Virtual currencies pose attractive alternative to physical money
Bitcoin experienced a spectacular surge in value following Cyprus’ botched bailout attempt. Is the virtual currency a mere bubble waiting to explode, or the future of cash? April 10, 2013 | Magessan RajBitcoin, an alternative, virtual currency that does not exist in physical form, recently made headlines around the globe after it skyrocketed in value – from being worth $10.83 (per Bitcoin) in November 2012, to a record high of $147 in early April 2013! What exactly is Bitcoin and where did it come from? Indeed, the very idea of Bitcoin is tough to grasp. Created by pseudonymous hacker “Satoshi Nakamoto” in January 2009, the virtual currency is not unlike other digital currencies such as e-gold, Litecoin, Ripple and Linden Dollars in the computer game Second Life. The Bitcoin currency is created by a slow, complex computer process known as “mining”. In the early days of its existence, a small group of users who traded the currency on forums decided its price. Today, people can use real currencies (like the US dollar) to buy the virtual currency on real-world exchanges, such as Mt. Gox. These exchanges decide Bitcoin's price based on what people are willing to pay. Once a person acquires a Bitcoin, he or she can trade it online to anyone who will accept it as payment for goods or services. As of now, the value of all Bitcoins in circulation is worth around $1.4 billion, with a single Bitcoin worth about $140, though the value fluctuates. Bitcoins, unlike other physical currencies, are finite. There are currently 10.8 million Bitcoins in the system, and this will be capped out at 21 million by the year 2140. This limit in supply is a major reason why the currency has gone up in value. Upon closer inspection however, one will find that the price of each Bitcoin only began rising drastically on March 19th 2013, going from $47 to $72 by March 23rd, coinciding with the period of Cyprus’ bailout initiative almost exactly. During that period, the Cypriot government initially announced that it required a bailout and that all bank savers’ deposits would be tapped. Though the botched bailou... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
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