Bitcoin: What is it, really? A digital currency? An investment? An Xbox game? For many people it's not clear, but that hasn't stopped venture capitalists from going gaga over it.
Since earlier this year, startups dealing in the technology known as Bitcoin have grabbed millions of dollars from some very prominent Silicon Valley VC firms. The amount totals at least some $50 million, all for a technology that could be gone, or pushed deep underground, if financial regulators decided to ban it.
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Half of that $50 million went to Coinbase earlier this month in a major funding round led by Andreessen Horowitz. Coinbase acts as a Bitcoin bank of sorts, providing a suite of services including an exchange for buying and selling bitcoins, a payment processor, and a so-called wallet service for storing bitcoins.
Other startups attracting investor interest since May include BitPay, another payment processor that lets online merchants accept payment in bitcoins; Circle, which offers its own payment acceptance tools and an exchange; itBit, yet another marketplace for trading bitcoins; and BTC China, which has been described as the country's largest exchange but recently was forced to stop accepting deposits after banking regulators took action.
During one particularly manic period in late November, Bitcoin was trading on some exchanges for well over $1,000 -- now it's down to about $625, according to CoinDesk, which measures its per-minute value based on various criteria.
Some bankers and regulators appear to be on the technology's side as well. In an early December report, Merrill Lynch said the technology could become "a major means of payment for e-commerce and may emerge as a serious competitor to traditional money transfer providers." And in Washington, D.C., federal officials in November offered cautionary support for the technology, partly for its potential to promote more efficient global commerce.