With Bitcoin becoming one of the latest trends of the 21^st century, many who previously dismissed it as a speculative investment are probably shaking their heads in regret.

What exactly is this “virtual currency” that so many people are talking about?

Bitcoin is a peer-to-peer (P2P) payment system that was introduced in 2009. It uses cryptography, a form of secure communication, to create and transfer money between individuals and different markets. Users send and receive Bitcoins directly; neither intermediate banks nor sellers are present in the payment process.

The “virtual currency” has attracted many users for a variety of reasons. In addition to preserving anonymity when making purchases, Bitcoins are not associated with any country in specific and payment processes do not have rigorous guidelines. Some individuals buy Bitcoins just as they do stocks, hoping to make money off the initial purchase.

Since its launch in 2009, many countries have been actively trying to enforce regulations on Bitcoin mining that would control the supply and utility of the virtual currency. Two weeks ago, one of the world’s largest Japanese Bitcoin exchange sites, Mt. Gox, shut down. In a dollar equivalent, that’s like saying the New York Stock Exchange suddenly shut down. More than 744,000 Bitcoins, equivalent to $423 million in current currency, were lost. As a result, many international finance committees have been more aggressively trying to control the currency. United States Federal Reserve Chairman, Janet Yellen, stated that implementing new methods to control the currency would be worthwhile. That is, if the currency survives. Many have already proclaimed it dead; with this big Bitcoin “scandal,” many have lost faith in the virtual currency.

I recently read about what makes currency legitimate in my economics class. To be recognized as currency, something must not only serve as a medium of exchange but also measure and store value. Does Bitcoin truly achieve any of these?

Although many supporters do argue that bitcoin is the future of currency, it does not serve as a feasible medium of exchange for most people. When at the local grocery shop, we can easily take out two US dollars to pay for the milk carton we need. How would we do this with bitcoin? This currency is not even a physical entity; it’s completely virtual and as a result would impede our daily transactions.

Also, do we estimate the value of our cars in bitcoins? No. We assign a dollar-value to the worth of our vehicles. Associating a bitcoin value to cars seems ludicrous currently, but who knows what might happen in the future. Regarding the final stipulation of storing money, most individuals, I presume, who sell items would prefer to receive actual cash. Even though bitcoin is still a currency, it has not reached its maturity yet to compete with fiat currency.

Even though I might seem a little harsh towards the virtual currency, I am only discussing its practical uses. Bitcoin definitely does have the potential to become the future currency; however, it needs more regulation and stability before common people can set aside their bank notes and transition to this digital payment system.

Needless to say, the digital revolution is well underway. How it will transform traditional banking and currency exchange is hard to predict but definitely fascinating to ponder over.