Sir Richard Branson thinks so. Virgin Galactic has begun accepting bitcoins.

With Silk Road infamously biting the dust last week and Australia’s bitcoin exchange start-up, CoinJar having secured $500,000 in investment, it seems that people are willing to hedge their bets on this virtual gold mine.

But before you take the plunge, here are a few things to consider:

  1. What the heck are they?

If we remove all of the geek speak (i.e. open source P2P payment network, crypto-currency, public keys, etc), bitcoins are essentially a form of virtual currency that has been around since 2009. People have used them to buy everything from meat to homes.

  1. Why you might want to use bitcoins:
  • The ownership and use of bitcoins are essentially anonymous. While bitcoin transactions are made public, the identities of the parties are very difficult to ascertain. It’s made even harder when a bitcoin can only be used once! Hooray for privacy (but boo to criminal activity)!
  • No crazy fees charged by third parties to complete your transaction.
  • It’s a truly global currency – it’s not dependent on any foreign law and can be used anywhere.
  • Using bitcoins ain’t illegal. Some countries (e.g. US and Canada),
  • have given the ok for their banks to accept them.
  1. Why you might not want to use bitcoins:
  • Given the P2P nature of bitcoins and the fact that no one really controls them, the value of the bitcoin is solely based on what the market’s prepared to pay for it. A bitcoin can be worth 15 cents one day, and $1,000 the next.
  • There’s only a finite supply of these bad boys – just 21 million. 12 million bitcoins are now in circulation so this means there are only 9 million left.
  • The finite supply and attractiveness of the bitcoins to criminal organisations means that bitcoin wallets are susceptible to hackers. In fact, an Australian bitcoin exchange was hacked about a month ago to the value of $1 million (ouch).
  1. What else do I need to know? 

This stuff is new, so expect the authorities to be releasing guidelines governing bitcoin transactions. The ATO, for example, has released a statement saying that such transactions are subject to tax.

And of course, there’s the bitcoin “bubble” debate. But like all speculation, that remains to be seen. Gold doesn’t actually have an inherent value either, you know. So, with all of that in mind, are you willing to get on the bitcoin band wagon?