by Olivier Mann
For the first time, one unit of the crypto-currency Bitcoin is valued at more than an ounce of gold. It went up to US$1,268 per unit last Thursday, while an ounce of gold stood at US$1,233.
Bitcoin’s climb has been supported by China’s growing demand, although Beijing officials see it as a way to take money out from China.
The value of Bitcoin plunged three years ago and its growth in recent months has led the cryptocurrency to recover considerably.
The performance of the cryptocurrency has always been erratic following its launch eight years ago and experts continue to be cynical about Bitcoins longevity.
Earlier this year Chinese officials started looking more closely at Bitcoin in an attempt to stop capital outflows.
Beijing’s inquiry only sent the value of the Bitcoin lower for a short time, following its record climb in January and it is now seeing a more gradual increase in value. The anonymity of the currency has been one of its greatest attractions.
Bitcoin is considered a new mode of exchange and just like other currencies, its value is decided by how much a consumer is willing to pay for it.
To transact the cryptocurrency, a “mining” procedure is needed, the process requires a computer to solve a challenging mathematical problem with a 64-digit resolution.
For each answered problem, a new Bitcoin is created and the miner is rewarded with new Bitcoins.
To balance the increasing capacity of computer chips, the challenges of the problem are recalibrated to ensure that there will be a continuous flow of new Bitcoins every day.
At present, there are around 15 million Bitcoins existing in the market.
To have a bitcoin, a user will sign-up for a Bitcoin address – an alphanumeric combination of 27-34 characters – which will work as a virtual PO-box and can be used to send and receive units of the currency.
As there is no central record of bitcoin wallet holders, the identity of each Bitcoin user is anonymous when making transactions.