Bitcoins gaining popularity as new digital currency

Some people, including ones in financially troubled countries, are turning to bitcoins as their new currency.

Bitcoin sounds like a typical Internet scam — digital "money" not backed by any real world assets and traded for free.

But some are banking big on Bitcoin.

The digital currency known as bitcoins is based on the idea that money can be any object accepted as payment. There are no central authorities with Bitcoin, no banks, no physical currency at all. The value comes from people trusting in an idea, from people literally creating money from nothing.

A man in Canada reportedly offered to sell his house for bitcoins. In Cyprus, Greece and other financially troubled European countries, the demand for bitcoins is rising. A user on Reddit claimed to have put his entire retirement savings into bitcoins.

And it gets weirder. The person or people who created it – using the pseudonym Satoshi Nakamoto – "never revealed his identity and simply left his invention to the world," according to Bitcoin's website.

Bitcoin says that every day more than $1 million (real dollars) of trade occurs by way of Bitcoin across 40,000 transactions.

The system does have a cap, though. No more than 21 million bitcoins will ever exist. They are generated by users who "mine" for bitcoins by letting their computers run complex equations in exchange for tiny fragments of a bitcoin.

Bitcoins can be traded for real-world money, which may explain their popularity in countries with failing currencies.

Last month, while Cyprus was struggling with bankruptcy, Bitcoin shot up 152 percent in value. According to Quartz, the current value of all outstanding bitcoins is more than $1 billion.

According to CNET, the virtual currency more than doubled in value between January and March.

But some are predicting Bitcoin's demise.

Forbes forecast such a fall in 2011.

A problem with Bitcoin, according to Forbes, is the lack of regulation. An unregulated Internet currency can be used anywhere, for anything — including drugs, gambling and other illegal products.

And there are plenty of places where a foreign currency, such as Bitcoin, would not be accepted.

Still, Bitcoin has a foothold, at least online. Several digital marketplaces will happily take bitcoins instead of any real-world currency.


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