Bitcoin: students at Trinity College Dublin believe a bitcoin credit-check database could solve its transparency problem. Photograph: Karen Bleier/AFP/Getty Images

The students are hoping to develop such a database, in which potential business partners could scope each other out, reducing the risk of fraud while allowing people to maintain sufficient anonymity.

The virtual currency, which can be used to pay for goods and services, is attractive because it is not regulated by governments or banks.

However, the TCD team believe a certain degree of regulation might be a good thing, if only to reduce the risk of fraudulent business practices or money laundering taking place behind bitcoins closed doors.

We wanted to develop systems that would give a regulator a degree of visibility on the flows of bitcoin in the same way that central banks have this visibility over normal currencies, TCD professor of computer science Donal OMahony said.

He said bitcoin basically acts like cash, for the internet.

Just as an ounce of gold or a gram of salt has value across all countries, so too does the electronic bitcoin. The coins are created using computer algorithms that are complex it takes an ever-increasing amount of computer power to create each new one, and there is an overall cap set that no more than 21 million coins can ever be created.

Mr OMahony said people who want privacy migrate to using cash, but this can be inconvenient in many ways particularly in a world in which many transactions take place at a rapid pace and on a global scale at the mere click of a mouse button.

The research-led Trinity team of staff and students looked under the bitcoin bonnet and found bitcoins system is much like that used by Swiss numbered bank accounts. The difference is that every time someone makes a transfer from one numbered bitcoin account to another, it gets written into a giant ledger that is open for the world to see.

Using this giant ledger, called the Bitcoin Blockchain, the students were able to trawl through every bitcoin transaction to date to look for patterns.

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Trinity students to create bitcoin credit-check database