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It is a decentralized digital currency without a central bank or single administrator that can be sent from user-to-user on the peer-to-peer bitcoin network without the need for intermediaries. Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain. Bitcoin was invented by an unknown person or group of people using the name Satoshi Nakamoto \\\\\\\\\\\\\[9\\\\\\\\\\\\\] and released as open-source software in They can be exchanged for other currencies, \\\\\\\\\\\\\[11\\\\\\\\\\\\\] products, and services. Research produced by the University of Cambridge estimates that in , there were 2. Bitcoin has been criticized for its use in illegal transactions, its high electricity consumption, price volatility, thefts from exchanges, and the possibility that bitcoin is an economic bubble. The domain name 'bitcoin. In January , the bitcoin network was created when Nakamoto mined the first block of the chain, known as the genesis block. The receiver of the first bitcoin transaction was cypherpunk Hal Finney , who created the first reusable proof-of-work system RPOW in Wei Dai , creator of b-money , and Nick Szabo , creator of bit gold. Nakamoto is estimated to have mined one million bitcoins \\\\\\\\\\\\\[27\\\\\\\\\\\\\] before disappearing in , when he handed the network alert key and control of the code repository over to Gavin Andresen. Andresen later became lead developer at the Bitcoin Foundation. This left opportunity for controversy to develop over the future development path of bitcoin. After early ' proof-of-concept ' transactions, the first major users of bitcoin were black markets , such as Silk Road. During its 30 months of existence, beginning in February , Silk Road exclusively accepted bitcoins as payment, transacting 9. Litecoin , an early bitcoin spin-off or altcoin , appeared in October In March the blockchain temporarily split into two independent chains with different rules. The two blockchains operated simultaneously for six hours, each with its own version of the transaction history. Normal operation was restored when the majority of the network downgraded to version 0. Prices remained low until late China banned trading in bitcoin, with the first steps taken in September , and a complete ban starting 1 February Bitcoin prices were negatively affected by several hacks or thefts from cryptocurrency exchanges, including thefts from Coincheck in January , Coinrail and Bithumb in June, and Bancor in July. In November , the state of Ohio , in the United States, became the first North American government agency to allow businesses to pay various state taxes through an intermediary that converts bitcoin into dollars. The bitcoin blockchain is a public ledger that records bitcoin transactions. A network of communicating nodes running bitcoin software maintains the blockchain. Network nodes can validate transactions, add them to their copy of the ledger, and then broadcast these ledger additions to other nodes. To achieve independent verification of the chain of ownership each network node stores its own copy of the blockchain. This allows bitcoin software to determine when a particular bitcoin was spent, which is needed to prevent double-spending. A conventional ledger records the transfers of actual bills or promissory notes that exist apart from it, but the blockchain is the only place that bitcoins can be said to exist in the form of unspent outputs of transactions. Transactions are defined using a Forth -like scripting language. When a user sends bitcoins, the user designates each address and the amount of bitcoin being sent to that address in an output. To prevent double spending, each input must refer to a previous unspent output in the blockchain. Since transactions can have multiple outputs, users can send bitcoins to multiple recipients in one transaction. As in a cash transaction, the sum of inputs coins used to pay can exceed the intended sum of payments. In such a case, an additional output is used, returning the change back to the payer. The unit of account of the bitcoin system is a bitcoin. Though transaction fees are optional, miners can choose which transactions to process and prioritize those that pay higher fees. The size of transactions is dependent on the number of inputs used to create the transaction, and the number of outputs. In the blockchain, bitcoins are registered to bitcoin addresses. Creating a bitcoin address requires nothing more than picking a random valid private key and computing the corresponding bitcoin address. This computation can be done in a split second. But the reverse, computing the private key of a given bitcoin address, is mathematically unfeasible. Users can tell others or make public a bitcoin address without compromising its corresponding private key. Moreover, the number of valid private keys is so vast that it is extremely unlikely someone will compute a key-pair that is already in use and has funds. The vast number of valid private keys makes it unfeasible that brute force could be used to compromise a private key. To be able to spend their bitcoins, the owner must know the corresponding private key and digitally sign the transaction. The network verifies the signature using the public key. If the private key is lost, the bitcoin network will not recognize any other evidence of ownership; \\\\\\\\\\\\\[31\\\\\\\\\\\\\] the coins are then unusable, and effectively lost. Mining is a record-keeping service done through the use of computer processing power. To be accepted by the rest of the network, a new block must contain a proof-of-work PoW. In this way the system automatically adapts to the total amount of mining power on the network. The proof-of-work system, alongside the chaining of blocks, makes modifications of the blockchain extremely hard, as an attacker must modify all subsequent blocks in order for the modifications of one block to be accepted. Computing power is often bundled together or 'pooled' to reduce variance in miner income. Individual mining rigs often have to wait for long periods to confirm a block of transactions and receive payment. In a pool, all participating miners get paid every time a participating server solves a block. This payment depends on the amount of work an individual miner contributed to help find that block. The successful miner finding the new block is rewarded with newly created bitcoins and transaction fees. To claim the reward, a special transaction called a coinbase is included with the processed payments. The bitcoin protocol specifies that the reward for adding a block will be halved every , blocks approximately every four years. Eventually, the reward will decrease to zero, and the limit of 21 million bitcoins \\\\\\\\\\\\\[f\\\\\\\\\\\\\] will be reached c. Their numbers are being released roughly every ten minutes and the rate at which they are generated would drop by half every four years until all were in circulation. A wallet stores the information necessary to transact bitcoins. While wallets are often described as a place to hold \\\\\\\\\\\\\[91\\\\\\\\\\\\\] or store bitcoins, \\\\\\\\\\\\\[92\\\\\\\\\\\\\] due to the nature of the system, bitcoins are inseparable from the blockchain transaction ledger. A better way to describe a wallet is something that 'stores the digital credentials for your bitcoin holdings' \\\\\\\\\\\\\[92\\\\\\\\\\\\\] and allows one to access and spend them. Bitcoin uses public-key cryptography , in which two cryptographic keys, one public and one private, are generated. There are several modes which wallets can operate in. They have an inverse relationship with regards to trustlessness and computational requirements. Third-party internet services called online wallets offer similar functionality but may be easier to use. A malicious provider or a breach in server security may cause entrusted bitcoins to be stolen. An example of such a security breach occurred with Mt. Physical wallets store the credentials necessary to spend bitcoins offline. Another type of wallet called a hardware wallet keeps credentials offline while facilitating transactions. The first wallet program, simply named Bitcoin , and sometimes referred to as the Satoshi client , was released in by Satoshi Nakamoto as open-source software. Bitcoin Core is, perhaps, the best known implementation or client. On 1 August , a hard fork of bitcoin was created, known as Bitcoin Cash. On 24 October another hard fork, Bitcoin Gold , was created. Bitcoin Gold changes the proof-of-work algorithm used in mining, as the developers felt that mining had become too specialized. Bitcoin does not have a central authority and the bitcoin network is decentralized: Researchers have pointed out at a 'trend towards centralization'. Although bitcoin can be sent directly to the bitcoin network, in practice intermediaries are widely used. The pool has voluntarily capped their hashing power at According to researchers, other parts of the ecosystem are also 'controlled by a small set of entities', notably the maintenance of the official client software, online wallets and simplified payment verification SPV clients. Bitcoin is pseudonymous , meaning that funds are not tied to real-world entities but rather bitcoin addresses. Owners of bitcoin addresses are not explicitly identified, but all transactions on the blockchain are public. In addition, transactions can be linked to individuals and companies through 'idioms of use' e. To heighten financial privacy, a new bitcoin address can be generated for each transaction. Wallets and similar software technically handle all bitcoins as equivalent, establishing the basic level of fungibility. The blocks in the blockchain were originally limited to 32 megabytes in size. The block size limit of one megabyte was introduced by Satoshi Nakamoto in Eventually the block size limit of one megabyte created problems for transaction processing, such as increasing transaction fees and delayed processing of transactions. Transactions contain some data which is only used to verify the transaction, and does not otherwise effect the movement of coins. SegWit introduced a new transaction format that moved this data into a new field in a backwards-compatible way. The segregated data, the so-called witness , is not sent to non-SegWit nodes and therefore does not form part of the blockchain as seen by legacy nodes. Thus, per computer scientist Jochen Hoenicke, the actual block capacity depends on the ratio of SegWit transactions in the block, and on the ratio of signature data. Satoshi Nakamoto stated in his white paper that: The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. According to the European Central Bank , the decentralization of money offered by bitcoin has its theoretical roots in the Austrian school of economics , especially with Friedrich von Hayek in his book Denationalisation of Money: The Argument Refined , \\\\\\\\\\\\\[\\\\\\\\\\\\\] in which he advocates a complete free market in the production, distribution and management of money to end the monopoly of central banks. According to The New York Times , libertarians and anarchists were attracted to the idea. Early bitcoin supporter Roger Ver said: We saw bitcoin as a great idea, as a way to separate money from the state. Nigel Dodd argues in The Social Life of Bitcoin that the essence of the bitcoin ideology is to remove money from social, as well as governmental, control. The declaration includes a message of crypto-anarchism with the words: Bitcoin undermines governments and disrupts institutions because bitcoin is fundamentally humanitarian. David Golumbia says that the ideas influencing bitcoin advocates emerge from right-wing extremist movements such as the Liberty Lobby and the John Birch Society and their anti-Central Bank rhetoric, or, more recently, Ron Paul and Tea Party -style libertarianism. It takes control back from central authorities. However, researchers looking to uncover the reasons for interest in bitcoin did not find evidence in Google search data that this was linked to libertarianism. Bitcoin is a digital asset designed to work in peer-to-peer transactions as a currency. Economists define money as a store of value , a medium of exchange , and a unit of account. According to research by Cambridge University , between 2. The number of users has grown significantly since , when there were , to 1. The overwhelming majority of bitcoin transactions take place on a cryptocurrency exchange , rather than being used in transactions with merchants. Prices are not usually quoted in units of bitcoin and many trades involve one, or sometimes two, conversions into conventional currencies. Bitcoin is 'not actually usable' for retail transactions because of high costs and the inability to process chargebacks , according to Nicholas Weaver, a researcher quoted by Bloomberg. High price volatility and transaction fees make paying for small retail purchases with bitcoin impractical, according to economist Kim Grauer. However, bitcoin continues to be used for large-item purchases on sites such as Overstock. Bitcoins can be bought on digital currency exchanges. Bitcoin has not gained acceptance for use in international remittances despite high fees charged by banks and Western Union who compete in this market. Unlike bitcoin, these competitors accept and dispense cash and do not require the use of the Internet which is a distinct advantage in lower income countries. In , the National Australia Bank closed accounts of businesses with ties to bitcoin, \\\\\\\\\\\\\[\\\\\\\\\\\\\] and HSBC refused to serve a hedge fund with links to bitcoin. Plans were announced to include a bitcoin futures option on the Chicago Mercantile Exchange in The Winklevoss twins have purchased bitcoin. Other methods of investment are bitcoin funds. The first regulated bitcoin fund was established in Jersey in July and approved by the Jersey Financial Services Commission. Forbes named bitcoin the best investment of The price of bitcoins has gone through cycles of appreciation and depreciation referred to by some as bubbles and busts. According to Mark T. However, the use of bitcoin can be criminalized, and shutting down exchanges and the peer-to-peer economy in a given country would constitute a de facto ban. Regulations and bans that apply to bitcoin probably extend to similar cryptocurrency systems. According to the Library of Congress , an 'absolute ban' on trading or using cryptocurrencies applies in eight countries: Seventeen other countries have similar AML requirements. Commodity Futures Trading Commission has issued four 'Customer Advisories' for bitcoin and related investments. Securities and Exchange Commission has also issued warnings. A May 'Investor Alert' warned that investments involving bitcoin might have high rates of fraud, and that investors might be solicited on social media sites. An official investigation into bitcoin traders was reported in May Justice Department launched an investigation into possible price manipulation, including the techniques of spoofing and wash trades. K, South Korea, and possibly other countries are being investigated. Following the first delivery date in January , the CME requested extensive detailed trading information but several of the exchanges refused to provide it and later provided only limited data. The Commodity Futures Trading Commission then subpoenaed the data from the exchanges. State and provincial securities regulators, coordinated through the North American Securities Administrators Association , are investigating 'bitcoin scams' and ICOs in 40 jurisdictions. Academic research published in the Journal of Monetary Economics concluded that price manipulation occurred during the Mt Gox bitcoin theft and that the market remains vulnerable to manipulation. Research by John M. Griffin and Amin Shams in suggests that trading associated with increases in the amount of the Tether cryptocurrency and associated trading at the Bitfinex exchange account for about half of the price increase in bitcoin in late The Bank for International Settlements summarized several criticisms of bitcoin in Chapter V of their annual report. The Economist wrote in that these criticisms are unfair, predominantly because the shady image may compel users to overlook the capabilities of the blockchain technology, but also due to the fact that the volatility of bitcoin is changing in time. Bitcoin and other cryptocurrencies have been identified as economic bubbles by at least eight Nobel Memorial Prize in Economic Sciences laureates, including Robert Shiller , \\\\\\\\\\\\\[\\\\\\\\\\\\\] Joseph Stiglitz , \\\\\\\\\\\\\[\\\\\\\\\\\\\] and Richard Thaler. Bitcoin has been criticized for the amount of electricity consumed by mining. As of \\\\\\\\\\\\\[update\\\\\\\\\\\\\] , The Economist estimated that even if all miners used modern facilities, the combined electricity consumption would be To lower the costs, bitcoin miners have set up in places like Iceland where geothermal energy is cheap and cooling Arctic air is free. Various journalists, \\\\\\\\\\\\\[\\\\\\\\\\\\\] \\\\\\\\\\\\\[\\\\\\\\\\\\\] economists, \\\\\\\\\\\\\[\\\\\\\\\\\\\] \\\\\\\\\\\\\[\\\\\\\\\\\\\] and the central bank of Estonia \\\\\\\\\\\\\[\\\\\\\\\\\\\] have voiced concerns that bitcoin is a Ponzi scheme. In , Eric Posner , a law professor at the University of Chicago, stated that 'a real Ponzi scheme takes fraud; bitcoin, by contrast, seems more like a collective delusion. Bitcoin is vulnerable to theft through phishing , scamming , and hacking. The use of bitcoin by criminals has attracted the attention of financial regulators, legislative bodies, law enforcement, and the media. Senate held a hearing on virtual currencies in November Several news outlets have asserted that the popularity of bitcoins hinges on the ability to use them to purchase illegal goods. By regulating the abuses, you are going to regulate it out of existence. It exists because of the abuses. In , researchers at the University of Kentucky found 'robust evidence that computer programming enthusiasts and illegal activity drive interest in bitcoin, and find limited or no support for political and investment motives'. There were an estimated 24 million bitcoin users primarily using bitcoin for illegal activity. The Japanese platform Line and the Russian platform Yandex have similar prohibitions. Bitcoin was obscure back then, and I figured had just enough name recognition to be a useful term for an interstellar currency: The documentary The Rise and Rise of Bitcoin portrays the diversity of motives behind the use of bitcoin by interviewing people who use it. These include a computer programmer and a drug dealer. It covers studies of cryptocurrencies and related technologies, and is published by the University of Pittsburgh. Authors are also asked to include a personal bitcoin address in the first page of their papers. From Wikipedia, the free encyclopedia. For a broader coverage of this topic, see Blockchain. Number of bitcoin transactions per month logarithmic scale \\\\\\\\\\\\\[66\\\\\\\\\\\\\]. Number of unspent transaction outputs. Amateur bitcoin mining with specialized ASIC chips. This was when mining difficulty was much lower, and this is no longer feasible. Today, bitcoin mining companies dedicate facilities to housing and operating high performance mining hardware. For a broader coverage of this topic, see Mining pool. For a broader coverage of this topic, see Cryptocurrency wallet. Bitcoin Core , a full client. A paper wallet with the credentials required to send and receive bitcoin payments printed to the page as 2D barcodes. A brass token with credentials usable to redeem bitcoins hidden beneath a tamper-evident security hologram. A hardware wallet peripheral which processes bitcoin payments without exposing any credentials to the computer. Fork blockchain and List of bitcoin forks. Price \\\\\\\\\\\\\[g\\\\\\\\\\\\\] left y-axis, logarithmic scale and volatility \\\\\\\\\\\\\[h\\\\\\\\\\\\\] right y-axis. Legality of bitcoin by country or territory. Bitcoin portal Cryptography portal Business and economics portal Free and open-source software portal Internet portal Numismatics portal. 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