Bitcoin crosses $1,000 on Zynga move

Farmville promotional image Zynga said it would allow users to make purchases in some games using Bitcoins

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The value of Bitcoin has topped $1,000 (£610) again after social gaming firm Zynga said it would start accepting the virtual currency as a payment option.

Zynga is perhaps the most significant video games firm to accept bitcoins to date.

The virtual currency has been gaining in popularity but its value has been highly volatile in recent weeks.

It peaked at $1,250 in November last year, but fell sharply in December after China restricted trade.

According to the South China Morning Post, the value of a single Bitcoin fell to as low as 2,560 yuan ($421, £258) in December, after China's move.

On Monday, a single Bitcoin was trading close to $1,030 on MTGox, one of the virtual currency's major exchanges.

Zynga follows Ouya, the Android-based video games console-maker, which began accepting payments for its hardware in bitcoins last month.

The Humble Bundle - an organisation selling a changing selection of indie games - also began accepting bitcoins in 2013.

'Expanded payment options'

Supporters of Bitcoin, which is not backed by a central bank, have been pushing for its increased usage.

How Bitcoin works

Bitcoin is often referred to as a new kind of currency.

But it may be best to think of its units being virtual tokens rather than physical coins or notes.

Like many assets its value is determined by how much people are willing to exchange it for.

To process Bitcoin transactions, a procedure called "mining" must take place, which involves a computer solving a difficult mathematical problem with a 64-digit solution.

For each problem solved, one block of bitcoins is processed. In addition the miner is rewarded with new bitcoins.

This provides an incentive for people to provide computer processing power to solve the problems.

To compensate for the growing power of computer chips, the difficulty of the puzzles is adjusted to ensure a steady stream of about 3,600 new bitcoins a day.

There are currently about 11 million bitcoins in existence.

To receive a bitcoin a user must have a Bitcoin address - a string of 27-34 letters and numbers - which acts as a kind of virtual postbox to and from which the bitcoins are sent.

Since there is no registry of these addresses, people can use them to protect their anonymity when making a transaction.

These addresses are in turn stored in Bitcoin wallets which are used to manage savings.

They operate like privately run bank accounts - with the proviso that if the data is lost, so are the bitcoins owned.

Its popularity and value surged last year after a US Senate committee described virtual currencies as a "legitimate financial service".

Zynga said it had tied up with BitPay, a Bitcoin payment service, to allow users to purchase virtual goods in some of its games using the facility.

"In response to Bitcoin's rise in popularity around the world, Zynga, with help from BitPay, is testing expanded payment options for players to make in-game purchases using Bitcoin," the firm said in a post on Reddit.

Concerns

Concerns over the use and risks associated the virtual currency have also grown.

Bitcoin became popular, in part, due to it being difficult to trace transactions that use it. The currency has been linked to illegal activity online.

Last month, the European Banking Authority (EBA) warned the public about the potential risks of using bitcoins.

"Currently, no specific regulatory protections exist in the European Union that would protect consumers from financial losses if a platform that exchanges or holds virtual currencies fails or goes out of business," the EBA said.

China, the world's second largest economy, has also banned its banks from handling Bitcoin transactions, saying they had no legal status and should not be used as a currency.

At the same time, there have been concerns that the rise in Bitcoin's value has been triggered by speculators looking to cash in on its popularity.

Alan Greenspan, former US Federal Reserve chairman, has called the rapid rise a "bubble".

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