What’s the News: The currency on the tech world’s lips these days isn’t the yen or the yuan. It’s Bitcoin, a digital form of money that’s totally anonymous and currently valued at many times the worth of the dollar and the Euro. How does it work, what can you buy with it, and why is it making people mad?

What’s the Context:

The first thing to consider is that currency is just the physical manifestation of a promise. Money issued by governments has value because governments say it does, and its value fluctuates according to people’s faith in the government. It used to be that money was worth something because of the agreed-upon value of its contents, like gold or silver, but modern currencies trade on trust rather than intrinsic value.
Digital currency can be made anonymous and independent of third parties like governments or banks. Its advocates, notably the hacker community, see this ...