What's a Bitcoin?

Bitcoins are a digital currency (aka, as virtual currency, electronic money, or cryptocurrency) that was introduced in 2009. They are created by a process called mining, and users can send and receive them with a personal computer or mobile device. The Bitcoin system is not controlled by a single entity (e.g., a central bank), which is why they are considered a decentralized currency. The commercial use of bitcoins as a form of payment is small compared to how they have been bought and sold by speculators, which has led to considerable volatility in the price of bitcoins. That said, there has been some growth in their use as a currency because bitcoin transaction fees are typically lower than credit card fees. So far, the largest purchase using bitcoins was the purchase of a villa in Bali for over $500,000.

Bitcoins have been the subject of two recent podcasts: one on NPR's Planet Money and one on Freakonomics. The one on Planet Money ("Bitcoin Goes To The Moon") discusses the recent volatility in the price of bitcoins. There's also a link to an earlier 2011 Planet Money podcast ("Bitcoin"), which talks about the nuts and bolts of the Bitcoin system. The Freakonomics podcast ("Why Everybody Who Doesn’t Hate Bitcoin Loves It") examines what bitcoins are and why bitcoins (or something like them) could prove to be revolutionary. As the folks at Freakonomics put it: "thinking of Bitcoin as just a digital currency is like thinking about the Internet as just e-mail. Its potential is much more exciting than that." Both the Planet Money and Freakonomics podcasts can be downloaded from iTunes or you can listen to them at their respective websites. Just follow the links above.