This is exactly the basic idea behind Bitcoin. Keeping in line with all sorts of internet activity, bitcoin works on a platform which ensures cryptic transactions. This has also been popularly referred to as crypto-currency.
Started off in January 2009, by an individual/group called as “Satoshi Nakamoto” (identity yet to be ascertained) this currency works across the world with no country / existing financial board or committee having any control over issuing it. The only way of tracking the movement of bitcoins across the world is through timestamps. Simply put, each time i intend to pay you 1 bitcoin; I would be digitally signing off on a hash of timestamps for the previous transactions and your address (IP). Leaving out the technicalities of how transactions are processed, here some finer points to ponder:
1. Valuation: Since there is no central issuing authority, there is little control over how much should a bitcoin be valued at. It started off with a group of individuals setting a value which has fluctuated majorly in the past 2 years. Back in Jan’13 1 bitcoin = $13, however post the Cyprus banking collapse its value has inflated to $137. As of now, the total value is 21 million bitcoins. According to experts this represents a bubble in the making.
3. Code Loopholes: Hackers are waiting to exploit systems such as these. While frauds, phishing and snooping impact even the most secure banking systems, this could only become more easier to crack. An episode did take place in August ’09 where a high number of bitcoins were generated and siphoned off to 2 accounts. This was however tracked and the additional bitcoins generated were wiped clean.
Those were a few of the pointers that sprung up when i was reading up on this alternative currency. Many economists have written it off as an experiment and there is mass contemplation over whether bitcoins can even be converted in to real money. But there are a set of enthusiasts who are willing to receive their salary in the form of this currency! It would be interesting to see how big bitcoins eventually become or if these would just end up to be a fad. My take on it? I’d hold off till i hear my neighbors talk about it!