Can Bitcoin become a secure currency?

Last year, bitcoin made headlines when Braintree announced that it was making its first foray into cryptocurrency. As Braintree is owned by PayPal, which is owned by eBay, proponents of digital currency are hopeful that this will smooth the way for bitcoin to be accepted across mainstream payment platforms. Although some firms already accept bitcoin as payment for their products, and bitcoin is also traded on an exchange, regulators and governments have been slow to endorse it as a bona fide currency.

Supporters point to the many benefits offered by bitcoin, such as how bitcoin transfers can be completed almost instantly, and at zero or minimal cost. This compares favorably against the time lapse between bank transfers, and the two to four percent charge imposed on credit card transactions. As bitcoin has a predictable growth supply and is not controlled by a central authority such as the central bank, proponents say it is more stable - it is not subject to the risk of devaluation, which can occur if the central bank prints excessive amounts of money.

Critics, however, say that problems arise precisely because bitcoin is not backed by a central authority. For a currency to be widely accepted, it must be relatively stable in value, and bitcoin's exchange rate with major currencies around the world has been anything but stable. As a case in point, from January to November 2013, speculative trading pushed the price of bitcoin from $13 to $1,242 - which incidentally, is close to the $1,250 for an ounce of gold at that time. Bitcoin's inherent volatility, and the fact that there has been no official guidance from accounting standard-setters on how to account for bitcoins, cast a pall over its widespread use.