Bitcoin is a peer-to-peer payment system and digital currency introduced as open source software in 2009 by pseudonymous developer Satoshi Nakamoto. It is a cryptocurrency, so-called because it uses cryptography to control the creation and transfer of money.[5] Conventionally "Bitcoin" capitalized refers to the technology and network whereas lowercase "bitcoins" refers to the currency itself.[6]
Bitcoins are created by a process called mining in which participants verify and record payments in exchange for transaction fees and newly minted bitcoins.[7] Users send and receive bitcoins using wallet software on a personal computer, mobile device or on the web. Bitcoins can be obtained by mining or in exchange for products, services, or other currencies.[8]
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 144,000 bitcoins worth US$28.5 million at the time.[9] In China, new rules restrict bitcoin exchange for local currency,[10] and the European Banking Authority has warned that Bitcoin lacks consumer protections.[11] Bitcoins can be stolen, and chargebacks are impossible.[12]
Commercial use of Bitcoin, illicit or otherwise, is currently small compared to its use by speculators, which has fueled price volatility.[13] Bitcoin as a form of payment for products and services has seen growth, however, and merchants have an incentive to accept the currency because transaction fees are lower than the 2–3% typically imposed by credit card processors.[14]
