Bitcoin has been chosen as the word of the year by the Australian National Dictionary Centre (ANDC).

Bitcoin is a type of digital currency in which transactions can be performed without the need for a central bank.

A single bitcoin is essentially a computer file or code that is traded between two people.

A peer-to-peer network using cryptography is used to verify bitcoin transactions as opposed to a central bank.

The currency has exploded in popularity since it began four years ago.

Where once a single bitcoin was worth a few cents online, it is now jumping around $1,000 per coin, creating millionaires in the process.

The ANDC, which is based at the Australian National University (ANU) in Canberra, chose the word after extensive research into popular words and phrases in circulation this year.

The centre's Dr Amanda Laugesen says popular words such as FOMO, microparty, Captain's Pick and twerk were also considered.

"FOMO or 'fear of missing out' refers to the anxiety that an exciting or interesting event may be happening elsewhere, often aroused by posts seen on social media," she said.

"The Federal Election results saw the word microparty come to prominence in reference to small political parties often based around a single issue.

"This year we learnt that to twerk is to dance in a sexually provocative manner involving thrusting hip movements and a low, squatting stance.

"We saw the term popularised by [pop star] Miley Cyrus and the American VMA Awards, and in Australia by Clive Palmer during the election campaign."

Last month, the Oxford Dictionaries chose selfie as its International Word of the Year.

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