WHEN Roger Ver goes out for dinner with his friends they all argue over who pays the bill, but it's not because they're especially generous.

They just want to be paid back in BitCoin, an online currency which has almost tripled in value since the beginning of March.

BitCoin, the brainchild of an anonymous programmer who goes by the pseudonym Satoshi Nakamoto, is a digital currency which allows people to make direct payments to each other over the internet.

The coins must be held in a digital wallet, a piece of software which allows you to store BitCoins on your computer, and they can be purchased through an online exchange trader like the foreign exchange counter in a bank.

Once the BitCoins are in your wallet you can then exchange them directly, without going through a bank or clearing house, for anything you wish. There are hardly any transaction fees and the process is anonymous.

Vendor

It may seem foolish to swap real cash for an intangible crypto-currency which is just four years old but it's becoming more common than most realise.

Roger Ver is also the founder of bitcoinstore.com, an online vendor of electronic goods which only accepts payment in BitCoin. The store was launched at the beginning of March and Mr Ver says that it's been a struggle to keep on top of the business.

"Things have just been incredibly busy. We've been overwhelmed with orders," he said. "We've had to hire a bunch of new people."

Here in Ireland it seems to be gaining in popularity. "There's been a bunch of orders from Ireland," Mr Ver said. "All sorts of them."

David Fleming, from EirCoin.net, an Irish BitCoin exchange, also says that demand has risen.

"The number of orders I'm getting for BitCoin has certainly gone up over the last few weeks," he said. "It seems like more people are now starting to find out about it."

Currently the coins can be used to purchase anything from pizzas to televisions. You can use BitCoin to tip people who post interesting comments on websites like Reddit, to invest in hedge funds or even to sell your house. However, many retailers still don't accept the currency. A lot of the time people will have to pay BitCoin to an intermediary, such as bitpay.com, who will purchase the product in the local currency and then send it to you.

"I think it won't be too much longer before major traditional retailers like amazon.com are accepting BitCoins directly," Mr Ver said.

In March, Bitpay processed over $5.2m BitCoin transactions, compared to just under $700,000 in the previous month.

Head writer for BitCoin magazine, Vitalk Buterin, says usage is definitely going up but blames speculators for the jump in value. The value of a single BitCoin has jumped from under €30 at the beginning of March to about €90 today.

"There's been lots of new exchanges popping up [which are] specifically designed for various wealthy investors," Mr Vitalk said.

BitCoin's value is driven purely by supply and demand, something which can lead to instability and extreme fluctuations. For example, in 2011 its value jumped from $1 to over $30 in less than three months. However, just three months later the value had dropped back down to $2.

The currency isn't regulated by Governments, central banks or anything similar. Nor is it backed by reserves such as gold. In fact, anybody with a computer and an internet connection can technically generate BitCoins through a process called "Mining".

In order for the BitCoin system to function each payment has to be validated and submitted to a network. However, this work isn't done by any bank or clearing house but by people connected to the internet throughout the world.

The mining process uses up huge amounts of a computer's processing power because it involves millions of complex calculations. Anyone who offers their computer's processing power to the network is then compensated with BitCoins. However, the money supply is tightly controlled because BitCoins are only rewarded at a fixed rate.

The number of BitCoins, currently just above 11 million, is also finite. Once there are 21 million in circulation, supply will stop.

The disadvantages are that BitCoins carry a certain amount of risk.

Pickpockets

Just as pickpockets can steal your wallet so too can programmers hack into your computer and steal your BitCoins. This can be mitigated by printing out the coins or backing them up offline, for example, on a USB key. Encrypting your wallet is another way of making your BitCoins safer.

Transactions are not reversible, once a payment is made there is no clawback. While this is worrying from a purchaser's perspective it can be an advantage for businesses. "Once I receive the BitCoin, there's no risk of fraud, I know I have it," Mr Ver says.

Even though BitCoin is not an official currency, the Revenue Commissioners here did confirm that any trade or profession which makes a profit using BitCoin is taxable.

"Profit is subject to income tax or corporation tax. . . [irrespective of] the currency by which goods or services are purchased and sold," a spokesperson said.

While the jury may still be out on whether BitCoin falls under tax legislation in certain countries, Mr Ver isn't taking any chances.

He still pays his domestic staff in US dollars, even though some of them would prefer to be paid in BitCoin. "From a legal standpoint it's scary," he said. "Because you never know what politicians are going to decide what's legal and what's not."

Only time will tell whether fighting with his friends to pay all those restaurant bills really was the "smart move".

Irish Independent