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Even in this digital age where most data is secured in faraway servers and virtual accounts, many people still see value in storing precious assets in a locker or safe. Several individuals also shunned the idea of digital currency because they couldn't procure it physically like they would with traditional fiat. The creation of physical bitcoins was done with these pointers in mind.

On the surface, physical bitcoins are similar to their fiat counterparts. They are usually made from metals like brass, silver or even gold. They also have a logo printed on one side and their value on the other. However, the similarities between the two ends here.

While centralized fiat coins have a specific value, the value of a physical bitcoin comes from a private key printed on its back. This key holds the coin's actual value in a digital wallet it could be 1 BTC or 100 BTC, depending on the maker of the coin.

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You can think of physical bitcoins as a bank card or a gift certificate. The paper or the card does not have any value. Rather, the magnetic strip on the front of the card or the certification on the voucher is what gives you access to the real currency. Similarly, when it comes to physical bitcoins, it is not the coin that matters so much, but the private key mentioned on the back thats important.

How are physical bitcoins created?

Most people who create physical bitcoins use a 3-D printer. The design itself varies as they are created by enthusiasts, not a centralized organization. Some coins are metal-plated, and some use pure silver or gold.

The back of the coin is where its value lies; it contains the private key for the actual bitcoins. Holders can use this key to redeem the BTC online. Also, each coin has its individual private key. Therefore, even if someone steals or tampers with it, they will only be able to access the BTC in that specific coin. On the other hand, if this were a digital wallet, the entity would have access to all the cryptocurrency stored within it.

To further mitigate tampering, the private key is stored in a holographic sticker on the back of the coin. When the sticker is peeled, it leaves an identifiable mark. If there is a mark on your coin, you will know it was tampered with.

The first physical bitcoin

Physical representations of Bitcoin have existed for a long time now. Over the years, several different renditions have also cropped-up, each with different compositional material, values, and purposes. However, it all started with the Casascious coin, created by Mike Caldwell in 2011.

Caldwell minted a range of physical coins. He began with 0.5 and 1 BTC brass coins and even expanded to a 1,000 BTC gold-plated bar. By 2013, Caldwell had minted roughly 27,000 coins. However, he had to suspend his operation due to restrictions from the Financial Crimes Enforcement Network (FinCEN), a branch of the Treasury Department.

They informed him that minting physical bitcoins would qualify him as a money transmitter. Thus, he would have to register at a federal level if he wanted to continue selling the coins.

What are the coins worth?

The answer to this question seems relatively simple a physical bitcoin is worth the amount of BTC held in its private key. However, it is not as simple as that. Due to the rarity of the coins, the price is often more than the BTC stored in the digital wallet.

Another factor for a physical Bitcoin's worth is the material used to create the coin. As discussed above, these coins are made from various materials. They could be metal-plated, made from gold or silver, or even plastic. The coin's price will increase if the material it was made from is expensive. For example, a coin made from gold will be more costly than a coin that uses metal plating.

Collectability also plays a significant factor. These coins are rare and unique due to the materials used, the logo printed and their limited supply. A coin that was minted a long time ago will be a rare collectable, especially if only a few others like it exist. As such, its value will be independent of the value of bitcoins stored in the private key. People would want to buy it because of its rarity, similar to movie posters or fiat coins that are no longer in circulation.

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What is a physical bitcoin, and what is its worth? - CNBCTV18