Bitcoin is a digital currency that operates over the internet as an alternative to traditional money. The Bitcoin network allows users to transfer bitcoins directly from peer-to-peer, without going through a bank or financial institution. It is completely decentralised, meaning there is no central bank to float the currency. As such, its value is based entirely on the forces of supply and demand.
The strength of these forces have been made starkly apparent by the bitcoin’s rapid rise in value over recent years and months. In September 2011, the bitcoin (BTC) was valued at $US7.61, by April 2013 it sat at $US135.19. Today it is worth around $US605.48 – however this is down from figures of $US900-1000 seen earlier this year.