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Bitcoin: 10 things you need to know about the virtual currency

Published on Mar 6, 2014 3:00 PM
Mr Prashant Somosundarm, owner of Artistry Cafe in Jalan Pinang, is one of the few local businesses which accepts Bitcoins, a virtual currency, as payment. -- FILE PHOTO: BERITA HARIAN 
Bitcoin has attracted a lot of attention in recent months, for the wrong reasons. Wild price fluctuations, the collapse of Mt Gox, a leading bitcoin exchange, and more recently the death of Ms Autumn Radtke, the chief executive officer of bitcoin trader First Meta in Singapore, have thrown up serious doubts over its viability.

For better or worse, it looks like the crypto-currency is here to stay, at least for the foreseeable future, with the first bitcoin ATMs set up here and more retailers likely to accept it as payment.

1. Bitcoin is a virtual currency “minted” in 2009 by a computer programmer, or group of programmers, known only as Satoshi Nakamoto.

2. A computer programme controls the creation of bitcoins and all the transactions. It is not controlled by a central bank or governing body.

3. There are 12.2 million bitcoins in circulation and, according to how the programme is written, a maximum of 21 million bitcoins will be created.

4. Those who are part of the network that helps to verify bitcoin transactions are called miners, and they are rewarded for their services with bitcoins.

5. Regular consumers may also buy bitcoins online through exchanges or directly from other owners of the virtual currency. At the moment, 1 BTC (bitcoin) is selling for around US$670 (S$850).

6. Owners of bitcoins can trade them to make profits on the wild value fluctuations. When it was created in 2009, 1 BTC was worth less than 10 US cents. At the end of 2011, it was worth almost US$5. The price crossed the US$1,000 mark in November 2013, largely due to demand in China.

7. At the same time, owning bitcoins is risky as the currency is not guaranteed by any central bank. So 10 BTC today may be worth nothing tomorrow if online exchanges suddenly shut down, or buyers and businesses stop accepting them.

8. At least eight merchants in Singapore, including cafe Artistry in Jalan Pinang and 3-D printing company Meka, accept the digital currency as payment.

9. Payment involves launching an app on your mobile phone or computer and transferring bitcoins from your virtual wallet to the cafe’s virtual wallet.

10. The bitcoin is just one of many virtual currencies in the market. Others include peercoin, litecoin and ripple. Even the Royal Canadian Mint is jumping on the bitcoin bandwagon with its own MintChip, backed by the Canadian dollar.