unit of the digital cryptocurrency Bitcoin has
exceeded the value of an ounce of gold for the first
time.
It closed at $1,268 on Thursday while a troy ounce of
gold stood at $1,233.
The current high is being attributed to surging
demand in China, where authorities warn it is used to
channel money out of the country.
The past months’ surge is a major reversal for
Bitcoin, which plummeted in value in 2014 after the
largest exchange collapsed.
The value of Bitcoin has been volatile since it was
first launched in 2009, and many experts have
questioned whether the crypto-currency will last.
Earlier this year, Chinese authorities cracked down on
Bitcoin trading in an attempt to stop money flowing
out of the country illegally.
But the closer scrutiny from Beijing only briefly sent
the currency lower. After it had soared to record
highs in January , it has since picked its steady rise in
value.
How Bitcoin works
Bitcoin is often referred to as a new kind of currency .
Yet like all currencies its value is determined by how
much people are willing to exchange it for.
To process Bitcoin transactions, a procedure called
“mining” must take place, which involves a computer
solving a difficult mathematical problem with a 64-
digit solution.
For each problem solved, one block of Bitcoins is
processed. In addition the miner is rewarded with new
Bitcoins.
To compensate for the growing power of computer
chips, the difficulty of the puzzles is adjusted to
ensure a steady stream of new Bitcoins are produced
each day.
There are currently about 15 million Bitcoins in
existence.
To receive a Bitcoin, a user must have a Bitcoin
address – a string of 27-34 letters and numbers –
which acts as a kind of virtual post-box to and from
which the Bitcoins are sent.
Since there is no register of these addresses, people
can use them to protect their anonymity when making
a transaction.
These addresses are in turn stored in Bitcoin wallets,
which are used to manage savings.