Is Virtual Currency The New Money?
CASH RICH: Online currency bitcoin has been described as an emerging alternative to paper money.
PICTURE COURTESY OF ZCOPLEY
IT'S not even a real currency, yet the bitcoin is being traded in the millions online.
Bitcoin, a currency first spun out of a mathematical equation by cyber geeks in 2009, can be brought or generated using powerful computers.
When it started after the global financial crisis, 1 BTC (that's the denomination) was worth a few cents here. Now it's worth more than $200.
Those trading in the currency are spending serious money.
Last year a teenager who created a bit-coin exchange platform here was sued in the US for US$460,457
The case has not been settled
Emerging alternative
But that has not deterred bitcoin traders, even though the hot currency is not considered real money by many traders.
Bitcoin can be used to make some online purchases and is described as "an emerging alternative to paper money" by the Wall Street Journal.
Before you dismiss it as a fad, consider this: The global trade in bitcoins is now estimated at more than US$2 billion.
There are now more than 10 million bitcoins in circulation online, with 1BTC worth about $272.27, as of yesterday.
Bitcoins can also be generated through a process called mining, where powerful computers solve complex mathematical problems to generate bitcoins. There are active bitcoin communities.
One bitcoin members said that instead of buying them, he mines for bitcoins using powerful computers to solve mathematical equations to earn the currency.
Mr Timothy B. Lee, a US-based technology policy writer for popular technology site Ars Technica, said that the bitcoin has its sues.
"As members of a small open economy, people might find (the) bitcoin a particularly convenient way to transfer wealth to other countries which they travel to and do business in," he said."
He added: "Bitcoin could potentially be much cheaper (way to transfer money), and many different businesses could spring up, providing bitcoin-based money transfer services."
"Bitcoins are a borderless, intermediary-free payment system...Here in the US, states companies like Western Union (a money wiring services) charge 2 to 5 per cent (of money wired) to wire money overseas."
Mr Lee disagreed with the experts from The Economist, who viewed the rapidly rising price of bitcoins as signs of a bubble.
"I think it's too early to say whether it's a bubble or not. The current high price is a bet that bitcoin will become an important part of the global finanical system."
What are bitcoins?
BITCOIN was created in 2009 by Japanese programmer Satoshi Nakamoto, with the intention of eliminating governments or banks as financial intermediary.
It is widely lauded as the world's first decentralised, anonymous digital currency.
Bitcoins are sent through the Internet from one address to another, with no central regulating authority.
The value of bitcoins (BTC) rely on the willingness of people to exchange them for goods and services.
Bitcoins can be created through a process known as mining, where users are awarded bitcoins each time they find the solution to a certain mathematical problem, thereby creating a new "block" in the bitcoin network.
A block is a record of some or all of the most recent bitcoin transactions. Some people are already finding ways to use bitcoins as alternative to native currencies.
In the wake of the heavy toll of the financial crisis on Cyprus, which led to a closure of the second-largest bank thereand the loss of savings for some, online news site
Wired.co.uk reported that a Bitcoin Automated Teller Machine (ATM) was set up.
The bitcoin ATM was to give Cypriots "the chance to keep their money safe from government seizure", Wired reported.
