There is no doubt that physical currency is going the way of the dinosaur. Over the years people have been gradually carrying less and less cash and relying more heavily on debit cards. Interestingly enough as more traditional monies become more virtual there are other virtual currencies actually gaining momentum. The most popular of which being Bitcoin.

Imagine a currency not backed by gold or silver. Unlike a traditional dollar or any other unit of currency where there can always be more of them made, there is only a finite number of Bitcoins in existence thus making inflation impossible. Bitcoin are also originally obtained by a process called mining. Essentially, the creator of Bitcoin, whom remains anonymous has hidden all the Bitcoins behind encrypted algorithms that must be solved using a series of software programs in order for someone to actually obtain them.

Since the currency is easily transferred anonymously it has attracted a lot of attention from criminals whom use Bitcoin in order to trade over virtual black markets like the notorious Silk Road. But don’t let that necessarily be a deterrent. There are many reasons that one would want to potentially get involved with Bitcoin. People whom want to avoid banks or securely hold their funds have turned to Bitcoin.

There is also great potential to have a return on an investment. Though it is considered rather risky, I myself have deeply considered investing in Bitcoin in the past. With the drastic jumps it has seen in the past someone would be crazy not to seeing as to how Bitcoin’s value surged in 2013 when the price jumped from $13 to over a thousand nearly over night. Heck, the price even doubled recently this week to around 800 dollars due to heavy investments from a Chinese market.

I must warn that an investment in Bitcoin however is an extremely risky one. It is also just as likely to plummet at any minute just as it can jump. It will be extremely interesting to see how governments and society either adapt to or attempt to reject these virtual currencies.

Do you have any experience with virtual currencies? Let me know in the comments.