What is Bitcoin (BTC)
Bitcoin is a peer-to-peer payment network and digital currency based on an open source protocol, which makes use of a public transaction log. Bitcoin was introduced in 2009 by pseudonymous developer Satoshi Nakamoto. It is called a cryptocurrency as it uses public-key cryptography. When paying with bitcoin, there will be no exchange of digital notes or tokens between buyer and seller. Instead, the buyer requests an update to a public transaction log, the blockchain. This master list of all transactions shows who owns what bitcoins currently and in the past and is maintained by a decentralized network that verifies and timestamps payments. The operators of this network, known as "miners", are rewarded with transaction fees and newly minted bitcoins.
Bitcoin has been a subject of scrutiny due to ties with illicit activity. In 2013 the FBI shut down the Silk Road online black market and seized US$28.5 million worth of bitcoin. However, the United States is currently considered to be Bitcoin friendly compared to other governments[citation needed]. In China, new rules mean bitcoins cannot be exchanged for local currency, and the European Banking Authorityhas warned that Bitcoin lacks consumer protections. Theft of bitcoins can and does occur. Generating and storing keys offline mitigates such risk, however.
Commercial use of Bitcoin, illicit or otherwise, is currently small compared to its use by speculators, which has fueled price volatility. However, Bitcoin is also used to pay for products and services. Merchants have an incentive to accept the currency because transaction fees are lower than the 2-3% typically imposed by credit card processors. Notable vendors accepting Bitcoin include OkCupid, Reddit, WordPress, and Virgin Galactic.
There is a distinction between capital-b and lowercase-b bitcoin. When capitalized, Bitcoin refers to the protocol and transaction network, whereas lowercase-b bitcoins are the currency itself. As of 23 December 2013 the number of Bitcoin network peers was about 172,000.
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