Despite this rollercoaster ride, the outstanding supply of the digital money is worth about $US1.3 billion. The Winklevii — as they are popularly known — say they own nearly 1 per cent of that, or some $US11 million. Hot commodity: bitcoins. Credit:Flickr/zachcopley The decision by the brothers to go public with their position signals a new stage of maturity for what has been an experiment alternative to national currencies. Created in 2009 by a programmer or programmers known only by a pseudonym, the bitcoin world has, until now, been dominated by a cabal of anonymous traders. Now mainstream investments in the digital money are starting to emerge. On Thursday, a group of venture capitalists, including Andreessen Horowitz, announced that they were funding a bitcoin-related company, OpenCoin. Other Silicon Valley venture firms, while not holding bitcoins, are starting to show interest in the technology. Tim Draper of the firm Draper Fischer Jurvetson put money into CoinLab, which is doing bitcoin-related projects. Tribeca Venture Partners announced this week they were putting money into Coinsetter, a startup trading platform for the currency. The question, however, is whether bitcoin will end up in the same dustbin as Dutch tulips and Pets.com, or, as its backers believe, turn into a disruptive technology with the potential to revolutionise the global payments system.

"It's not something I'd want to be involved in or have any investor's money involved with," said Steven Hanke, a professor specialising in alternative currencies at Johns Hopkins University. "To say highly speculative would be the understatement of the century." Bitcoin hit a high of $260 this week, before falling to $120 on Thursday before a 12-hour trading halt. Credit:richardhughes@fairfaxmedia.com.a Tumult But the 6-foot-5 (1.95 metre) Winklevii are unfazed by the latest tumult. Indeed, the brothers said they used the low prices to buy more. They argue that bitcoin will have much further to soar once a broader audience sees its virtues: a unit of exchange that can be moved around the world at the click of a button without requiring any payments to Western Union or American Express. The Winklevoss twins, as played by actor Armie Hammer, in 'The Social Network'. Credit:Theresa Ambrose

"People say it's a Ponzi scheme, it's a bubble," Cameron Winklevoss said on Thursday. "People really don't want to take it serious. At some point that narrative will shift to 'virtual currencies are here to stay.' We're in the early days." Other champions of bitcoin also believe that it could mark a new chapter in the history of money. "Three eras of currency," Chris Dixon, a partner at Andreesen Horowitz and well-known technology investor, recently wrote on a personal website. "Commodity based, e.g., Gold; Politically based, e.g., Dollar; and Math based, e.g., Bitcoin." Olympic rowers Tyler and Cameron Winklevoss in action. Credit:Getty Images For those whose idea of money still involves greenbacks and metal coins, bitcoins do not exist in any explicit physical form. The creators wrote algorithms that allow only a finite number of bitcoins to be created — the count is currently around 11 million — with new coins "mined" by programmers who solve mathematical riddles. The coins can then be bought and sold through upstart exchanges, and held in what are known as virtual wallets. So far, few real companies accept bitcoins as payment, and the primary place they can be used is an online bazaar, known as Silk Road, where narcotics and weapons are the main wares for sale.

But the currency's believers see a future in which Starbucks and Amazon take bitcoins. For their part, the Winklevoss twins have used some of their bitcoin to pay for the services of a Ukrainian computer programmer who has worked on the site of their venture capital firm. While bitcoin has amassed a cult following since its beginnings, it has set off a frenzy in recent weeks as the price spiked from $35 per bitcoin at the beginning of March, to a high of $255 early Wednesday. Some of the credit for this surge is given to the banking crisis in Cyprus, which raised some questions about the viability of the euro currency. "We have elected to put our money and faith in a mathematical framework that is free of politics and human error," Tyler Winkelvoss said. 'The Social Network' Bitcoin is far from the first bet the brothers have made on an emerging technology. As students at Harvard College, the twins founded a social networking site, ConnectU, and enlisted their schoolmate, Mark Zuckerberg, to help them build the company. After Zuckerberg went off to start Facebook, the brothers sued him, accusing him of stealing their idea — a story that was dramatised in the movie The Social Network. The case was settled with the brothers being given $20 million in cash and Facebook shares that are now worth over $200 million. They have parlayed that fortune into Winklevoss Capital Partners.

Bitcoin itself exists as a string of letters and numbers. In order to keep their holdings secure from hackers, the twins have taken those codes off of any networked computer and saved them on small flash drives. They said they have put the drives in safe deposit boxes at banks in three different cities. It's hard to verify how the Winklevoss holdings compare with other bitcoin players given the anonymity of accounts, and the twins believe that some early users of the system probably have holdings that are at least as large. A Maltese hedge fund, Exante Partners, says it has bought up about 82,000 bitcoins — or about $US10 million as of Thursday — with money from wealthy investors. A founder of the fund, Anatoli Knyazev, said his main concern is hackers and government regulators, who have so far mostly left the currency alone. Loading These investments were all in an uncertain state on Thursday after the big price swings and the shutdown of trading on Mount Gox, a Japan-based company that claims to handle 80 per cent of all bitcoin trades. Mount Gox said in a statement that the problems were a result of the currency's popularity, making it impossible to process all the incoming orders. It added that it was not the victim of hackers but "instead victim of our own success!"

New York Times