- ‘Virgin bitcoins’ can attract a premium of up to 30% over regular bitcoins
- These coins come straight from miners and are prized because they are seen as ‘untainted’
- What are the benefits of virgin bitcoins and the arguments against their value?
There’s a type of Bitcoin out there that typically fetches up to 20% more than its market value, but very few people know about them. Sold under the illusion of extra privacy and protection from regulators, ‘virgin bitcoins’ are sought after by certain individuals and institutions. But what exactly are they, and why do they fetch a higher premium?
Fresh From the Miners
Virgin bitcoins are bitcoins that have no transactional history; in other words, they have been freshly mined and have not yet been sent anywhere. The cash equivalent would be a dollar bill that you have collected straight from the printers.
When it comes to the dollar bill, this might be nice because, well, who doesn’t like a nice crisp note, but it can serve another purpose too. Imagine if the police issued a call for cashiers up and down the land to be on the lookout for banknotes between a certain range of serial numbers that were involved in a recent crime. You hand over your ten-dollar bill, and before you know it, you’re in a police station being treated like a suspect and interviewed about the origins of the note.
This is perhaps a little extreme, but in the same way that each bill can be identified by its serial number, each bitcoin, or fraction of a bitcoin, can be identified and tracked on the Bitcoin ledger. And if you happen to receive some bitcoin that was the known proceeds of crime and the police can identify you, then you can expect a knock at the door, whether you know something about it or not.
The Benefits of Clean Bitcoin
Virgin bitcoins are completely ‘clean’ and cannot possibly have been used for nefarious purposes, which is why some ultra-careful investors pay up to a 30% percent premium for them—they want to eliminate the risk of their bitcoin being frozen as part of a criminal investigation, or receiving a visit from the police.
The likelihood of being hauled off to the cells because of some bitcoin you received is, at the moment, almost the same as that of being collared while buying a stick of gum with your tainted ten-dollar bill. However, with new regulations making it mandatory for each exchange to identify their account holders, the chances are rising all the time.
Virgin Status May be an Illusion
There are some key arguments against the value of virgin bitcoins, however. Firstly, the UTXO system on which Bitcoin operates tracks quantities of coins rather than individual units. This means that once bitcoins are spent, their distinctiveness disappears. Bitcoin transactions are akin to mixing water from several glasses into new containers; it becomes impossible to identify the original sources once combined. This undermines the idea that specific bitcoins can retain their unique, untainted status once they circulate in the market.
Mining practices also pose a significant challenge. The majority of bitcoin mining happens within pools, where the rewards are distributed among participants, introducing transaction history. This distribution makes it difficult for coins to retain their ‘virgin’ label, as each step introduces perceived risk based on transaction lineage.
Additionally, miner revenue includes not just new bitcoins but also transaction fees derived from coins already in circulation. These fees, inherently mixed with previously used bitcoins, blur the line of purity for newly minted coins
Finally, the market for virgin bitcoins shows little evidence of sustained demand. While the idea of paying a premium for coins with no history might seem logical to avoid links to illicit activity, miners report minimal encounters with such buyers. This indicates that the premium is more speculative than actual.
Overall, while virgin bitcoins might carry a unique theoretical appeal, the practical and economic realities suggest they are not as valuable as some might believe; their distinctiveness is fleeting, their transfer problematic, and their market interest questionable.
