Bitcoin is a software-based online payment system described by Satoshi Nakamoto[note 5] in 2008[11] and introduced as open-source software in 2009.[12] A peer-to-peer client records transactions in a shared, public ledger denominated in its own unit of account,[13] which is also called bitcoin.[note 6] Because it lacks a central repository or single administrator, the US Treasury has called bitcoin a decentralized virtual currency.[1] Media reports often refer to bitcoin as a cryptocurrency or digital currency. Bitcoin's status as an actual currency is disputed as it does not have all the attributes of money. Bitcoin is the first cryptocurrency and the largest in terms of total market value[17] although others such as Litecoin and Dogecoin also exist. Bitcoin is not the first virtual currency, however.
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.[18] Besides mining, bitcoins can be obtained in exchange for fiat money, products, and services.[19] Users can send and receive bitcoins electronically for an optional transaction fee.[20]
Bitcoin as a form of payment for products and services has grown,[19] and merchants have an incentive to accept the digital currency because fees are lower than the 2–3% typically imposed by credit card processors.[21] The European Banking Authority has warned that bitcoin lacks consumer protections.[22] Unlike credit cards, any fees are paid by the purchaser, not the vendor. Additionally, bitcoins can be stolen,[23] and chargebacks are impossible.[18] As of July 2013, the commercial use of bitcoin was small compared to its use by speculators, which has contributed to price volatility.
