Bitcoin is an electronic currency that began in 2009 and relies on a network of computers to verify transactions without a central authority. The value of bitcoin is highly volatile and dependent on user confidence. Bitcoins can be used to purchase goods online from some retailers and are stored in virtual wallets with unique keys. The collapse of Mt. Gox, a major bitcoin exchange, in 2014 demonstrated issues with unregulated currency when over $450 million in bitcoins went missing due to theft. Better regulation of exchanges may help bitcoin gain mainstream acceptance.

1. Bitcoin
What is it? What happened?

2. What is Bitcoin
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Electronic money, began 2009
Most prominent digital currency
Relies on network of computers that use
mathematics to verify and record details
of transactions
No central authority governs supply and
value
Value depends on people’s confidence

3. Volatility of the Bitcoin
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Very volatile!
In December, one of the online exchanges
(Bitstamp) spiked from $30 to $1100.
However, concerns caused decline to $530
on Tuesday
Price varies greatly depending on
exchange

4. How do I spend it?
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Ideal for online. Some companies already
ready to accept (Overstock.com, other
stores)
Critics worry about volatility and potential
to be used for illegal activity

5. Where do I store and trade
Bitcoins?
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Held in virtual wallets with unique keys
Transactions made by sending bitcoins
from one wallet to a unique key
associated with another wallet in a
cryptographic process verified by
computers
Wallets can be stored offline or online at
exchanges such as Bitstamp and BTC-E

6. Creating a bitcoin
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Known as bitcoin mining
Rewards computers that do the work of
verifying transactions, rewarded in bitcoin

7. What happened to Mt. Gox
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The Tokyo based site halted withdrawals
this month after detecting “unusual
activity” and on Tuesday stopped trading
More than 744,000 bitcoins missing due to
malleability-related theft
Debts of Mt. Gox is over $65 million,
surpassing the assets
Mt. Gox was formerly a website for
exchanging trading cards

8. What could have helped Mt.
Gox
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Since bitcoins are software, any computer
or server connected to the Internet that
stores the files are vulnerable to
unauthorized access. Similar to a hacker
copying email.
Move the digital money off a webconnected computer. This is known as
“cold storage”. Can go online to trade.
(Online is known as “hot storage”

9. What is the future of bitcoins?
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The Mt. Gox failure proves unregulated
currency is not quite ready for widespread
use
However, newer exchanges are trying to
make it mainstream and are better
supervised.

10. Where can I learn more?
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Learn all about Bitcoin: https://bitcoin.org/en/
Sign up for a Bitcoin wallet: http://www.bitcoin.com/
More about Bitcoin in the free market:
http://spectrum.ieee.org/computing/software/bitcoin-the-cryptoanarchists-answer-to-cash