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Bitcoins are accepted by a growing number of merchants, even used to pay some employees

Bitcoin Magazine this week heralded some exciting news. The popular cryptocurrency that's free of regulation by any nation state has hit a new high of $32 USD/Bitcoin on Mt. Gox, the world's largest exchange.  The previous high had been $31.9099 on June 8, 2011.

Right after hitting that previous high, Bitcoin values began a freefall, which we covered in our piece "Digital Black Friday: First Bitcoin "Depression" Hits".  It was unclear whether the plunge was due merely to profit taking or other issues.  Shortly thereafter, the currency was further devalued when MtGox was hit with a database dump attack and users accounts were compromised due to the service's weak MD5 hashing of passwords.  It took the site months to rebuild trust, beef up security, and unwind the trail of fraudulent transfers.

The Bitcoin rollercoaster ride bottomed out at $2 USD/coin in November 2011.  And last fall BitFloor -- another major exchange -- was hacked, and $250,000 USD worth of Bitcoins were stolen.  But despite that, the currency continued to creep upwards.

Bitcoins on the rise
Bitcoins values have soared in the last six months. [Chart]

Inflation remains a serious concern for Bitcoins, as do scammers using classic techniques like Ponzi schemes.  And there's the issue of Bitcoin-mining malware that's afflicted PC and Mac users alike.  However, the currency's utility as an (relatively) untraceable and easy to use digital currency is keeping it sailing high.

Popular social media site Reddit recently gave Bitcoins a boost, by accepting the cryptocurrency as a means of paying for "Gold" premium memberships.  LaCie Group SA's (EPA:LAC) "Wuala" and Kim Dotcom's new "Mega" file sharing services both accept Bitcoins as a means of payment.

Mt. Gox remains the most popular place to buy and sell Bitcoins.

Domain registrar Namecheap is also considering BitCoin.  And is currently accepting BitCoin payments for various services.

Source: BitCoin Magazine

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RE: Not for me
By danielravennest on 2/28/2013 5:37:42 PM , Rating: 2
Bitcoins are like any commodity you can trade. The price is determined by supply and demand. What backs gold? Nothing, just the demand people have for it, and the scarcity.

The second part of your comment is incorrect. The software adjusts the difficulty of solving a block of transactions to maintain a near-constant generation rate.

What bitcoins actually are is a data entry in a history of transactions, associating a balance with an account number. They are just like checking account balances. How much is in the account now is just the sum of previous deposits and withdrawls.

New coins are created as a reward for solving a difficult cryptographic problem based on a set of new transactions (a block). Once solved, it is easy to check the solution is correct. The difficulty makes it hard to fake transactions, because if you change any part of a block, even by one bit, the resulting hash will be different. So it is a security measure to ensure the history of transactions has not been messed with.

There will never be more than 21 million bitcoins, no matter how fast future computers get, or how many people try to generate them.

RE: Not for me
By NellyFromMA on 3/1/2013 3:33:39 PM , Rating: 2
This is a bubble just waiting to burst. A worse ponzi scheme than even debt based currency.

Its a currency promoted as a commodity valued in debt based REAL currency.

Thanks, but I'll pass on that. I actually don't need to obfuscate debt-laden currency even further.

"We shipped it on Saturday. Then on Sunday, we rested." -- Steve Jobs on the iPad launch

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