WHAT IS BITCOIN — AND HOW DOES THE CURRENCY WORK?

HOW BITCOINS WORK: Bitcoin is a digital currency that is not tied to a bank or government and allows users to spend money anonymously. The coins are created by users who “mine” them by lending computing power to verify other users’ transactions. They receive bitcoins in exchange. The coins also can be bought and sold on exchanges with U.S. dollars and other currencies.

HOW MUCH IS IT WORTH? One bitcoin trades for $10,886, according to coindesk, a website that monitors the price. That’s a more than ten-fold increase from the start of the year, when it was worth under $1,000. The value of bitcoins can swing sharply, though. A bitcoin’s value plunged by 22 per cent against the dollar in just three days earlier this month.

WHY BITCOINS ARE POPULAR: Bitcoins are basically lines of computer code that are digitally signed each time they travel from one owner to the next. Transactions can be made anonymously, making the currency popular with libertarians as well as tech enthusiasts, speculators — and criminals.

IS IT REALLY ANONYMOUS? Transactions and accounts can be traced, but the account owners aren’t necessarily known. However, investigators might be able to track down the owners when bitcoins are converted to regular currency.

WHO’S USING BITCOIN? Some businesses have jumped on the bitcoin bandwagon amid a flurry of media coverage. Overstock.com accepts payments in bitcoin, for example. The U.S. exchange operator CME Group said in October that it plans to open a futures market for the currency before the end of the year, if it can get approval from regulators.

HOW BITCOINS ARE KEPT SECURE The bitcoin network works by harnessing individuals’ greed for the collective good. A network of tech-savvy users called miners keep the system honest by pouring their computing power into a blockchain, a global running tally of every bitcoin transaction. The blockchain prevents rogues from spending the same bitcoin twice, and the miners are rewarded for their efforts by being gifted with the occasional bitcoin. As long as miners keep the blockchain secure, counterfeiting shouldn’t be an issue.

HOW BITCOIN CAME TO BE It’s a mystery. Bitcoin was launched in 2009 by a person or group of people operating under the name Satoshi Nakamoto. Bitcoin was then adopted by a small clutch of enthusiasts. Nakamoto dropped off the map as bitcoin began to attract widespread attention. But proponents say that doesn’t matter: The currency obeys its own internal logic.