A Bitcoin for Your Thoughts

Bitcoin seems to be everywhere these days. What was once an esoteric topic discussed only by mathematicians, cryptographers, end-of-the-world doomsday predictors, and the occasional conspiracy theorist has grabbed front-page headlines around the world and become a leading topic presented at financial services industry events. Regulators, journalists, bankers, consultants, and venture capitalists have poured time, money, and energy into understanding what a bitcoin is and trying to determine how the virtual currency fits into the global payments landscape.

The bitcoin payment mechanism emerged in 2008 under extremely mysterious circumstances. The term “bitcoin” was supposedly coined by someone named Satoshi Nakamoto, who wrote a paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System.” As of this writing, no known individual, organization, agency, or government has ever maintained that it created the bitcoin infrastructure or technology platform. Various theories have been floated, and a few mainstream publications—including The New York Times and Fast Company—have launched serious investigations, but so far no one really knows how bitcoin payments got their start.

The bitcoin currency is entirely digital. Although publications sometimes use photo montages of gold-embossed coins to accompany articles about bitcoins, these are purely mock-ups. Bitcoins do not exist in the physical world; the best way to think of a bitcoin is as a long sequence of data. Individuals who want to make bitcoin-denominated purchases can buy the currency through one of several exchanges, including Bitstamp; Kraken; CampBX; and Mt. Gox, which is the most prominent and popular. Bitcoins’ value fluctuates vis-à-vis the U.S. dollar and other traditional currencies. Users can track exchange rates at sites such as bitcoinexchangerate.org and preev.com. Through most of 2013, the price of a bitcoin has hovered in the $100 to $140 range, but it fluctuated from a low of US$20 in January to around US$220 in April, and it’s back up to just over US$240 today.