Bitcoin is a peer-to-peer payment network and digital currency based on an open source[6] protocol[disputed – discuss], which makes use of a public transaction log. Bitcoin was introduced in 2009 by pseudonymous developer Satoshi Nakamoto.[7] It is called a cryptocurrency as it uses public-key cryptography.[8] 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.[9] The operators of this network, known as "miners", are rewarded with transaction fees and newly minted bitcoins.[10]
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.[11] 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,[12] and the European Banking Authority has warned that Bitcoin lacks consumer protections.[13] Theft of bitcoins can and does occur.[14] Generating and storing keys offline mitigates such risks, however.[15]
Commercial use of Bitcoin, illicit or otherwise, is currently small compared to its use by speculators, which has fueled price volatility.[16] Bitcoin is a burgeoning form of payment for products and services; merchants have an incentive to accept the currency inasmuch as transaction fees are lower than the 2-3% typically imposed by credit card processors.[17] Notable vendors accepting bitcoin include OkCupid, Reddit, and Virgin Galactic;[18] non-profit and advocacy organizations such as WordPress,[19] the Tor anonymity network,[20] and the Electronic Frontier Foundation[21] also accept bitcoin.
"Bitcoin" refers to the protocol and transaction network, whereas "bitcoin" refers to the currency itself.[22] As of 23 December 2013 the number of Bitcoin network peers was approximately 172,000.[23]
