Bitcoins have become all the rage lately as its value has skyrocketed this year.

Bitcoins are a form of decentralized, digital currency. Today, Bitcoin is trading around $118. At its peak, it reached $266. In January, it was trading at $15.



Chris Dixon, a partner at Silicon Valley firm Andreessen Horowitz, is making a bet on Bitcoin and has invested a significant amount of money into Bitcoin startups. Last month, Andreessen Horowitz invested an undisclosed amount in a seed round for Bitcoin startup OpenCoin.

Dixon envisions Bitcoins becoming a legitimate, mainstream "payment mechanism," he said at a recent PandoMonthly event in New York. In fact, he believes Bitcoins can completely revolutionize e-commerce as we know it.

“You go to a payment company, half of the staff is anti-fraud,” Dixon said. “You talk to a commerce company… you have to block 40 countries in the world from buying stuff from there.”

With Bitcoins, you don't have to deal with issues of identity fraud and global verification. Like cash or gold, Dixon says, Bitcoins are a financial product where when you hand it to someone, they can look at it and know for a fact that they received it. That's the true power of Bitcoins.

But it's not without risks. Earlier this week, the Department of Homeland Security seized assets from Mt. Gox, the world's largest Bitcoin exchange. The government says it has reason to believe Mt. Gox is guilty of transmitting money without a license.