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Bitcoin Total Value Tops $14bn

Tom Jowitt is a leading British tech freelance and long standing contributor to TechWeek Europe

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Two year high for digital currency as its total value reaches £11.3bn, with most bitcoin trading located in China

Bitcoin has reached a two year record high in value amid a backdrop of growing political uncertainty globally and a fall in value of the Chinese yuan.

Ransomware demands often seek bitcoin payments, as do the criminals behind distributed denial-of-service (DDoS) attacks. In October a security expert warned that major British financial institutions are looking into hoarding bitcoins for use in buying off online attackers. But Bitcoin also has legitimate uses.

Bitcoin (c) Alexander Kirch, Shutterstock 2014

Volatile Currency

And now the total value of all Bitcoin in circulation hit a record high above $14bn (£11.3bn) on Thursday, Reuters reported, after the web-based digital currency jumped 5 percent on the day to its highest levels in three years.

Bitcoin has doubled in price this year, and one bitcoin costs a cool $875 (£714) on the Bitstamp exchange BTC=BTSP, its strongest level since January 2014. In comparison, at the start of this year, Bitcoin was trading around the $435 (£356) mark.

The rise in the value of bitcoins is being attributed by some experts to the fall in the value of the Chinese currency, after the Chinese yuan slid almost 7 percent this year. Reuters also reported that the majority of Bitcoin trading is done in China, so any increase in demand from there tends to have a significant impact on the price.

It should be remembered that even though a single Bitcoin is now worth $875 (£714), this is still some way from its peak value of $1,163 (£949) in late 2013.

And Bitcoin are being continually added to the system at a rate of 12.5 bitcoins every 10 minutes.

Bitcoin Revolution

It is fair to say that at the moment Bitcoin are a very niche area of tech, and not everyone is engaged with it. Bitcoins can be defined in many ways, but the easiest way to think at it is as a digital asset and payment system.

It was developed in 2008 by Satoshi Nakamoto, the name given to the unknown inventor of the software.

The main attraction of the system is that it uses a peer-to-peer format, whereby individuals make financial transactions directly without the need for a third-party. The latter are confirmed by network nodes and placed in the so-called blockchain, a sophisticated digital public ledger system.

Bitcoins are the monetary element of the digital currency, are given to individuals after completing work or providing a product of some kind. They can also be awarded for an activity called Bitcoin mining, where people add past transactions to the blockchain.

One of the biggest attractions of bitcoin is the fact that all completed payments are transparent and available for everyone to see.

But the Bank of England has previously warned that Bitcoin could pose a threat to financial stability in the UK should it see widespread adoption.

Quiz: How much do you know about Bitcoin?