Just as the plastic card liberated many consumers from a reliance on cash and coin, alternative payment sources are gaining enough adoption to steal transactions from plastic — with a little help from the very companies these digital currencies threaten.

Bitcoin, the online crypto-currency that hit the market three years ago, is still portrayed by many in the media as if it were a tabloid starlet (criticized for both its famous-for-being-famous rise to prominence and a reputation that is sometimes linked to illegal drugs), but the currency is slowly making its way into mainstream use.

To truly threaten plastic cards, however, Bitcoin and other digital systems must serve a need where entrenched payment systems are not meeting demand. The payments industry has been all too eager to provide such opportunities.

A relatively recent example is PayPal's decision this year to block payments to the e-book publisher Smashwords, leading some authors to suggest the company seek alternatives (PayPal eventually removed the block). The most prominent example, however, began in late 2010, when the major payments providers blocked transfers to WikiLeaks after the organization released thousands of classified documents. 

To this day, many WikiLeaks supporters use bitcoins to offer their monetary support.

"Bitcoin is a payment platform that is immune to that kind of payment censorship," says Jon Matonis, a payments industry veteran who evangelizes for the currency on his blog, The Monetary Future.

WikiLeaks has taken in at least $32,000 in Bitcoin contributions, Matonis reported Aug. 20 in an article he wrote for Forbes.com. He estimates that the total is much higher, since donors can make contributions to WikiLeaks using Bitcoin addresses other than the public one people can monitor. 

"Unlike traditional bank currency that closes on the weekend, Bitcoin is a currency that never sleeps," Matonis said in an interview.

Bitcoin was always meant to be an alternative to cash and plastic, but in other instances, virtual currencies achieved real value despite the intentions of the currencies' creators.

An example is World of Warcraft gold, which Blizzard Entertainment (now Activision Blizzard) invented for players to use in its online role-playing game. Though other games used similar systems, the popularity of Blizzard's game sparked an explosion in the market for virtual gold.

Blizzard has fought this growth tooth-and-nail. Its policies prohibit players from buying or selling Warcraft gold for cash, since doing so allows the purchaser to buy an advantage over other players.

However, rival game company Sony created Station Exchange in 2005 to allow users to sell in-game gold and items under limited circumstances. Lately even Blizzard is loosening its restrictions. In its Diablo III game, which it launched this May, Blizzard established a structure for players to legitimately buy and sell virtual gold. 

And today it is even possible to fund the purchase of Diablo III gold using bitcoins

Though virtual gold may not be as versatile as bitcoins, it further legitimizes the concept of a digital currency.

Facebook seemed to copy the gaming industry when it created its own currency, Facebook Credits. Though Facebook recently began phasing out Credits, the structure it built around its digital currency remains, and all software developers that use Facebook's platform are required to handle payments through Facebook.

Facebook gets a 30% fee for every transaction completed through its site, says Kevin Flood, CEO of Gameinlane Inc., an online game development and deployment specialist company.

According to Forbes, 1.6% of Facebook users spent more than $1 billion on virtual goods in the first half of 2012. "But they don't generate enough revenue to sustain their growth," Flood says. 

Although many of Facebook's users ultimately fund their purchases with a credit or debit card, Facebook provides an option for those who prefer an alternative — in retail stores, it sells Credits loaded to plastic sheets that resemble gift cards. Users can buy these for cash (or Bitcoin, if the retailer accepts it).

Even as these currencies gain legitimacy, they have a well-earned reputation as money for outsiders. Bitcoin in particular is often categorized this way, as its anonymous nature appeals to those who would prefer their payments be difficult to trace.

"A new technology exploits what's on the edges to start with," Matonis says.

The Center for a Stateless Society, an anarchist think tank and media center, seems a perfect example of a group that would take to using the digital currency.

"I see [Bitcoin] more as one component of a free currency ecosystem than as the dominant model," says Kevin Carson, a research associate for the group.

Websites that run on "Tor" may also prefer Bitcoin over conventional payment systems. Tor, short for "The Onion Router," is a system designed to enable online anonymity by encrypting communication multiple times.

Juha Nurmi, spokesperson for Ahmia, which works on Tor-related projects, says the company avoids accepting card payments.

"Bitcoin is something we have been waiting for; unlike any national currency, Bitcoin is the real currency of the global world," says Nurmi, who plans to try to live using only bitcoins next year.

To some, Bitcoin's anonymous nature is a weakness. Many mainstream consumers prefer to have an automatic record of their transactions, and for that plastic cards are ideal.

"The card gives you protection," Matonis says. "It's not a bad way to pay for things."

Perhaps the line between Bitcoin and the card companies is blurring. A company called BitInstant plans to offer a stored-value card that can fund point of sale payments using bitcoins.

Still, there is a place for a cash-like anonymity in digital payments. "Why lose [anonymity] because we've moved online?" Matonis says.

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