Some call it a cryptocurrency - more on that in a future post. It is certainly a non-fiat currency.
The guys over at "CoinDesk: The voice of digit currency" have a nice article on their experience on Silk Road.
Silk Road for readers not yet familar with Bitcoins was a recently shutdown webiste that was accessed through the anonymous Tor network.
Once connected it was simple a site where goods and services were bought and sold using Bitcoins. Where is the harm in that you might ask?
Here is where the problems began given those very same products were class A drugs and other illicit goods. Estimates are that $1.2 billion's worth of transactions took place over the two years of the silk road's existence.
So far, so interesting but where is the economics. This is where it gets interesting. Those $1.2 billion worth of transactions went through using bitcoins - it had become a legitimate currency of exchange.
Of course since mankind first started trading many things have been used for money. Gold, silver, seashells and many other "rare" items.
Bitcoins are mined (a process I will blog about another time) and are limited in supply. Most importantly they are not backed by any government. They are not backed by gold (what is these days) and they are tradable and can be broken into smaller units. It has all the attributes of a currency and it works.
Silk Road was a big player and the shutdown caused a huge sell off of bitcoins (although they bounced back quickly). Early predictions were that Bitcoins were finished. Now the dust has settled other retailers that take Bitcoins continue to do so.
The FEDs own 26,000 of them ($137 per coin) - what will it spend them on?
However, the currency lives on.
John Law's post over on CoinDesk is worth reading.