An expert on virtual online currencies says they are here to stay.

The University of Cumbria became the first in the world to accept payment of fees in the online currency, Bitcoin, in 2014.

At the turn of the year, the currency's value jumped above $1,000 for the first time in three years, outperforming all central-bank-issued currencies, with a 125 per cent climb in 2016.

Professor Jem Bendell, founder of the Institute for Leadership and Sustainability (IFLAS) at the university, says that there are many theories about why people are buying and holding Bitcoin - and who they are.

"My view is that the steady price increase over the last two years is a result of hedge funds using bitcoin to diversify their assets as a means of cheap international transfer," he told the News & Star.

"The main lesson of this price is wider than bitcoin. It shows that private currencies are here to stay."

The university began accepting Bitcoin payments for two courses that addressed online currencies.

"As a university, we have found it useful to learn about private currencies, following our move to be the world's first public university to accept Bitcoin," Prof Bendell added.

"Our free online course on this topic, called the Money and Society MOOC, now has over 300 alumni.

"We also offer a qualification that those alumni can study for."

However, Prof Bendell said research conducted by the university - and published by the UN - shows there are better forms of complementary currency than Bitcoin that already exist to help local communities trade together.

"I'm delighted that two of our students are creating one such local currency for Cumbria, launching later this year," he said.

"As it has grown, the Bitcoin system has become slower, so it is no longer such a useful means of payment - and transactions denominated in Bitcoin are actually using different systems.

"Bitcoin has introduced a wider audience to currency innovation but it won't be the central innovation in years to come: our creativity is already moving ahead of it."