "Satoshi Nakamoto", who has yet to be identified, the bitcoin program was designed so that the reward would be halved roughly every four years, in order to keep a lid on inflation.The next time that is due to happen is July 2016.Bitcoin was also designed to emulate a commodity by having a finite supply of 21 million bitcoins, which will be reached in around 125 years, up from around 15 million today.bitcoin futures cmeHence, also, the use of the term "mining".bitcoin coin kaufenDaniel Masters, co-founder of Jersey-based Global Advisors' multi-million dollar bitcoin hedge fund, started his career as an oil trader at Shell in the mid-1980s and spent 30 years trading commodities before crossing over to bitcoin.Now he reckons the price of bitcoin could test its 2013 highs of above $1,100 next year and then pick up speed to rise to $4,400 by the end of 2017.That would be due to a number of factors, Masters said, including an increased acceptance of payments in bitcoin by big companies and authorities, rapidly growing interest and investment in the "blockchain" technology that underpins bitcoin transactions, and also more demand from China as its currency weakens and the economy slows.litecoin mining rig

But taken in isolation, the halving of the mining reward will increase the price of bitcoin by around 50 percent from where it is now, Masters reckons.That is despite the fact that the halving of the reward has always been inevitable - a factor that would already have been accounted for in pretty much every other market.bitcoin kaufen in berlin"If OPEC (Organization of the Petroleum Exporting Countries)came out tomorrow and said, 'in six months' time we're going to halve oil production', the oil price would instantaneously react.ethereal wings of a dragonflyBut the bitcoin market is still in its infancy, and I don't think that factor is discounted into the price fully," he said.Bitcoin's price has already almost doubled in the last three months, putting it on track for its best quarter in two years.safest bitcoin exchange

It hit $500 last month for the first time since August last year, with Chinese demand for a pyramid scheme set up by a Russian fraudster cited as a reason for the price surge.But Bobby Lee, the chief executive of one of the leading bitcoin exchanges in China, BTCC, reckons there is scope for the cryptocurrency to go much further.He thinks the price could increase by as much as eight times in the time up to the reward halving, taking it as high as $3,500 by next summer."Today the worth of bitcoin is $1 per capita in the world (population)," Lee said, referring to the value of all the bitcoins in circulation, around $6.5 billion."For such an innovative, decentralized digital asset, I say 'boy, are we undervaluing it'.But it takes a while for people to realize that."Themining reward has already been halved once before, in November 2012, from 50 to 25 bitcoins.The stakes were much lower then, with one bitcoin worth around $12, but nevertheless the price increased by about 150 percent in the preceding seven months - roughly the time left before the next halving.

"It (the halving) dampens supply so, all other things being equal, that puts upwards pressure on price," said Jeremy Millar, partner at London-based financial technology specialists Magister Advisors, who expects demand to continue to increase."Noone can argue with that fundamental economic principle."(Editing by Greg Mahlich)If you ask most bitcoiners today how many miners there are hashing away at the bitcoin blockchain, you're likely to get a number somewhere around 5,000 or lower.This figure tends to reflect the number of full nodes shown on the blockchain data maps.However, a full node is not a miner.Any computer that connects to the bitcoin network is called a node.Full nodes run the original Bitcoin Core wallet, or implement the bitcoin protocol, and form the backbone of the network.These nodes help the network by accepting transactions and blocks from other full nodes, validating those transactions and blocks, and then relaying them to further full nodes.This means that many of the roughly 5,000 full nodes, perhaps as many as half of them, aren't mining at all.

Add to this the fact that none of the major mining pools - not to be confused with p2p pools - require participants to download their own copy of the blockchain and the correlation dwindles further.Pools tend to host full nodes for the their miners, in this way many thousands of miners could be using the same full node at the same time.Taken together, these two situations make counting the number of miners much more complex than most people would think.Thankfully, at least one miner and statistician has been keeping tabs on the situation.Australian bitcoin miner Andrew Geyl, known in Bitcoin circles as organofcorti, has run an authoritative mining research blog called Neighbourhood Pool Watch since March 2012.It's filled with impressive statistical analysis and many different types of colorful charts on every page.His recent data shows a much higher number of miners than 5000, perhaps as high as 100,000, although that number is faltering in line with bitcoin's price.If the price of bitcoin doesn’t cover the overheads of mining, miners will tend to stop.

Geyl has a background which enables him to collect data on miners, and make it presentable., Geyl has a range of skills that lend themselves to researching the mining network.Interestingly, he says that it was his day job in healthcare that gave him the statistical knowledge and experience he needed, as a starting point, to analyze bitcoin mining pool data and the bitcoin network.When asked about his reason for doing all of this work Geyl stated that, “the research never stops being interesting.Cryptocurrencies in general and bitcoin in particular are new and evolving areas.There are so many things left to be discovered and contributions to be made, even by someone like me who only researches in his spare time.” His latest report displays the following chart with the clarification, “The known number of miners is calculated using the miner hashrate distribution that some pools provide.” In it you can clearly see the number of miners estimated to be around 100,000.This may sound like a surprisingly large number to some people, especially given the size of the fledgling bitcoin industry as a whole, but it’s not the highest this number has been.

When asked how he was gathering this data, Geyl replied that it's an extrapolation of statistical user data provided from different pools.This data includes the number of accounts at each pool and their cumulative hashing amounts.“I estimate the number of miners using the hashrate per miner data, that some pools make available, and then scale this up to the size of the public part of the network.” Geyl explains, “I derive my estimate from a model of the distribution of miner hashrates.” Although none of the top 4 pools are represented, Geyl listed 9 separate pools that give him statistical data on users.Between them they make up about 15% of the current total mining capacity.Those pools include; Slush's pool, BTCGuild, Ghash.IO, Eligius, BitMinter, P2pool, MMPool, Ozcoin, and Polmine.To ensure that miners can't be identified, and that no ones' privacy is being breached, Geyl makes sure to only receive anonymized statistical metadata.Unfortunately, as time goes on the proportion of miners Geyl has data for is becoming less and less accurate.

The newer pools are reluctant to share user data, no matter how anonymized.As these pools become more popular the percentage of all miners that he has data on gets smaller.It's important to note that this doesn't mean the number of miners is getting smaller, but it does substantially affect a researcher's ability to be accurate when modeling this data.Bitcoin's price is not the only thing that affects how many miners bitcoin has, says Geyl.When asked how high the price of bitcoin would have to go before seeing another huge surge in hashrates, as we’ve seen in the past, Geyl responded that “Price has had some recent effect on hashrate, but ASIC mining is still a developing field” The opposite fear would appear to be unfounded as well.When asked how large a drop it would take in bitcoin's price to create a widespread miner panic, where we start to lose large amounts of hashing power, he responded that “It depends on how long it took to get there.If the change was slow enough, the network would adjust and difficulty decrease and the remaining miners could still make a profit.