'Legitimate' bitcoins value soars

The value of virtual currency Bitcoin surged to over $600 (£372), ahead of a US Senate committee hearing on Monday. The committee will hear that virtual currencies are a "legitimate financial service" with the same benefits and risks as other online payment systems. The Homeland Security and Governmental Affairs Committee wants to explore the "promises and risks" of Bitcoin for "government and society at large". The currency has trebled in value since October. The Senate hearing was prompted by the closure of the Silk Road website in October. The site, which sold drugs and other illegal goods, was shut down by the FBI. Users of the site were required to pay for their transactions using Bitcoins. Representatives from the Department of Justice and financial regulator the Securities and Exchange Commission have been asked to provide their views about virtual currencies to the committee and submissions have been received from the FBI and the US Federal Reserve. The FBI, in a letter to the committee released yesterday, said that it recognised virtual currencies offered "legitimate financial services" but they could be "exploited by malicious actors". A US Senate committee will hear from the Department of Justice and Securities and Exchange Commission Mainstream acceptance ''Two years ago it was alarm when Silk Road first came on the scene,'' Jerry Brito, senior research fellow at George Mason University told Bloomberg. ''Since then, Congress has been educating itself and understands that there are great potential benefits, and like any new technology there are going to be some challenges. But they see there is a balance to be struck here and they are generally positive on the technology," he said. Continue reading the main story HOW BITCOINS WORK Bitcoin is often referred to as a new kind of currency. But it may be better to think of its units as being virtual tokens that have value because enough people believe they do and there is a finite number of them. Each Bitcoin is represented by a unique online registration number. These numbers are created through a process called "mining", which involves a computer solving a difficult mathematical problem with a 64-digit solution. Each time a problem is solved the computer's owner is rewarded with Bitcoins. To receive a bitcoin, a user must also have a Bitcoin address - a randomly generated string of 27 to 34 letters and numbers - which acts as a kind of virtual postbox to and from which the bitcoins are sent. But it may be better to think of its units as being virtual tokens that have value because enough people believe they do and there is a finite number tcoin address - a randomly generated string of 27 to 34 letters and numbers - which acts as a kind of virtual postbox to and from which the bitcoins are sent. Since there is no registry of these addresses, people can use them to protect their anonymity when making a transaction. These addresses are in turn stored in Bitcoin wallets, which are used to manage savings. They operate like privately run bank accounts - with the proviso that if the data is lost, so are the bitcoins contained. Trade in Bitcoin is small compared with that in countries' official currencies. But since its creation in 2008, Bitcoin has become a popular way to pay for things online. There are currently more than 12 million bitcoins in existence according to Bitcoincharts, a website that provides financial information about the currency. On one exchange site, Mt. Gox, the value of the currency rose to $619 (£384) on Monday. This compares with a price of $200 (£124) in late October. The closing down of Silk Road and hearings in front of US government committees have led some to believe that prices are increasing as investors think Bitcoin will gain more mainstream acceptance. "Lots of factors are driving the price action in Bitcoin, including pure speculation," said Garrick Hileman, an economic historian at the London School of Economics. "Regulatory interest in Bitcoin also traditionally has a positive effect on the price of Bitcoin," he added. Jan Lambregts, head of financial market research at Rabobank, which does not trade in Bitcoin, said regulators were right to get involved. "Looking at it from a distance, it very much looks like it could be a speculative bubble. It's a small market, with a lot of interest in it, which is inflating and distorting the price," he said. "But you can see the concerns for governments - this is a currency outside their normal domain and which is not influenced by central banks. "It may all be relatively small-scale now, but decisions taken now could have wider repercussions were such virtual currency experiments to be expanded in the future," he added. Some have questioned whether trading in Bitcoin is insufficiently transparent and therefore easier to use for illegitimate means. Patrick Murck, from the Bitcoin Foundation, which promotes the use of the currency, told the BBC that the network was very open and everybody could see every transaction that happened. "I would challenge that it's for illegitimate use or bad actions. What we're finding is not that it's a haven for illegitimate activities but that there are many legitimate uses," he said. Whatever people are using Bitcoin for, Mr Brito thinks its here to stay. "These hearings mean Bitcoin is finally coming into its own," he said. "It's a real thing and it's not going anywhere and these hearings highlight that."

'Legitimate' bitcoins value soars 2013-11-18T11:04:00-08:00 Rating: 4.5 Diposkan Oleh: Undercover 999