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] Payments are recorded in a public ledger using its own unit of account,^[13] which is also called bitcoin.^{[note 6]} Payments work peer-to-peer without a central repository or single administrator, which has led the US Treasury to call bitcoin a decentralized virtual currency.^[1] Although its status as a currency is disputed, media reports often refer to bitcoin as a cryptocurrency or digital currency.^[17]Bitcoin is the first fully implemented decentralized cryptocurrency; most other cryptocurrencies are similar and derived from it. It is also the largest cryptocurrency in terms of total market value.^[18]

Bitcoins are created as a reward for processing work in which users offer their computing power to verify and record payments into the public ledger. This activity is called mining, which individuals or companies engage in, in exchange for transaction fees and newly created bitcoins.^[19] Besides mining, bitcoins can be obtained in exchange for fiat money, products, and services.^[20] Users can send and receive bitcoin electronically for an optional transaction fee^[21] using wallet software on a personal computer, mobile device, a web application, or a specialized device called hardware wallet.^[22]

Bitcoin as a form of payment for products and services has seen growth,^[20] and merchants have an incentive to accept the digital currency because fees are lower than the 2–3% typically imposed by credit card processors.^[23] The European Banking Authority has warned that bitcoin lacks consumer protections.^[24] Unlike credit cards, any fees are paid by the purchaser, not the vendor. Bitcoin can be stolen,^[25] and chargebacks are impossible.^[19] As of July 2013 the commercial use of bitcoin was small compared to its use by speculators, which has contributed to price volatility.^[26]

The first-ever U.S. congressional hearing on virtual currencies was held on 18 November 2013. Authorities appearing at the hearing outlined the pitfalls and promises of bitcoin amid concern the virtual currencies can help facilitate crimes. At the hearing, the officials who have previously highlighted the currency's role in money laundering and other illicit activities, called bitcoin a "legitimate" financial service.^[27]

The United States is considered more bitcoin-friendly than some other governments.^[28] In China, buying bitcoins with yuan is subject to restrictions, and bitcoin exchanges are not allowed to hold bank accounts.

 

Source: wiki