In 1988, The Economist predicted that a new global currency will emerge in 30 years. As we approach 2018, supporters of bitcoin and other digital currencies are staking their claim on the title.
Digital currencies’ rapid rise to prominence is causing a global rethink on the concept of money with Bank Negara expected to issue guidelines by the end of the year.
Bitcoin was created in 2009. In less than a decade, it has emerged from an obscure curiosity to a household name. It’s value has surged, with ups and downs, from a few US cents to around US$4000 (RM16,800). Sceptics say that because the value of bitcoin is so volatile, it is virtually impossible to use it as a standard currency for ongoing trade.
There are 16.5 million bitcoins in the system, with a current market value close to US$70 billion (RM294 billion). Bitcoin is the largest and most popular among hundreds of other digital currencies in the market.
To compare there are 1.56 trillion US dollars in circulation as of July this year.
No country or central bank issues or controls bitcoin. It can be obtained either by selling goods and services, purchasing it via the bitcoin exchange or private sellers, or ‘mining’ it.
Bitcoin miners perform and verify transactions and add them to the public ledger, or blockchain.
There is no physical denomination of the digital currency. It only exists on the Internet and is secured using codes.
Bitcoins are kept in individual online ‘wallets’ that allow each owner to receive, store and send bitcoins to other wallet owners.
Each wallet has an address to which its owner has a private key.