The Bitcoin bubble
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How the digital currency became all the rage, and why it could be dangerous
Around the time the EU was engaged in a rescue act involving Cyprus's metastised banking sector and ill-considered deposit taxes, a virtual currency called Bitcoin was witnessing an unprecedented boom. Suddenly, there were reports of panicky European investors putting their money in Bitcoins and the value of the currency doubled, and then doubled again. So just what is Bitcoin? It's exactly what it sounds like: a system of currency not backed by a central bank or any other authority, and one that exists only in the digital world. But it is not a make-believe currency like Monopoly money. It has value in the real world and currently, it costs around $242 to buy one Bitcoin — up from $142 last Friday, $44 a month ago and $4.93 a year ago.
Bitcoin was created in 2009 by Satoshi Nakamoto, an unknown programmer. The network is a decentralised cash exchange system, which means that people can directly trade among themselves using Bitcoins, without involving the formal banking system. They can trade Bitcoins for offline currency. The network is cryptographically secure, although Bitcoin heists have been known to happen and the source code for it is free and public.