Bitcoin, an online currency that allows people to make one-to-one transactions, buy goods and services and exchange money across borders without involving banks, credit card issuers or other third parties disappeared from the Internet, sending the price of the virtual currency tumbling, according to the Associated Press.
This exotic new form of money has become popular with libertarians as well as tech enthusiasts, speculators and criminals, the AP reported. Bitcoins are basically lines of computer code that are digitally signed each time they travel from one owner to the next.
Bitcoin was launched in 2009 by a person or group of people operating under the name Satoshi Nakamoto and then adopted by a small clutch of enthusiasts, according to the AP.
Nakamoto dropped off the map as bitcoin began to attract widespread attention, but proponents say that doesn't matter and that the currency obeys its own, internal logic, the AP reported.
Like any other currency, bitcoins are only worth as much as you and your counterpart want them to be. In its early days, boosters swapped bitcoins back and forth for minor favors or just as a game, according to the AP.
As the market matured, the value of each bitcoin grew, the AP reported. At its height three months ago, a single bitcoin was valued at $1,200. On Tuesday, it was around $500.
Businesses ranging from blogging platform Wordpress to retailer Overstock have jumped on the bitcoin bandwagon amid a flurry of media coverage, but it's not clear whether the currency has really taken off, according to the AP.
Leading bitcoin payment processor BitPay works with more than 20,000 businesses, roughly five times more than it did last year, but the total number of bitcoin transactions has stayed roughly constant at between 60,000 and 70,000 per day over the same period, according to bitcoin wallet site blockchain.info, the AP reported.
The bitcoin network works by harnessing individuals' greed for the collective good, the AP reported. 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.
This blockchain prevents rogues from spending the same bitcoin twice, and the miners are rewarded for their efforts by being gifted with the occasional bitcoin, the AP reported. As long as miners keep the blockchain secure, counterfeiting shouldn't be an issue.
If an exchange has sloppy security, or if a person's electronic wallet is compromised, then the money can easily be stolen, according to the AP.
Those fears appear to have been confirmed late Monday when bitcoin enthusiast Ryan Selkis posted an 11-page-long "Crisis Strategy Draft" allegedly leaked by a Mt. Gox insider, the AP reported. The draft appeared to show the exchange secretly trying to grapple with the loss of more than 740,000 bitcoins over several years.
