Bitcoin: the virtual currency built on math, hope and hype

Bitcoin's sharp rise in value this year has many questioning whether the virtual currency is sustainable in the long term

By , IDG News Service |  IT Management

But on a broader level, people using Bitcoin must trust the software and ecosystem, said Toby Miller, a professor of journalism, media and cultural studies at the University of Cardiff in Wales.

Youve got to have several kinds of trust involved when you dont have government or reserve banks or the banks themselves, Miller said.

That hasn't stopped some legitimate businesses from accepting and even keeping some bitcoins, even with its wild exchange rate.

David Maloney runs Honestbeef.com.au, a Web-based business from Casino, a small town in northern New South Wales in Australia. Honestbeef brokers orders between farmers and buyers seeking high-quality beef.

Maloney, a database programmer by trade who has watched Bitcoin since it started, said he doesn't accept credit cards, only interbank transfers, which carry no fee, and bitcoins.

But Bitcoin is much more than just a payments system, Maloney said.

Bitcoin's blockchain, a public ledger that record transactions, holds much potential for other kinds of cryptographic verification rather than just transferring bitcoins, he said.

Bitcoins software protocol could accommodate escrow payments and contract arrangements, where trust is placed in the network rather than one entity.

"I think it will be used as a currency, but not in a way anyone's imagined it," Maloney said.

Send news tips and comments to jeremy_kirk@idg.com. Follow me on Twitter: @jeremy_kirk

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