Bitcoin is a digital asset and a payment system invented by Satoshi Nakamoto. Nakamoto introduced the idea on 31 October 2008 to a cryptography mailing list,[12] and released it as open-source software in 2009.[13] There have been several high profile claims to the identity of Satoshi Nakamoto; however, none of them have provided proof beyond doubt that back up their claims.[14]
The system is peer-to-peer and transactions take place between users directly, without an intermediary.[15]:4 These transactions are verified by network nodes and recorded in a public distributed ledger called the blockchain,[16] which uses bitcoin as its unit of account. Since the system works without a central repository or single administrator, the U.S. Treasury categorizes bitcoin as a decentralized virtual currency.[1] Bitcoin is often called the first cryptocurrency,[17][18][19] although prior systems existed[note 5] and it is more correctly described as the first decentralized digital currency.[15][22] Bitcoin is the largest of its kind in terms of total market value.[23]
Bitcoins are created as a reward for payment processing work in which users offer their computing power to verify and record payments into a public ledger. This activity is called mining and miners are rewarded with transaction fees and newly created bitcoins.[15] Besides being obtained by mining, bitcoins can be exchanged for other currencies,[24] products, and services.[25] When sending bitcoins, users can pay an optional transaction fee to the miners.[26]
In February 2015, the number of merchants accepting bitcoin for products and services passed 100,000.[27] Instead of 2–3% typically imposed by credit card processors, merchants accepting bitcoins often pay fees in the range from 0% to less than 2%.[28] Despite the fourfold increase in the number of merchants accepting bitcoin in 2014, the cryptocurrency did not have much momentum in retail transactions.[29] The European Banking Authority[30] and other sources[15]:11 have warned that bitcoin users are not protected by refund rights or chargebacks. The use of bitcoin by criminals has attracted the attention of financial regulators,[31] legislative bodies,[32] law enforcement,[33] and media.[34] Criminal activities are primarily centered around darknet markets and theft, though officials in countries such as the United States also recognize that bitcoin can provide legitimate financial services.[35]
Digital theft or hacking of bitcoins has also been an issue for bitcoin users. A major Bitcoin exchange, Bitfinex, was hacked and nearly 120,000 BTC (around US$60M) was stolen in 2016. Bitcoin value crashed and Bitfinex was forced to suspend its trading.[36]