The Future and Past of Bitcoins

In 2009, a new type of virtual currency, Bitcoins, were made available on the internet.  Different from other forms of currency, bitcoins are unique in that no government backs them and they can be generated by their users by solving complex algorithms with their computers.  Although unpopular, bitcoins found a niche in illegal activity and became used in the purchase of drugs on the internet.  The website, "The Silk Road", made drugs available for people to purchase using bitcoins.  Using the program TOR to stay anonymous on the internet, individuals could mine or buy bitcoins and then use them to have drugs shipped right to their doorstep.  This wasn't the only possible use for bitcoins though.  Other sites started taking donations in the form of bitcoins and even some internet dating sites started accepting them as payment more recently.  The value of bitcoin skyrocketed with their new found uses.  Once valued at $7 a bitcoin, the price went as high as $250 and settled around $100 with the current value sitting around $140.  Bitcoins were suddenly a big deal and the U.S. government finally set its sights on bitcoin.

Leading up to the arrest of the "Dread Pirate Roberts", the manager of The Silk Road, the U.S. government started to regulate bitcoins.  Regulatory guidelines were set and miners were classified as money service businesses.  The largest bitcoin exchange, Mt. Gox, had their accounts seized by the government due to them not being registered as a money transmitter.  The U.S. government is now taking bitcoin seriously, but how much regulation is needed to make bitcoin mainstream enough to use regularly?  U.S. courts have considered bitcoins to be currency and therefore under their jursidiction, so the question remains how far will the government go to keep this currency legal?  With The Silk Road down and its head arrested, the price of bitcoins dropped to $110 temporarily, but is already back up to its original $140.  Bitcoins will outlive their illegal uses and hopefully become a new common and convenient form of currency, but is it necessary to regulate bitcoin the same as any other currency or will this short period of freedom end when the government steps in?