A few days ago, the value of all the bitcoins in the world blew past $1 billion for the first time ever. That’s an impressive achievement, for a purely virtual currency backed by no central bank or other authority. It’s also temporary: we’re in the middle of a bitcoin bubble right now, and it’s only a matter of time before the bubble bursts.

There are a couple of reasons why the bubble is sure to burst. The first is just that it’s a bubble, and any chart which looks like the one at the top of this post is bound to end in tears at some point. But there’s a deeper reason, too — which is that bitcoins are an uncomfortable combination of commodity and currency. The commodity value of bitcoins is rooted in their currency value, but the more of a commodity they become, the less useful they are as a currency.

...Still, for the time being, bitcoin is in many ways the best and cleanest payments mechanism the world has ever seen. So if we’re ever going to create something better, we’re going to have to learn from what bitcoin does right – as well as what it does wrong.

There are no bitcoin servers to hack.

Because it's a currency that's based solely in the online world, bitcoins are subject to the same threats as anything else on the Internet, specifically hackers. And that's when the lack of a backing commodity shines through.

On June 19, Mt. Gox, the most popular bitcoin exchange, saw the value of the currency drop from $17 to nearly zero in just a few minutes after hackers gained access to an account with a large number of bitcoins, and sold them all off. The site suspended trading for six days, as it upgraded security and "rolled back" exchange prices to the pre-hack level.

The hack and others like it underscore the problem with the unregulated nature of bitcoins. The unnamed owner of that Mt. Gox account, as well as the owner of another unrelated account who saw 25,000 bitcoins (worth roughly $500,000 at the time) stolen, has little to no chance of recovering his or her investment.

I made $100k so far from Bitcoins, seems I'm doing just great without meds, thanks.

edit:

Technically I didn't make anything yet, but if I sold them that's how much I'd make before taxes.

Sell before the crash!

Also, I'm not sure what was up with all the uncalled for personal attacks on you, but glad to hear you are doing well.

Bitcoins essentially exist as a distributed database of transactions. The history log of transactions are verified by peers which have to solve forced work problems generated by a hash function (using SHA-256 protocol) whenever a transaction occurs. The problems are generated from the transaction details of the public wallet keys (aka ID) of both the transmitter and the receiver as well as the transmitter's private key. The first node to solve the problem broadcasts the results to all clients. They verify the solution and this transaction is then appended to others as a block and becomes a part of the universal, distributed, peer-verified transaction history. As blocks are "generated", nodes are rewarded with BTC created out of thin air by the network (the distributed BTC code) for verifying the transaction. The current rate of generation is 25 BTC/ hour continuing to half until it caps the total at 21 million sometime in 2030s?

Essentially, in order to double spend or chargeback BTC, it would require coordinated computing power greater than the current sum of honest nodes verifying transactions to rebuild the current transaction log with false information and "overtake" the current block.

This summation may have omitted factual details or be incorrect in some aspects but I'm drunk and high right now and I'm still parsing the BTC open source and reading information about it.

Totally do not understand a word of this.

Open-source currency Bitcoin is currently experiencing an incredibly volatile day — after reaching a daily high of $266 earlier, one Bitcoin is currently valued at $178, though pricing has gone as low as $150 as of this writing. That's a difference of more than $100, quite the roller coaster for Bitcoin investors. This comes in the wake of a pretty massive increase in Bitcoin's value — a few weeks ago, the value of all Bitcoins in circulation broke $1 billion, and even today's volatile pricing is still up significantly from there. While there's no telling what is causing the fluctuations yet, it seems likely that it's a result of jittery investors selling off, which drove the price down — and now more investors are jumping on board. We'll be keeping an eye on the price today to see how high or low it will go.

Update 3PM: The wild swings continue — Bitcoin is currently valued at $180, but has gone as low as $126.

What's that, you say? Bitcoins have been fluctuating wildly, losing up to 50% of their value?

Totally do not understand a word of this.

Mt. Gox, the world's largest Bitcoin exchange, is delaying plans to support a new form of virtual currency known as Litecoin following a series of debilitating Internet attacks that are growing increasingly powerful.