A physical bitcoin is a physical metal coin that features a public and private encryption key, acting as a Bitcoin wallet. Mike Caldwell produced some of the first physical Bitcoins on November 26th, 2013. His coin, which would come to be known as the Casacasius Coin was a physical metal coin that contained the private key to the equivalent amount of Bitcoin. His coins, available at the time in 1, 10, 25, 100 BTC were embedded with a tamper-resistant hologram. These physical coins function more or less in the same manner as a ‘paper wallet.’
By moving or removing this hologram the owner of the coin would reveal the private key that allows access to the actual digital Bitcoin. In this sense, the coin itself does not have the value of the Bitcoin, but instead ‘holds’ its digital equivalent via the key contained within. This hologram also allows individuals to recognize if the physical coin has been altered or tampered with in any way, therefore altering digital currency.
Once the private key is used and the Bitcoin attached to that key is ‘redeemed’ the physical coin itself loses its value. This system theoretically offers some security measures that aren’t found in conventional digital cryptocurrency wallets. Losing access or having somebody take access to your cryptocurrency wallet is a potentially financially catastrophic event.
With physical coins, however, the amount that is lost or stolen is equal to only that which is stored in the physical coin itself. This system does offer some robust security measures that have made it an attractive prospect for different startups and investors while also maintaining something of a novelty collector’s value.