Today, the value of one bitcoin exceeded $1,000 for the first time. But what does that mean? How real and safe are these things? What's the future of your bitcoin? It might just be something else entirely -- a ripple.

(A version of this story was published in the December 2013 issue.)

Don't roll your eyes. I know — another article about bitcoin. But I promise this one's different. I'm not a fanboy who theorizes about the identity of secret creator "Satoshi Nakamoto." And I'm not a throwback who believes that since money creation has largely been left to government fiat over the past hundred years, this must always be so.

I'm a believer. But not so much because I understand or care to understand the complexity underlying the creation of math-based currency. It's more because I have seen all kinds of things turn into money and have also seen things that are already money deployed so irresponsibly that it enabled new money to take hold.

Let's backtrack a bit. Bitcoin is a "cryptocurrency" in which new coins are minted digitally and transferred based on an open-source Internet protocol that doesn't go through a central intermediary. The coins are processed by servers that "mine" new bitcoins via a mathematical formula that limits the total number that can ever be created to 21 million. Over an already volatile 2013, the value of a single bitcoin has ranged from $13 to more than $1,000, and it's attracted the attention of everyone from the Winklevoss twins to a new fund (the Bitcoin Investment Trust) composed only of bitcoins.

As revolutionary as I believe bitcoin to be, the mining process creates critical weaknesses — it's difficult to understand and can be panic-inducing for the several minutes people are waiting to get their funds. And if your funds disappear from the noncentralized ledger, there's no recourse; they're just gone, as has happened recently. But now there's an alternative — an open-source math-based currency called ripple — that solves some of the problems.

The genius of both bitcoin and ripple is there is no centralized depository. Without a central "ledger," all transactions must be broadcast to all other servers that run the protocol so that these math-based currencies avoid being debased. Both are anonymous and skillfully encrypted.

But bitcoins have to be mined through a series of cumbersome Cloud-based computations that take ten minutes or so; ripples are instantaneous. And you get a key to recover any apparently compromised accounts.

Naturally, there are haters who cannot endure the idea of a company, Ripple Labs, creating a more user-friendly protocol on top of the libertarian utopia of bitcoin. Then there are those who criticize Ripple's business plan. The idea is to create 100 billion ripples and get more than half of them into the hands of the public by giving them away. As more people start using ripples to buy things, they will presumably grow in value, leaving the company and its founders sitting on about 50 billion ripples. If that's devious, then so is every company that's ever gone public while retaining the great bulk of its shares.

It's also analogous to what governments do. Every government manipulates its currency. What's more, they're not transparent about it. At least these guys have made it clear that there can never be another ripple created. When the U. S. needed more cash to bail out AIG and other reckless financial actors, it simply printed more money.

Ripple also solves some other elemental problems in the existing system of government-issued money. Banks are thieves. Every three months, I get a distribution of about $1,400 from an investment I have in some apartments. It's wired directly to my bank account, yet my bank charges me $15 for the privilege. Then there's the time question. I am a user of Dwolla, an online payment system that you can use like cash in thousands of stores. Funding my Dwolla account took six days from the moment it was taken out of my bank account. It's absurd. Someone had use of that float for almost a week.

The entire corrupt system is ripe for disruption.

Chris Larsen, the CEO of Ripple Labs Inc., is someone I've written about often. His first company, E-Loan, sought to democratize mortgage lending, and his second company, Prosper, sought to do the same for peer-to-peer lending. The problem with both of those ideas is that they were seeking to dismantle gigantic industries with huge political momentum.

This time, ripple could have its own giant on its side. MasterCard and Visa charge as much as 4 percent for their transactions. The banks that issue the cards in the end get to keep some of that. But all they really get for taking the risk that you don't pay your bill is the chance to collect massive interest if you're late. These banks would love to keep collecting that interest without having to pay MasterCard and Visa. Ripple makes that possible if it gets accepted ubiquitously. In my opinion, the big financial-service brands ought to feel about ripple the way the record labels felt about Napster.

And then it's game on. With the August announcement that Germany will start taxing bitcoin assets, and a ruling by a federal judge in Texas that bitcoin is a legit currency, it's clear that imaginary money is becoming more real by the day. Meanwhile, I'm stocking up on ripple while it's still less than a dollar apiece.

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