I'm still wrapping my mind around Bitcoin, a digital currency that has become widely accepted in the last few years. As I understand it, the currency is transferred as an encrypted digital file that can be stored anywhere the owner pleases, and transferred to another party and deleted when used to pay for something.
It appeals to libertarians, since it's outside of government regulation by and large. It appeals to folks working in gray and black markets for much the same reason, so Bitcoin has a bit of shady reputation. So does a stack of $100 bills, since you usually don't need that much cash for a conventional purchase, but we don't ban C-notes.
A Bitcoin exchange, Mt. Gox, got hacked and filed for bankruptcy. They were holding Bitcoins for customers' accounts, but the hack seem to erased the Bitcoin files, which as the same effect of burning a piece of paper currency.
I'm reminded of the practice common in the stock market of brokerages holding shares "in street name" for customers. The brokerage is listed with the company's trustee bank as the owner, but passes any dividends through to the customer; if the customer wants to sell, the shares are at the ready, rather than having to be hauled down to the broker's office. If a brokerage goes under, those street-name stocks are part of the company's assets and frozen until the bankruptcy proceedings get settled; customers are in line with the rest of the creditors...
...except that there is an FDIC for failed brokerage firms, the SIPC. An insured account gets their cash and securities back up to $500,000. Note that you get your stocks back, not what the stocks were worth when Deadbeat Financial went under, so if you were hoping to sell a stock in your portfolio with DF before it took a tumble, you're out of luck, but you still have your shares.
Mt.Gox seems to have been doing something akin to street-name holding of Bitcoins, except there's no SIPC to bail out customers. Bitcoin is "outside of government regulation, by and large", which has its downsides as well as upsides.