The floating Aussie dollar turns 30 next month, but a new digital currency "bitcoin" is taking the world by storm.

A Norwegian man reportedly bought an apartment in Oslo recently after rediscovering bitcoins he bought four years ago when they were invented for just $27.

So what on earth is a bitcoin? Should you buy some?

First, some history.

All currencies are basically promises to pay.

In the old days, when we gathered at the local village market every Sunday, we would exchange goods directly- my pig for your five chickens. If we trusted each other enough, maybe you'd be happy to give me your five chickens today in return for my promise that I'd give you my pig when we saw each other again next Sunday.

When markets grow, this base of trust is harder to sustain.

So, in a bigger market, of participants who have never met, we may rely on a method of exchange, like gold or grain for our transaction.

Let's say we both agreed that one pig and five chickens were both worth one sack of grain. I would probably agree to let you pay me one sack of grain for my pig, instead of five chickens. I'd happily accept that because I would know that I could go use that gain to go buy five chickens from some other trader whenever I pleased.

The grain, in this case acting as a currency, basically a store of value that can be easily exchanged.

Throughout history, many things have acted as currencies, including cattle and grain.

The Aztecs used cocoa beans. The ancient Greeks were the first to realise it may be easier, instead of carting around cattle or grain, to mint coins for exchange.

Modern currency was born.

The value of currencies is crucially dependent on what people are willing to pay for them.

What people are wiling to pay, in turn, depends on how scarce they are. No point accepting water for pigs when water is in abundant supply and pigs are not.

Gold has often been the worlds reserve currency because it exists only in a finite supply.

Likewise, diamonds are a girls best friend precisely because they are so scarce.

In the modern age, governments have seen value in printing their own currencies. Government backed currencies help to extend the scope for trade because, while I might not trust you to pay me for something, nor you me, we both generally trust the government.

A certain level of trust exists that well functioning governments won't destroy the value of their own currencies by printing too much.

And so the modern system of national currencies as we know it was born.

And now we come to bitcoin, a virtual currency that exists only on the internet.

Bitcoins promise a low cost, transaction fee free method of exchange. Cut out the middle man. You pay me in bitcoins over the internet and I can use those bitcoins to buy other things.

Bit coins are created every day by users. Presently 12 million exist, but the founders have said only 21 million will ever exist.

Investors, desperate for investment opportunities in our low yield world have jumped on the bandwagon, buying up bitcoins and pushing their value for pretty much nothing to a high of $940 each. They're currently trading about $650.

So should you run out an buy bitcoins?

Short answer: no.

Remember, currencies are only worth what people will pay for them. And that depends on trust and scarcity.

First, scarcity. While the number of bitcoins is supposed to stop at 21 million, whose to say that will happen? The whole point is that it is user generated and not policed by a middle man.

Which brings me to trust. All transactions must be based on trust, and it's hard to see how anonymous users making promises to each other can be trusted in the long term There is a genuine revolution underway in internet transactions. But bitcoin is a distraction. It's a classic bubble.

Trust me.