The digital currency bitcoin has broken new records - surging by more than 245 per cent since the start of the year.

Key points: Total cryptocurrency market is worth $US75b (or $101b)

Total cryptocurrency market is worth $US75b (or $101b) The top ten currencies (including bitcoin and ethereum) have a 94 per cent market share

The top ten currencies (including bitcoin and ethereum) have a 94 per cent market share Government will make changes to GST so bitcoin transactions are not double taxed

In just five months, the price of one bitcoin rose from $1,337 (US$997.69) to its all-time-high of $3,704 (US$2,766.56) on May 25.

People buy bitcoins for all sorts of reasons. They range from those seeking to invest in safe haven assets in the face of political instability, speculators wanting to ride the wave of what some regard to be an asset bubble, to purchasers who want to purchase illegal goods anonymously on the dark web.

Since mid-2010, when the highly-volatile currency was worth just 9 cents, it has surged by more than 4 million per cent.

When you add the value of every bitcoin, its current market capitalisation is $49.6 billion - almost half of the value of all cryptocurrencies.

Bitcoin, however, is not the only digital currency which has enjoyed a strong market rally.

"We've had the total market capitalisation of all cryptocurrencies rising three-fold this year - from around US$25 billion to now US$75 billion," according to Steve Sammartino, entrepreneur and technology author.

In Australian dollar terms, the total market capitalisation is more than $101 billion.

"The big two, bitcoin and ethereum, are heading the charge," Mr Sammartino told ABC's The World Today.

Cryptocurrency bubble risks

Mr Sammartino believes the cryptocurrency market is in a bubble.

"The question is which of these cryptocurrencies is going to fail, and which will ones are going to be the winners?"

The ten largest cryptocurrencies are worth more than $95 billion - approximately 94 per cent of the total market share.

However, the remaining 6 per cent of the market is flooded disproportionately by more than 800 of these currencies.

The top ten cryptocurrencies and their market capitalisations (at May 30, 2017). ( Supplied: coinmarketcap.com )

"People are investing, I think, exuberantly. In a way, they are hoping for irrational economic profits they are not going to get," Mr Sammartino said.

"There have been more than 100 ICOs (initial coin offerings) this year."

Unlike the IPO (initial public offering) of a company in the share market, ICOs are not backed by any real, intrinsic value.

"Anyone could start a coin by putting a platform out there and releasing coins on the market using open source software," Mr Sammartino said.

"The problem is these ICOs fall outside the governance of the SEC [US Securities and Exchange Commission] and ASIC [Australian Securities and Investments Commission], but they behave like IPOs in the stock market.

"Creative technologists can raise large amounts of capital with the new cryptocurrency, [then] exit their own position without any regulatory approvals or oversights."

The rise of number two - ethereum

Investors who think bitcoins are too expensive, or are looking for higher yields, are turning to some of the alternative cryptocurrencies.

Bitcoin's 245 per cent surge this year is just a blip, when compared to the bull run of ethereum, which was launched in 2014.

Since January 3, the price of an ethereum unit has surged by more than 2,000 per cent - from $12.69 (US$9.48) to its record-high of $257.59 (US$192.32) on May 24.

One reason for the massive uptake in ethereum is the endorsement it has received from multinational powerhouses including Accenture, Microsoft, Intel, JPMorgan Chase and UBS.

In late-February, those corporate giants (plus two dozen other companies) teamed up to form the Enterprise Ethereum Alliance (EEA).

Credit Suisse, ING, Bank of New York and Thomson Reuters were also among the founding members of EEA.

The alliance was formed to "build, promote and broadly support ethereum-based technology best practices, standards and a reference architecture," according to a statement released by the EEA.

Since its formation, more than 80 other multinationals have joined the EEA including Toyota, State Street, Merck and Rabobank.

Companies that are part of the Enterprise Ethereum Alliance. ( Supplied: EEA website )

The EEA is essentially attempting to create a new kind of computing system based on ethereum's blockchain.

Blockchain is the technology that bitcoin, ethereum and other cryptocurrencies use to facilitate anonymous transactions.

It is basically the register of all transactions in a cryptocurrency, like a bank ledger - which is updated whenever a transaction occurs.

Whereas bitcoin's blockchain is used as consumer payment technology, ethereum's blockchain can also be used for its 'smart contract' applications - which is what attracted the interest of those multinationals.

A smart contract is a computer program that automatically executes the terms of a contract when certain conditions are met.

Through automation, this technology has the potential to reduce the amount of human labour needed to complete a deal.

The future of cryptocurrencies

Although Mr Sammartino considers bitcoin, ethereum and the wider cryptocurrency market is in a bubble, he believes they are the future of payment systems.

"People are starting to realise, within the financial and governmental community, that cryptocurrencies are not going to go away, and they are going to be a staple of our modern economy."

The Australian Government shares some of that sentiment, given its new stance on financial technology and innovation.

"The Government will encourage the exploration of blockchain technology, including through a study and pilot testing by the CSIRO's Data61," it noted in the latest federal budget.

"We will also introduce changes to the GST to ensure that consumers are no longer double taxed when using digital currencies such as bitcoin."

This is a reversal of the Australian Taxation Office's stance.

In 2014, the ATO released guidance stating that it would not treat cryptocurrencies as money - and that it would therefore be taxed in the same way as a non-cash barter transaction.

At the time of publication, bitcoins had risen 5.83 per cent on Tuesday to $3,074.56 per coin, and ethereum had lifted 25.1 per cent to $284.26.