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Surprising Science

The Future of Money Is Online

Hoping to exploit public skepticism over the banking system, a bunch of libertarians and internet geeks are hoping to disrupt our cash system with an online currency called Bitcoin.

What’s the Latest Development?

How does the virtual currency Bitcoin work? “As with Skype, each Bitcoin user downloads and runs a P2P client program on their PC that communicates with similar programs being run by other users. Then a lottery ensues: the software on each P2P client runs a mathematical routine that attempts to generate a number lower than a constantly changing target figure. Every 10 minutes, one client succeeds and is rewarded with a certain amount of virtual money… The bitcoins can then be used to buy services such as web design or various types of goods that include T-shirts and ground coffee.”

What’s the Big Idea?

Where do the value of Bitcoins come from? From the willingness of the public to accept them as public tender: “They can be exchanged for conventional currency at a rate that is now hovering around 1 BTC equating to $8, making the entire Bitcoin economy worth around $50 million. ‘The idea of money created and controlled by everybody instead of elite central bankers seems to strike a chord in a lot of people all over the world,’ says Gavin Andresen, the lead developer of the Bitcoin project based in Amherst, Massachusetts.”


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