Ditching the Dollar: The Real Deal on the Bitcoin

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bitcoinMore than 80 alternative currencies exist in the United States alone.

From BerkShares in western Massachusetts to Bridgetown Bucks in Portland, Ore., cities and regions across the country print dollar alternatives to promote homegrown trade.

But one alternative currency—that’s completely digital and worldwide—has taken the main stage in the aftermath of the recent financial panic in Cyprus.

Hello, bitcoin!

And despite the fact that the bitcoin lost half of its value in April, thanks to better-than-expected economic news and a stock market rally, the digital currency remains more popular than ever—popping up in all sorts of places:

  • An ATM that converts bitcoins into cash was unveiled in San Diego on May 1. And another group of entrepreneurs plans to offer a bitcoin ATM in Boston.
  • Growing ranks of merchants—from a San Francisco cupcake shop to gift card website Gyft—accept bitcoins as payments.
  • Venture capitalists have plowed millions of dollars into start-ups that deal with bitcoins. On May 8, Fred Wilson’s Union Square Ventures announced a $5 million investment in San Francisco-based Coinbase, which makes a virtual wallet for bitcoins, and converts them into traditional currencies.

You can spend bitcoins at any merchant that accepts them using your mobile device. You can transfer bitcoins from your virtual wallet to other bitcoin users. You also can cash in your bitcoins at online exchanges for other currencies.

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But the rapid rise of bitcoin may leave you wondering what to do with this virtual money—and whether you should invest in it or, for that matter, even use it.