This is one of the many aspects of BitCoins that puzzle me. We saw the story a couple months ago about the guy that threw out an old hard drive from his laptop that he used for BitCoin mining. He said he left it running for a week and amassed 7500 bitcoins. Today this would be worth $6 or 7 million dollars. So what was he computing with his laptop that was worth that kind of jack? And who was paying him? And for that matter, who is paying the guy in this story? What is he paying him for?
I think the guy who lost the hard drive was mining years ago as a lark when Bitcoins were less than a penny. Remember, two years ago a guy paid 10.000 Bitcoin for a pizza. I also heard that a female singing performer turned down an offer of 100,000,00 Bitcoins to do one performance a few years ago.
To get back to the hard drive guy, he was mining when they were worthless. People were giving them away. Anyhow I think a significant amount time passed and he learned that Bitcoin were now worth 100x more and began to look for the hard drive. He inadvertently threw it out when he was cleaning his apartment.
As far as Bitcoin value goes it is determined by the market. Bitcoin the currency is a small part of Bitcoin the protocol that will solve many problems that have plagued man for time and memorial.
When this guy was mining hardly anyone else was. It was easy for him to grab large amounts. The algorithm gets harder to solve and the difficulty rises as more miners jump in with more powerful gear and the price continues to rise because more people are adopting the technology. This is the network effect that feeds on its self and gains traction as more and more people adopt. We are now standing at the bottom of a volcano that is about to erupt with exponential mass adoption. This is going to be amazing to watch.
Read this to get an idea of the incredible potential of this breakthrough.
http://dealbook.nytimes.com/2014/01/21/why-bitcoin-matters/
If you’d like to know more about mining take a look at this