Bitcoin is a cryptocurrency and worldwide payment system.[9]:3 It is the first decentralized digital currency, as the system works without a central bank or single administrator.[9]:1[10] The network is peer-to-peer and transactions take place between users directly, without an intermediary.[9]:4 These transactions are verified by network nodes through the use of cryptography and recorded in a public distributed ledger called a blockchain. Bitcoin was invented by an unknown person or group of people under the name Satoshi Nakamoto[11] and released as open-source software in 2009.[12]

Etymology

The word bitcoin first occurred and was defined in the white paper[6] that was published on 31 October 2008.[16] It is a compound of the words bit and coin.[17] The white paper frequently uses the shorter coin.[6]

There is no uniform convention for bitcoin capitalization. Some sources use Bitcoin, capitalized, to refer to the technology and network and bitcoin, lowercase, to refer to the unit of account.[18] The Wall Street Journal,[19] The Chronicle of Higher Education,[20] and the Oxford English Dictionary[17] advocate use of lowercase bitcoin in all cases, a convention followed throughout this article.

Unit

The unit of account of the bitcoin system is bitcoin. As of 2014, ticker symbols used to represent bitcoin are BTC[a] and XBT.[b] Its Unicode character is ₿.[25]:2 Small amounts of bitcoin used as alternative units are millibitcoin (mBTC)[1], bit (ƀ)[26][3] and satoshi (sat). Named in homage to bitcoin's creator, a satoshi is the smallest amount within bitcoin representing 0.00000001 bitcoins, one hundred millionth of a bitcoin.[4] A bit equals 0.000001 bitcoins, one millionth of a bitcoin or 100 satoshis. A millibitcoin equals 0.001 bitcoins, one thousandth of a bitcoin or 100,000 satoshis.[27]

history

On 18 August 2008, the domain name "bitcoin.org" was registered.[28] In November that year, a link to a paper authored by Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System[6] was posted to a cryptography mailing list.[28] Nakamoto implemented the bitcoin software as open source code and released it in January 2009 on SourceForge.[29][30][12] The identity of Nakamoto remains unknown.[11]

In January 2009, the bitcoin network came into existence after Satoshi Nakamoto mined the first ever block on the chain, known as the genesis block.[31][32] Embedded in the coinbase of this block was the following text:

The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.[12]

This note has been interpreted as both a timestamp of the genesis date and a derisive comment on the instability caused by fractional-reserve banking.[33]

One of the first supporters, adopters, and contributors to bitcoin was the receiver of the first bitcoin transaction, programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received 10 bitcoins from Nakamoto in the world's first bitcoin transaction.[34][35] Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold.[36]

In the early days, Nakamoto is estimated to have mined 1 million bitcoins.[37] In 2010, Nakamoto handed the network alert key and control of the Bitcoin Core code repository over to Gavin Andresen, who later became lead developer at the Bitcoin Foundation.[38][39] Nakamoto subsequently disappeared from any involvement in bitcoin.[40] Andresen stated he then sought to decentralize control, saying: "As soon as Satoshi stepped back and threw the project onto my shoulders, one of the first things I did was try to decentralize that. So, if I get hit by a bus, it would be clear that the project would go on."[40] This left opportunity for controversy to develop over the future development path of bitcoin.[41]

The value of the first bitcoin transactions were negotiated by individuals on the bitcointalk forums with one notable transaction of 10,000 BTC used to indirectly purchase two pizzas delivered by Papa John's.[31]

On 6 August 2010, a major vulnerability in the bitcoin protocol was spotted. Transactions were not properly verified before they were included in the blockchain, which let users bypass bitcoin's economic restrictions and create an indefinite number of bitcoins.[42][43] On 15 August, the vulnerability was exploited; over 184 billion bitcoins were generated in a single transaction, and sent to two addresses on the network. Within hours, the transaction was spotted and erased from the transaction log after the bug was fixed and the network forked to an updated version of the bitcoin protocol.[44][42][43]

On 1 August 2017, a hard fork of bitcoin was created, known as Bitcoin Cash. Bitcoin Cash has a larger blocksize limit and had an identical blockchain at the time of fork.[45][46] On 12 November another hard fork, Bitcoin Gold, was created. Bitcoin Gold changes the proof-of-work algorithm used in mining

regulation

Main article: Legality of bitcoin by country or territory
Because of bitcoin's decentralized nature, nation-states cannot shut down the network or alter its technical rules.[178] 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".[179] The legal status of bitcoin varies substantially from country to country and is still undefined or changing in many of them. While some countries have explicitly allowed its use and trade, others have banned or restricted it. Regulations and bans that apply to bitcoin probably extend to similar cryptocurrency systems.[180]

Energy consumption

Bitcoin has been criticized for the amounts of electricity consumed by mining. As of 2015, The Economist estimated that even if all miners used modern facilities, the combined electricity consumption would be 166.7 megawatts (1.46 terawatt-hours per year).[102] At the end of 2017, the global bitcoin mining activity was estimated to consume between 1 and 4 gigawatts of electricity (between 9 and 35 TWh a year), with 1.2 GW as the theoretical lower bound assuming that everyone is using the most energy-efficient mining hardware available.[181]

To lower the costs, bitcoin miners have set up in places like Iceland where geothermal energy is cheap and cooling Arctic air is free.[83] Bitcoin miners are known to use hydroelectric power in Tibet, Quebec, and Austria to reduce electricity costs.[182][183][184] Miners are attracted to suppliers such as Hydro Quebec that have energy surpluses.[185]

Criminal Activit

The use of bitcoin by criminals has attracted the attention of financial regulators, legislative bodies, law enforcement, and the media.[186] The FBI prepared an intelligence assessment,[187] the SEC has issued a pointed warning about investment schemes using virtual currencies,[186] and the US Senate held a hearing on virtual currencies in November 2013.[82]

Several news outlets have asserted that the popularity of bitcoins hinges on the ability to use them to purchase illegal goods.[99][188] In 2014, 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."[189]

In popular culture

Academia
In September 2015, the establishment of the peer-reviewed academic journal Ledger (ISSN 2379-5980) was announced. It will cover studies of cryptocurrencies and related technologies, and is published by the University of Pittsburgh.[190][191] The journal encourages authors to digitally sign a file hash of submitted papers, which will then be timestamped into the bitcoin blockchain. Authors are also asked to include a personal bitcoin address in the first page of their papers.[192][193]

Film
The documentary film, The Rise and Rise of Bitcoin (late 2014), features interviews with people who use bitcoin, such as a computer programmer and a drug dealer.[194]

Literature
In Charles Stross' science fiction novel, Neptune's Brood, "bitcoin" (a modified version) is used as the universal interstellar payment system.[195][196]

Television
In November 2017, the American sitcom, The Big Bang Theory, dedicated an episode to the topic of bitcoins titled, "The Bitcoin Entanglement". In the episode, after hearing the price of a bitcoin had risen to $5000, friends try to track down bitcoins they mined seven years earlier.[197]

Citations

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