Bitcoin is a payment system invented by Satoshi Nakamotoin 2008 and introduced as open-source software in 2009. The system is peer-to-peer; users can transact directly without needing an intermediary.: Transactions are verified by network nodes and recorded in a public distributed ledger called the block chain. The ledger uses its own unit of account, also called bitcoin, which is the currency of the network. The system works without a central repository or single administrator, which has led the US Treasury to categorize it as a decentralized virtual currency. Bitcoin is often called the first cryptocurrency, although prior proposals existed. Bitcoin is more correctly described as the first decentralized digital currency. It is the largest of its kind in terms of total market value.
Bitcoins are created as a reward for payment processing work in which users offer their computing power to verify and record payments into the public ledger. This activity is called mining and is rewarded by transaction fees and newly created bitcoins. Besides mining, bitcoins can be obtained in exchange for fiat money, products, and services. Users can send and receive bitcoins for an optional transaction fee.
Bitcoin as a form of payment for products and services has grown, and merchants have an incentive to accept it because fees are lower than the 2–3% typically imposed by credit card processors. Unlike credit cards, any fees are paid by the purchaser, not the vendor. The European Banking Authority and other sources have warned that bitcoin users are not protected by refund rights or chargebacks.
The appeal of bitcoin to criminals has attracted the attention of financial regulators, legislative bodies, law enforcement, and media. They listed money laundering, financing of illicit activities, theft, fraud, tax evasion, and use in black markets as possible. As of 2013, the criminal activities centered around theft and black markets. Officials in countries such as the United States also recognized that bitcoin can provide legitimate financial services to customers
The most important part of the bitcoin system is a public ledger, called the block chain, that records bitcoin transactions. A novel solution accomplishes this without a single, central authority: maintenance of the ledger is performed by a network of communicating nodes running bitcoin software that anyone can join. Transactions of the form payer X sends Y bitcoins to payee Z are broadcast to this network using readily available software applications. Network nodes can validate these transactions, add them to their copy of the ledger, and then broadcast these ledger additions to other nodes.
The block chain
Bitcoin transactions are recorded in a public ledger called the block chain. The block chain is distributed; to independently verify the chain of ownership of any and every bitcoin amount, each network node stores its own copy of it. Approximately six times per hour, a group of accepted transactions, a block, is added to the block chain, which is quickly published to all nodes. This allows bitcoin software to determine when a particular bitcoin amount has been spent, which is necessary to prevent double-spending in an environment with no central authority. Whereas a conventional ledger records the transfers of actual bills or promissory notes that exist apart from it, the block chain is the only place that bitcoins can be said to exist in the form of unspent outputs of transactions.
The unit of account of the bitcoin system is bitcoin. As of 2014, symbols used to represent bitcoin are BTC, XBT, and . : Small multiples of bitcoin used as alternative units are millibitcoin (mBTC), microbitcoin (µBTC), and satoshi. Named in homage to bitcoin's creator, a satoshi is the smallest multiple of bitcoin representing 0.00000001 bitcoin, which is one hundred millionth of a bitcoin. A millibitcoin equals to 0.001 bitcoin, which is one thousandth of bitcoin. One microbitcoin equals to 0.000001 bitcoin, which is one millionth of bitcoin. A microbitcoin is sometimes referred to as a bit.
On 7 October 2014, the Bitcoin Foundation revealed a plan to apply for an ISO 4217 currency code for bitcoin, and mentioned BTC and XBT as the leading candidates.
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