Key facts about the world's most widely used crypto cur­rency

Kuwait Times - - TECHNOLOGY -

Mark Karpe­les, the for­mer CEO of col­lapsed Bit­coin ex­change MtGox, went on trial in Tokyo on charges stem­ming from the dis­ap­pear­ance of hun­dreds of mil­lions of dol­lars worth of the vir­tual cur­rency from its dig­i­tal vaults. Here are some key facts about the world's most widely used crypto cur­rency:

What is Bit­coin?

Bit­coin is a vir­tual cur­rency cre­ated from com­puter code. Un­like a real-world unit such as the US dol­lar or euro, it has no cen­tral bank and is not backed by any govern­ment. In­stead, Bit­coin's com­mu­nity of users con­trol and reg­u­late it. Ad­vo­cates say this makes it an ef­fi­cient al­ter­na­tive to tra­di­tional cur­ren­cies be­cause it is not sub­ject to the whims of a state that may de­value its money to boost ex­ports, for ex­am­ple.

Just like other cur­ren­cies, Bit­coins can be ex­changed for goods and ser­vices-or for other cur­ren­cies-pro­vided the other party is will­ing to ac­cept them.

Where does it come from?

Bit­coin was launched in 2009 as a bit of en­crypted soft­ware writ­ten by some­one us­ing the Ja­panese-sound­ing name Satoshi Nakamoto. Last year se­cre­tive Aus­tralian en­tre­pre­neur Craig Wright said he was the cre­ator of Bit­coin, but some have raised doubts over his claim.

Hun­dreds of other dig­i­tal cur­ren­cies fol­lowed but Bit­coin is by far the most pop­u­lar, with an in­creas­ing num­ber of mer­chants ac­cept­ing dig­i­tal cur­ren­cies for pay­ments. Trans­ac­tions hap­pen when heav­ily en­crypted codes are passed across a com­puter net­work. The net­work as a whole mon­i­tors and ver­i­fies the trans­ac­tion in a process that is in­tended to en­sure no sin­gle Bit­coin can be spent in more than one place si­mul­ta­ne­ously.

Users can "mine" Bit­coins-bring new ones into be­ing-by hav­ing their com­put­ers run com­pli­cated and in­creas­ingly dif­fi­cult pro­cesses. How­ever, the model is lim­ited and only 21 mil­lion units will ever be cre­ated.

What's it worth?

Like any other cur­rency, it fluc­tu­ates. But un­like most real-world units, Bit­coin's value has swung wildly in a short pe­riod.

When it first came into ex­is­tence it was worth a few US cents. Sev­eral years later Bit­coin topped $1,000. It's now worth more than $2,300, with com­men­ta­tors sug­gest­ing some are buy­ing it as an al­ter­na­tive bet in times of global eco­nomic un­cer­tainty.

The chaotic with­drawal of high-value notes in In­dia, and Chi­nese con­trols on the pur­chase of for­eign cur­rency have also been cited for its me­te­oric rise. There are presently more than 16 mil­lion units in cir­cu­la­tion. Some econ­o­mists say the lim­ited num­ber of Bit­coins mean its price will in­crease over the long run, mak­ing it less use­ful as a cur­rency and more a ve­hi­cle to store value, like gold.

But de­trac­tors point to Bit­coin's volatil­ity, se­cu­rity is­sues and other weak­nesses as flaws that will even­tu­ally un­der­mine it.

What's the fu­ture?

Some com­men­ta­tors say that like many tech­no­log­i­cal de­vel­op­ments, the first it­er­a­tion of a prod­uct will en­counter dif­fi­cul­ties, pos­si­bly ter­mi­nal ones. But the trail it blazes might smooth the way for the next crypto cur­rency. Prob­lems in­clude an ap­par­ent vul­ner­a­bil­ity to theft when Bit­coins are stored in dig­i­tal wal­lets.

A ma­jor Hong Kong-based Bit­coin ex­change sus­pended trad­ing last year af­ter $65 mil­lion in the vir­tual unit was re­port­edly stolen by hack­ers. The vir­tual cur­rency move­ment also faces le­git­i­macy is­sues be­cause of the way it al­lows for anony­mous trans­ac­tions-the very thing that lib­er­tar­ian adopters like about it. De­trac­tors say bit­coin's use on the un­der­ground Silk Road web­site, where users could buy drugs and guns with it, is proof that it is a bad thing. If Bit­coin does be­come more widely ac­cepted, ex­perts say, it could lead to more govern­ment reg­u­la­tions, which would negate the very at­trac­tion of the con­cept. — AFP

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