While you were still paying with US dollars, bitcoin had quite the week

Bitcoin has had quite a couple of weeks. Here’s a rundown of what’s up with the weird and fascinating and hard-to-comprehend cryptocurrency.

Bitcoin was center stage for a two-day gathering in San Francisco, called CoinSummit, and earned an enthusiastic backing from big-time venture capitalists Marc Andreessen and Balaji Srinivasan, of investing firm Andreessen Horowitz.

The Mercury News covered the summit, and highlights included:

Andresseen on why mainstream financial institutions and the tech world have to collaborate on bitcon: “Our broad cultural view of money is it’s based on trust of people and institutions. On the technical side, it’s you can trust the math, you can trust the science.”

The engineers and entrepreneurs have to be able to sell the idea of bitcoin, and the regulators and the mainstream institutions have to be willing to listen, he said.

“I think we in Silicon Valley have an obligation to explain ourselves. That’s our responsibility. That does happen; we’re just right at the beginning of it.”

Andreessen said he returned to Twitter after a leave of absence from the social media site primarily to talk about bitcoin. He ended up using Twitter this week, though, to defend/clarify/elaborate on his dig at Warren Buffett, a snide comment he made CoinSummit that ended up going viral.

When asked by a panel moderator to respond to Buffett’s dismissal of bitcoin, Andresseen said: “The historical trend of old white men crapping on new technology they don’t understand is at 100 percent.”

He later tweeted: “Removing foot from mouth slowly and carefully… :-)”

One more bitcoin exchange bit the dust when Vircurex froze user accounts, citing “a complete depletion of our cold wallet balance” after a hacking incident lead to massive losses.

But out with the old, and in with the new. Last week, Princeton Digital Exchange announced a new bitcoin trading platform PDEXtrading.com. Users can register with an email address or using a Google+ profile, and can use the site to view current and upcoming contracts to bid on, current positions, account balances, and more. The New Jersey-based platform was started by tech entrepreneur Ravi Sakaria.

And Vungle, a San Francisco-based video advertising platform, said that mobile developers that use its platform can now get paid in Bitcoin. Vungle is set up to pay mobile app developers directly so that developers don’t have to worry about hunting down advertisers to pay them after an advertisement runs in their apps. The company works with about 4,000 apps. Now, those app developers can open an account with Coinbase and get paid in bitcoin.

“Vungle believes the long-term prospects of the currency deem it important enough to offer it as a payment option,” the company said in a statement.

The IRS announced this week it would tax bitcoin as property, not income — a definitive statement that the regulatory agency does not view bitcoin as legal currency. Some bitcoin enthusiasts called the ruling a disincentive to invest and trade in the cryptocurrency. The ruling means any gains and losses incurred during a transaction are taxable at different rates than US dollars. (If you’re into tax law, you read it for yourself here.)

More on the regulatory front — Pricewaterhouse Cooper, the global professional services and consulting firm, put out a report this week on the risks and potential of bitcoin. The pros? Transactions on the bitcoin network are quicker than any banking institution can offer, and costs are lower because there aren’t any transaction fees. But the report cautions that bitcoin users assume a lot of risk (case in point: the Mt. Gox bankruptcy) and if regulators fail to establish sound, consistent and forward-thinking guidance, financial institutions may shun doing business with companies that deal in bitcoin, forcing an underground economy.

Bitcoin is both a currency and payments network, generated by computers and exists only in cyberspace. It was invented in 2009 and is not regulated or controlled by any company, organization, bank or government. The bitcoin network was created by a mathemiatical formula which caps how many bitcoin can be in circulation (21 million). The current buy price for bitcoin is just more than $503, according to Coinbase.

New bitcoins come from a process called mining, in which computer programmers around the world compete to crack an automatically generated code. When they figure out how to “unlock” the computer code, new bitcoins enter circulation.

 

 

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