Bitcoin and Beyond: Digital Money in 2012

(Image: ThinkStock)

What Is Digital Currency? What Is Digital Currency?

The most famous digital currency is Bitcoin, which is designed to function like cash. Other digital currencies include the fake gold used in online games and the virtual Credits used on Facebook. All of these can be traded for real cash, and though they are popular, they are far from mainstream. (Image: ThinkStock)

A Prosperous Idea A Prosperous Idea

Perhaps the most intriguing development in digital money is the news that Chris Larsen, who previously founded E-Loan and Prosper, is involved in the design of a new digital currency called Ripple.

Status Update Status Update

As Facebook grows its audience for online payments, it is phasing out the use of Credits, its own digital currency. Instead, the company urges developers to transact in local currencies. (Image: Bloomberg News)

Cultivating an Idea Cultivating an Idea

Amex tied its Serve digital wallet to the Facebook economy with the addition of a quest in the popular Facebook game Farmville. The quest urges Farmville players to open a Serve account.

A Welcome Change A Welcome Change

One Bitcoin exchange, Bitcoin-Central, welcomed European regulators by entering a partnership this year meant to further legitimize the digital currency. (Image: ThinkStock)

Not as Welcome Not as Welcome

Tradehill, a company that exchanges money for bitcoins, shut down after being targeted by regulators for lacking a money transmitter license. (Image: ThinkStock)

Romney Ransom Romney Ransom

Bad news for Bitcoin: the digital currency is now associated with a ransom demand and a Ponzi scheme. The ransom was requested in exchange for Mitt and Ann Romney's tax records. The Ponzi scheme is tied to an online hedge fund called Bitcoin Savings and Trust. (Image: Bloomberg News)

Hackers Attack Hackers Attack

Bitfloor, the fourth largest exchange dealing in U.S. dollars, was hacked in September. The equivalent of about a quarter of a million dollars in bitcoins was stolen from users. The exchange reopened shortly after the incident. (Image: ThinkStock)

Word Up Word Up

As Bitcoin fought for legitimacy, it got it from an unexpected source. The blogging platform WordPress announced it would accept bitcoins as part of its effort to promote free speech the cashlike nature of Bitcoin makes it resistant to the restrictions placed on card transactions. (Image: ThinkStock)

Good as Gold Good as Gold

Activision Blizzard, the company behind the massively popular World of Warcraft online game, has fought the trade of virtual Warcraft gold as real money. However, the company clearly recognizes the currency's potential when it launched its Diablo III game this year, Blizzard added the ability to use real money. (Image: Bloomberg News)

It's been a rocky year for digital currencies. Facebook began phasing out its Facebook Credits while Bitcoin continues to suffer a bad reputation. However, there are some promising developments on the horizon, with experienced payments providers joining in the digital currency game.