Mapping out bitcoin’s supply chain

The Block complements our writings and analyses with charts, graphs, and maps is to give our readers a comprehensive look at the complex crypto ecosystem. Even the veteran Bitcoiner can get lost in the twist and turns that is the bitcoin labyrinth. Here, we take a high-level approach to walk through and map out what we are calling the bitcoin supply chain. That is to say, the movement of bitcoin from when it is first mined to when it is spent.

At the start of the bitcoin supply chain is the bitcoin network. With special-purpose machines, folks “mine” bitcoins by solving cryptographic puzzles and sell them to make up for the energy expenditure of the network. Some of the largest buyers of bitcoins are exchanges and over-the-counter markets. Over-the-counter (OTC) markets enable traders to buy and sell large amounts of bitcoin without necessarily informing the general markets. OTC markets then supply those bitcoins to businesses that require large quantities, including exchanges, ATMs, and investment-product providers. These businesses go on to supply bitcoin to users and investors.

When those users receive bitcoin they effectively have three options: saving, trading, or using. They can custody their bitcoins to store value or trade on exchanges and alternative trading platforms. Additionally, users can use their bitcoins to purchase products and services from merchants.

Merchants are at the end of the supply chain. To accept bitcoins, merchants set up e-commerce shops on platforms that natively support bitcoin, like OpenBazaar or leverage the services of bitcoin payment processors like Bitpay and Coinbase Commerce, to enable their own e-commerce shops to accept bitcoins. 

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Mapping out bitcoin’s supply chain written by Steven Zheng @ November 1, 2018 Steven Zheng

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