Bitcoin is a virtual currency which a few poker sites currently use as an alternative to traditional deposit methods. In this column, PokerStrategy.com editor Matt Kaufman explores the pros and cons of the virtual currency, as well as its potential impact on the poker world.

How does Bitcoin work?

What are some pros and cons of Bitcoin?

Projected Bitcoin creation over time



Could US-facing sites have used Bitcoin?

Will major sites consider Bitcoin?

Earlier this week, a new poker site called "Infiniti Poker" launched a closed Beta version of its software. The software is still somewhat limited, but the site is interesting in one respect - it accepts Bitcoins as well as traditional currencies like Dollars, Euros, and Pounds.Infiniti Poker is now the 3rd poker site I'm aware of to use Bitcoins. The others are "Switch Poker" (which also accepts both Bitcoins and traditional currencies) and "Seals with Clubs", a Bitcoin-only US-facing poker room.Although major poker sites still don't accept Bitcoins, some people believe that Bitcoins will play a large role in the future of transactions on the internet - especially in industries like online gaming.Bitcoin is a controversial virtual currency which is unique in that it operates without a central governing agent. Bitcoins can be used to buy or sell goods and services via peer-to-peer (P2P) transactions on the internet.The following video contains a concise explanation of how Bitcoin works:Several of the advantages of Bitcoins include:- Considering their comparatively small total market cap, Bitcoins have been reasonably stable over the last 6 months, with an overall increase in price. They're created at a steady rate and there is a limited supply - only about 21 million can ever exist.- It is impossible for a central agency to intentionally devalue Bitcoins by rapidly creating more of them, as may soon be the case with the Euro.- Bitcoins can be easily transferred worldwide with very low fees. They're well-encrypted and it is possible to conduct transactions anonymously in many cases.While many Bitcoin-friendly businesses are quick to list the positive aspects of Bitcoins, they often forget the downside:- Although the value of Bitcoins has been reasonably steady over the last several months, they're also more likely to face significant price changes if some major event does occur in the marketplace.- There have been some problems with scammers on Bitcoin - new users who don't understand the system are sometimes very easy targets.- By far the biggest problem facing Bitcoin is the possibility that governments around the world will take action against it. Because Bitcoins can be transferred anonymously, they have been frequently used for black market items including drugs.Due to the inability for governments to monitor sizable Bitcoin transactions, some of them - including the United States - are beginning to take notice and may attempt to put an end to Bitcoin exchanges. If any government action against the currency takes place, the Bitcoin market would surely crash.Online gambling transactions are (perhaps unfairly) considered illegal by a number of governments throughout the world. Most notably, the US took action against many individuals involved in such transactions on Black Friday.What if sites which accepted US-based customers had been handling their deposits and withdrawals in Bitcoins?Perhaps the indictments would have taken place anyway, although the case against the sites would be much more difficult to make without the existence of financial records.Additionally, the most significant Black Friday charge in terms of the potential penalty - conspiracy to commit bank fraud and wire fraud - couldn't reasonably exist. If the transactions took place in Bitcoins via P2P transfers between players and the poker sites, there would have been no bank involved at all - thus, no bank could have been defrauded.For similar reasons, it is reasonable to imagine more US-facing sites accepting Bitcoins as an option in the near future.Despite the fact that Bitcoins seem to function reasonably well, it seems quite unlikely that major poker rooms will begin to accept them anytime in the near future.It is obvious why US-facing poker rooms would use Bitcoins - they're a way to circumvent US laws which prevent Americans from transferring funds to and from gambling sites via banks. For Americans, Bitcoin sites may even be safer than other options which are more likely to attract government attention.However, it is exceedingly difficult to come up with reasons for non-US sites to begin offering Bitcoins as an alternative deposit method. It is not hard for most people to make deposits using their own currency, and the anonymity of the transaction is not a huge advantage considering the poker room itself will need player information anyway.On top of that, there is more incentive now than ever before for non-US sites to stay in good standing with as many governments as they possibly can. Getting involved with a currency that many governments see as a threat is not wise if one of your goals is entry to newly regulated markets.Perhaps we'll someday see a virtual currency really take off on the internet, but until the threat of government intervention is less significant it is unlikely to happen. For now, Bitcoins are an interesting and mostly unexplored territory - but enter at your own risk.