Despite criticism of it not fulfilling some of the most important functions of currency, Bitcoin, the digital currency, has soared in recent months, spurred by greater acceptance of the blockchain technology that underpins exchange and optimism that faster transaction times will encourage broader use.
Prices have climbed more than four-fold this year to about $5240 from $926 at the beginning of the year, representing a whopping 750% rise.
The price of the digital currency has however had volatility, especially in September when it crashed to below $3000 because of the crackdown in China.
The Chinese regulatory authorities ordered cryptocurrency exchanges to stop trading and blocked new registrations because of the fears of the precipitation of a financial crisis if many Chinese had access to bitcoins.
Russian President, Vladimir Putin had earlier in the month called for the regulation of bitcoins because according to him it could be used to aid money laundering, tax evasion and could provide ready funds for terrorism.
Despite the skepticism of bitcoins, it is gradually gaining acceptance as the Japanese government earlier in the month implemented rules that recognize it as a payment method. Celebrities like Paris Hilton, Floyd Mayweather have promoted it aggressively.
The banks are largely sidelined in bitcoins transactions when goods and services are exchanged and they have raised warnings about a price bubble.
Kenneth Rogoff, a professor of economics and public policy at Harvard University and a former IMF chief economist, has predicted that the technology behind cryptocurrencies will thrive, but the price of bitcoin will collapse.
“It is one thing for governments to allow small anonymous transactions with virtual currencies; indeed, this would be desirable. But it is an entirely different matter for governments to allow large-scale anonymous payments, which would make it extremely difficult to collect taxes or counter criminal activity,” he said.
Wei Dai brought Bitcoin to world prominence in 1998, while the Bitcoin specification and proof of concept got published in 2009 in a cryptography mailing list by Satoshi Nakamoto. Satoshi left the project in late 2010 without revealing much about himself.
The Central Bank of Nigeria had warned Nigerians to stay away from bitcoin as it is not a legal tender.