Bitcoin: Its Rise And Fall

Digital Currencies are encrypted information in electronic mode for making transactions to indulge in the sale and purchase of goods and services, and also work as an alternate currency. This assists the end user to make use of this value-for-money in more than one way, so they do not have to depend on a conventional method. Generally, digital currencies are backed by a financial institution or a government agency to regulate the flow of currency but not produced by them.
Examples of the popularity of digital currency can be found even in under-developed countries like Kenya. The digital currency, named as M-Pesa, is popular among the local people who use it to save and trade from their mobile device. The digital level encryption of the currency helps it to be secure. Other examples of digital currencies are:

• PPCoin
• NovaCoin
• Litecoin
• Bitcoin
• Ven
• Ripple etc.

One of the popular digital currencies nowadays is Bitcoin which started in year 2009 and is based on a peer-to-peer based system of fund exchange. It has gained a sudden momentum since the crisis in Cyprus and speculation in Spain. Started at the value of $5 per Bitcoin, its popularity has helped it to cross the value of $250 per Bitcoin about a week ago. As according to the statistics of 14 April 2013, the overall value of the distribution of Bitcoin over the globe is about $2 billion.
Talking something more about Bitcoin, there is no centralized bank or organization which takes cares of the management instead, it's a decentralized currency based on the open source peer-to-peer internet protocol. A very brief description about how a transaction occurs is explained below:

• Bitcoins are stored inside a wallet, which works as a repository of Bitcoin addresses. Each Bitcoin address has a balance of Bitcoin or value of equivalent money contained in it.
• When a transaction is made using Bitcoin, the balance in a particular Bitcoin is stored inside a new address file or Bitcoin Address and is encrypted using the private key of the sender.
• When the transaction request is made from the merchant's side, the Bitcoin address is transported over the network. The merchant open the encrypted file with a public key. Moreover, anyone on the network can have a look inside the encrypted packet but cannot make use of it until verified by the Bitcoin server.
• In order to verify the transaction, the merchant forwards the Bitcoin address to the Bitcoin server, called as Bitcoin miners.
• The miners collect the bitcoin addresses collected during the session of 10 minutes and encapsulate them. Miners also set up to calculate the cryptographic hash function.
• At the other end, another miner uses a Nounce value recursively on the obtained hash function until it find out the one that is valid for the particular hash function.
• Once the transaction is verified, payment is transferred to the merchant's account.

Though it experienced a strong fluctuation the past few days with about 60% decrease in its value, Bitcoin is still the most popular and widely used digital currency. The main reason for the popularity of Bitcoin is well supported with the reason that as the smartphone technology is improving, the need of users to carry digital currency is also increasing. Moreover, digital currency is a more convenient mode of making transactions as compared to conventional one with lesser transaction fees.