Bitcoin (sign: BitcoinSign.svg; code: BTC or XBT[7]) is a distributed, peer-to-peer digital currency that functions without the intermediation of any central authority.[8] The concept was introduced in a 2008 paper by a pseudonymous developer known as "Satoshi Nakamoto".
Bitcoin has been called a cryptocurrency because it is decentralized and uses cryptography to control transactions and prevent double-spending, a problem for digital currencies.[8] Once validated, every individual transaction is permanently recorded in a public ledger known as the blockchain.[8] Payment processing is done by a network of private computers often specially tailored to this task.[9] The operators of these computers, known as "miners", are rewarded with transaction fees and newly minted bitcoins. However, new bitcoins are created at an ever-decreasing rate.[8]
In 2012, The Economist reasoned that Bitcoin has been popular because of "its role in dodgy online markets,"[10] and in 2013 the FBI shut down one such service, Silk Road, which specialized in illegal drugs (whereupon the FBI came into the control of approximately 1.5% of all bitcoins in circulation).[11] However, bitcoins are increasingly used as payment for legitimate products and services, and merchants have an incentive to accept the currency because transaction fees are lower than the 2 to 3% typically imposed by credit card processors.[12] Notable vendors include WordPress, OkCupid, Reddit, and Chinese Internet giant Baidu.[13]
Speculators have been attracted to bitcoin, fueling volatility and price swings. As of July 2013, there is a relatively small use of bitcoins in the retail and commercial marketplace in comparison to a relatively large use by speculators.[14]
