Bitcoin (BTC) is a cryptocurrency first described in a 2008 paper by pseudonymous developer Satoshi Nakamoto, who called it a peer-to-peer, electronic cash system.[1][6][7] Bitcoin creation and transfer is based on an open source cryptographic protocol and is not managed by any central authority. Each bitcoin is subdivided down to eight decimal places, forming 100 million smaller units called satoshis.[4] Bitcoins can be transferred through a computer or smartphone without an intermediate financial institution.[8]
The processing of Bitcoin transactions is secured by servers called bitcoin miners. These servers communicate over an internet-based network and confirm transactions by adding them to a ledger which is updated and archived periodically using peer-to-peer filesharing technology.[2] In addition to archiving transactions each new ledger update creates some newly-minted bitcoins. The number of new bitcoins created in each update is halved every 4 years until the year 2140 when this number will round down to zero. At that time no more bitcoins will be added into circulation and the total number of bitcoins will have reached a maximum of 21 million bitcoins.[1][9]
Bitcoin is accepted in trade by merchants and individuals in many parts of the world. Similar to other currencies, illicit drug and gambling transactions constitute some of its commercial usage.[10][11][12][13] Although the bitcoin is promoted as a digital currency, many commentators have criticized the bitcoin's volatile exchange rate, relatively inflexible supply, and minimal use in trade.