Bitcoin
Bitcoin (BTC) is a digital currency first described in a 2008 paper by pseudonymous developer Satoshi Nakamoto, who called it a peer-to-peer, electronic cash system. Bitcoin creation and transfer is based on an open source cryptographic protocol and is not managed by any central authority. Each bitcoin is subdivided into 100 million smaller units called satoshis, defined by eight decimal places. Bitcoins can be transferred through a computer or smartphone without an intermediate financial institution.The processing of bitcoin transactions is automated 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. 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 where 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 top out at 21 million bitcoins.
Bitcoin is accepted in trade by various merchants and individuals in many parts of the world. A large share of such commercial use is believed to be for illicit drug and gambling transactions.Although bitcoin is promoted as a digital currency, many commentators have criticized Bitcoin's volatile market value, relatively inflexible supply, and minimal use in trade.
Transactions
Bitcoins can be sent and received through various websites and apps after being bought on an exchange.Addresses
Based on digital signatures, payments are made to bitcoin "addresses" or "public keys": human-readable strings of numbers and letters around 33 characters in length, always beginning with the digit 1 or 3, as in the example of 175tWpb8K1S7NmH4Zx6rewF9WQrcZv245W.Users obtain new bitcoin addresses as necessary; these are stored in a wallet file with links to cryptographic passwords or "private keys" that enable access to and transfer of bitcoins. A file or "wallet" containing bitcoin addresses is usually encrypted with an additional password.
Confirmation
The network's software confirms transactions when it records them in the transaction log or "blockchain" stored across the peer-to-peer network every 10-minutes. Confirmation of future transaction records makes the ones before it increasingly permanent. After six confirmed records or "blocks" (usually one hour), a transaction is usually considered confirmed beyond reasonable doubt.Initiators of a bitcoin transaction may voluntarily pay a transaction fee for the confirmation of these records. Any fees are collected by the operators of bitcoin servers – often called nodes or "bitcoin miners". The transaction fee acts as an incentive to the miners to expend computational resources verifying transactions; without it the miners could choose not to do so and the transaction would not go through. However, transaction fees may not cover the cost of electrical power required to operate a bitcoin miner. As a result the network server operators often rely on "mined" bitcoins as their only significant revenue
Banknotes and coins
Various vendors offer banknotes and coins denominated in bitcoins; a bitcoin private key is sold as part of a coin or banknote. Usually, a seal has to be broken to access the key, while the receiving address remains visible on the outside so that the balance can be verified.A 1-BTC Casascius Coin was shown in the British Museum in London to represent bitcoin.
