By Bryan Clontz
Virtual currencies have been much in the news the last few years, with Bitcoin getting by far the most attention. That’s partly because of its incredible growth in value, going from less than $1 in early 2011 to nearly $1,000 at the end of 2013, before dropping into the mid-hundreds throughout 2014.
A virtual currency functions much like traditional (or “fiat”) currency, but all transactions occur online, and it is not regulated by any government. Bitcoins are created through the process known as “mining,” which involves verifying all Bitcoin transactions as they occur, and hence limits the supply of the currency.
People obtain Bitcoins by creating digital “wallets,” which allow them to deposit fiat currency and then transmit it to other wallets in exchange for virtual currency. Wallets are the primary method of transmittal for consumers, and each user has a unique key they share to send or receive Bitcoins.
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