Bitcoin 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. The cryptocurrency was invented in 2008 by an unknown person or group of people using the name Satoshi Nakamoto. The currency began use in 2009 when its implementation was released as open-source software.
Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products, and services, but the real-world value of the coins is extremely volatile. Research produced by the University of Cambridge estimated that in 2017, there were 2.9 to 5.8 million unique users using a cryptocurrency wallet, most of them using bitcoin.
Bitcoin has been criticized for its use in illegal transactions, the large amount of electricity (and thus carbon footprint) used by mining, price volatility, and thefts from exchanges. Some economists and commentators have characterized it as a speculative bubble at various times. Bitcoin has also been used as an investment, although several regulatory agencies have issued investor alerts about bitcoin.
The word bitcoin was defined in a white paper published on 31 October 2008. It is a compound of the words bit and coin. No uniform convention for bitcoin capitalization exists; some sources use Bitcoin, capitalized, to refer to the technology and network and bitcoin, lowercase, for the unit of account.
Satoshi Nakamoto This phenomenon has come to the world of finance in the person of Satoshi Nakamoto, the so-called father of Bitcoin. He appeared out of the ether in 2008 and disappeared just as abruptly three years later, after establishing the world’s first cryptocurrency.
Bitcoin is decentralized thus:
- Bitcoin does not have a central authority.
- There is no central server; the bitcoin network is peer-to-peer.
- There is no central storage; the bitcoin ledger is distributed.
- The ledger is public; anybody can store it on their computer.
- There is no single administrator; the ledger is maintained by a network of equally privileged miners.
- Anybody can become a miner.
- The additions to the ledger are maintained through competition. Until a new block is added to the ledger, it is not known which miner will create the block.
- The issuance of bitcoins is decentralized. They are issued as a reward for the creation of a new block.
- Anybody can create a new bitcoin address (a bitcoin counterpart of a bank account) without needing any approval.
- Anybody can send a transaction to the network without needing any approval; the network merely confirms that the transaction is legitimate