Bitcoin

Background Before bitcoin, several digital cash technologies were released, starting with David Chaum's ecash in the 1980s. In 2004, Hal Finney developed the first currency based on reusable proof of work. These various attempts were not successful: 2008–2009: Creation The domain name bitcoin.org was registered on 18 August 2008. On 31 October 2008, a link to a white paper authored by Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System was posted to a cryptography mailing list. Nakamoto's identity remains unknown. According to computer scientist Arvind Narayanan, all individual components of bitcoin originated in earlier academic literature. Nakamoto's paper was not peer reviewed and was initially ignored by academics, who argued that it could not work. On 3 January 2009, the bitcoin network was created when Nakamoto mined the starting block of the chain, known as the genesis block. Embedded in this block was the text "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks", which is the date and headline of an issue of The Times newspaper. Wei Dai and Nick Szabo were also early supporters. Satoshi tasked Finnish developer and early Bitcoin contributor with creating content for the bitcoin.org website. 2010–2012: Early growth Blockchain analysts estimate that Nakamoto had mined about one million bitcoins before disappearing in 2010 when he handed the network alert key and control of the code repository over to Gavin Andresen. Andresen later became lead developer at the Bitcoin Foundation, an organization founded in September 2012 to promote bitcoin. After early "proof-of-concept" transactions, the first major users of bitcoin were black markets, such as the dark web Silk Road. During its 30 months of existence, beginning in February 2011, Silk Road exclusively accepted bitcoins as payment, transacting ₿9.9 million, worth about $214 million. In May 2013, US authorities seized the unregistered exchange Mt. Gox. In June 2013, the US Drug Enforcement Administration seized ₿11.02 from an individual attempting to use them to purchase illicit drugs. This marked the first time a government agency had seized bitcoins. The FBI seized about ₿30,000 in October 2013 from Silk Road, following the arrest of its founder Ross Ulbricht. In December 2013, the People's Bank of China prohibited Chinese financial institutions from using bitcoin. After the announcement, the value of bitcoin dropped, and Baidu no longer accepted bitcoins for certain services. Buying real-world goods with any virtual currency had been illegal in China since at least 2009. 2015–2019 Research produced by the University of Cambridge estimated that in 2017, there were 2.9 to 5.8 million unique users using a cryptocurrency wallet, most of them using bitcoin. In August 2017, the SegWit software upgrade was activated. Segwit was intended to support the Lightning Network as well as improve scalability. SegWit opponents, who supported larger blocks as a scalability solution, forked to create Bitcoin Cash, one of many forks of bitcoin. In December 2017, the first futures on bitcoin was introduced by the Chicago Mercantile Exchange (CME). In February 2018, the price crashed after China imposed a complete ban on bitcoin trading. The percentage of bitcoin trading in the Chinese renminbi fell from over 90% in September 2017 to less than 1% in June 2018. During the same year, bitcoin prices were negatively affected by several hacks or thefts from cryptocurrency exchanges. 2020–present In 2020, some major companies and institutions started to acquire bitcoin: MicroStrategy invested $250 million in bitcoin as a treasury reserve asset, Square, Inc., $50 million, and MassMutual, $100 million. In November 2020, PayPal added support for bitcoin in the US. In February 2021, bitcoin's market capitalization reached $1 trillion for the first time. In November 2021, the Taproot soft-fork upgrade was activated, adding support for Schnorr signatures, improved functionality of smart contracts and Lightning Network. Before, bitcoin only used a custom elliptic curve with the ECDSA algorithm to produce signatures. In September 2021, bitcoin became legal tender currency in El Salvador, alongside the US dollar. In early 2022, during the Canadian trucker protests opposing COVID-19 vaccine mandates, organizers turned to bitcoin to receive donations after traditional financial platforms restricted access to funding. Proponents highlighted bitcoin's use as a tool for fundraising in situations where access to conventional financial systems may be restricted. In May and June 2022, the bitcoin price fell following the collapses of TerraUSD, a stablecoin, and the Celsius Network, a cryptocurrency loan company. In 2023, ordinals—non-fungible tokens (NFTs)—on bitcoin, went live. As of June 2023, River Financial estimated that bitcoin had 81.7 million users, about 1% of the global population. In January 2024, the first 11 US spot bitcoin ETFs began trading, offering direct exposure to bitcoin for the first time on American stock exchanges. In December 2024, bitcoin price reached $100,000 for the first time, as US president-elect Donald Trump promised to make the US the "crypto capital of the planet" and to stockpile bitcoin. The same month, BlackRock, the world's largest asset manager, recommended investors to allocate up to 2% of their portfolio to bitcoin. As of 2025, the Salvadoran government continues to describe Bitcoin as legal tender under the 2021 Bitcoin Law; however, a January 2025 reform removed obligations for businesses and the government to accept it, so many analysts regard its legal-tender status as effectively ended in practice. Later that year, some U.S. states, such as Texas and New Hampshire also instituted strategic bitcoin reserves, and the Czech National Bank bought less than €1 million in a "test portfolio". ==Design==

Units and divisibility The unit of account of the bitcoin system is the bitcoin. It is most commonly represented with the symbol ₿ designed in 2010 and ISO 4217 requires the first letter used in global commodities to be 'X'. No uniform capitalization convention exists; some sources use Bitcoin, capitalized, to refer to the technology and network, and bitcoin, lowercase, for the unit of account. The ''Cambridge Advanced Learner's Dictionary and the Oxford Advanced Learner's Dictionary'' use the capitalized and lowercase variants without distinction. One bitcoin is divisible to eight decimal places. Blockchain As a decentralized system, bitcoin operates without a central authority or single administrator, so that anyone can create a new bitcoin address and transact without needing any approval. This is accomplished through a specialized distributed ledger called a blockchain that records bitcoin transactions. The blockchain is implemented as an ordered list of blocks. Each block contains a SHA-256 hash of the previous block, Nodes validate and broadcast transactions, each maintaining a copy of the blockchain for ownership verification. A new block is created every 10 minutes on average, updating the blockchain across all nodes without central oversight. This process tracks bitcoin spending, ensuring each bitcoin is spent only once. Unlike a traditional ledger that tracks physical currency, bitcoins exist digitally as unspent outputs of transactions. Using multiple inputs is similar to using multiple coins in a cash transaction. As in a cash transaction, the sum of inputs can exceed the intended sum of payments. In such a case, an additional output can return the change back to the payer. It is estimated that around 20% of all bitcoins are lost. The private key must also be kept secret as its exposure, such as through a data breach, can lead to theft of the associated bitcoins. , approximately ₿980,000 had been stolen from cryptocurrency exchanges. Mining with large amounts of mining hardware Miners don't directly act as nodes, but do communicate with nodes. The mining process is primarily intended to prevent double-spending and get all nodes to agree on the content of the blockchain, but it also has desirable side-effects such as making it infeasible for adversaries to stifle valid transactions or alter the historical record of transactions, since doing so generally requires the adversary to have access to more mining power than the rest of the network combined. Each block must contain a proof of work (PoW) to be accepted, The difficulty of generating a block is deterministically adjusted based on the mining power on the network by changing the difficulty target, which is recalibrated every 2,016 blocks (approximately two weeks) to maintain an average time of ten minutes between new blocks. The process requires significant computational power and specialized hardware. Miners who successfully create a new block with a valid nonce can collect transaction fees from the included transactions and a fixed reward in bitcoins. To claim this reward, a special transaction called a coinbase is included in the block, with the miner as the payee. All bitcoins in existence have been created through this type of transaction. , a non-peer-reviewed study by the Cambridge Centre for Alternative Finance (CCAF) estimated that bitcoin mining represented % of global electricity consumption and % of world greenhouse gas emissions, comparable to Slovakia's emissions. About half of the electricity used is generated through fossil fuels. Moreover, mining hardware's short lifespan results in electronic waste. In October 2025, the US was the largest mining country with 38% of the global bitcoin mining market share, followed by Russia (16%) and China (14%, despite all cryptocurrency trading and mining being banned there in 2021). Privacy and fungibility Bitcoin is pseudonymous, with funds linked to addresses, not real-world identities. While the owners of these addresses are not directly identified, all transactions are public on the blockchain. Patterns of use, like spending coins from multiple inputs, can hint at a common owner. Public data can sometimes be matched with known address owners. Bitcoin exchanges might also need to collect personal data as per legal requirements. For enhanced privacy, users can generate a new address for each transaction. In the bitcoin network, each bitcoin is treated equally, ensuring basic fungibility. However, users and applications can choose to differentiate between bitcoins. While wallets and software treat all bitcoins the same, each bitcoin's transaction history is recorded on the blockchain. This public record allows for chain analysis, where users can identify and potentially reject bitcoins from controversial sources. For example, in 2012, Mt. Gox froze accounts containing bitcoins identified as stolen. Wallets Bitcoin wallets were the first cryptocurrency wallets, enabling users to store the information necessary to transact bitcoins. The first wallet program, simply named Bitcoin, and sometimes referred to as the Satoshi client, was released in 2009 by Nakamoto as open-source software. Wallets can be full clients, with a full copy of the blockchain to check the validity of mined blocks, or lightweight clients, just to send and receive transactions without a local copy of the entire blockchain. Third-party internet services, called online wallets or hot wallets, store users' credentials on their servers, making them susceptible of hacks. Cold storage protects bitcoins from such hacks by keeping private keys offline, either through specialized hardware wallets or paper printouts. The limited block size and frequency can lead to delayed processing of transactions, increased fees and a bitcoin scalability problem. The Lightning Network, a second-layer routing network, is a potential scaling solution. If a single miner or pool controls more than 50% of the hashing power, it would allow them to censor transactions and double-spend coins. A few entities also dominate other parts of the ecosystem such as the client software, online wallets, and simplified payment verification (SPV) clients. ==Economics and usage==

Bitcoin's theoretical roots and ideology According to the European Central Bank, the decentralization of money offered by bitcoin has its theoretical roots in the Austrian school of economics, especially with Friedrich Hayek's The Denationalisation of Money, in which he advocates a complete free market in the production, distribution and management of money to end the monopoly of central banks. Sociologist Nigel Dodd argues that the essence of the bitcoin ideology is to remove money from social, as well as governmental, control. The Economist describes bitcoin as "a techno-anarchist project to create an online version of cash, a way for people to transact without the possibility of interference from malicious governments or banks". Recognition as a currency and legal status Money serves three purposes: a store of value, a medium of exchange, and a unit of account. According to The Economist in 2014, bitcoin functions best as a medium of exchange. However, a 2018 assessment by The Economist stated that cryptocurrencies met none of these three criteria. Per some researchers, , bitcoin functions more as a payment system than as a currency. In 2017, François Velde, senior economist at the Chicago Fed, described bitcoin as "unlikely by itself to replace monies in well-functioning monetary systems." The legal status of bitcoin varies substantially from one jurisdiction to another. Because of its decentralized nature and its global presence, regulating bitcoin is difficult. However, the use of bitcoin can be criminalized, and shutting down exchanges and the peer-to-peer economy in a given country would constitute a de facto ban. The use of bitcoin by criminals has attracted the attention of financial regulators, legislative bodies, and law enforcement. Nobel-prize winning economist Joseph Stiglitz says that bitcoin's anonymity encourages money laundering and other crimes. This is the main justification behind bitcoin bans. Use for payments accepting Bitcoin According to Harvard Professor Kenneth Rogoff , bitcoin is rarely used in regular transactions with merchants, but is popular in the informal economy and for criminal activities. Prices are not usually quoted in bitcoin and trades involve conversions into fiat currencies. Bloomberg reported that bitcoin was being used for large-item purchases on the site Overstock.com and for cross-border payments to freelancers. , there was little sign of bitcoin use in international remittances despite high fees charged by banks and Western Union. From September 2021 until January 2025, the Bitcoin Law made bitcoin a legal tender currency in El Salvador, alongside the US dollar. In 2022, the International Monetary Fund (IMF) urged El Salvador to reverse its decision. , the use of Bitcoin in El Salvador remained low: 80% of businesses refused to accept it. In 2025, El Salvador's government revoked bitcoin's status as legal tender currency in order to comply with conditions set by the IMF for a loan. El Salvador still describes bitcoin as "legal tender", but its acceptance is no longer obligitory (as it is with the US dollar) and the El Salvador government no longer accepts bitcoin for payment of taxes or fees. In April 2022, the Central African Republic (CAR) adopted bitcoin as legal tender alongside the CFA franc, but repealed the reform one year later. Bitcoin is also used by some governments. For instance, the Iranian government initially opposed cryptocurrencies, but later began using them to circumvent sanctions. Since 2020, Iran has required local bitcoin miners to sell bitcoin to the Central Bank of Iran, allowing the central bank to use it for imports. Some constituent states and local governments also accept tax payments in bitcoin, including Colorado in the US and Zug and Lugano in Switzerland. As of 2023, the US government owned more than $5 billion worth of seized bitcoin. Use for investment and status as an economic bubble , the overwhelming majority of bitcoin transactions took place on cryptocurrency exchanges. Bitcoin is used as a store of value: individuals and companies such as the Winklevoss twins and Elon Musk's companies SpaceX and Tesla have each bought and sold hundreds of millions of dollars worth of bitcoin. Bitcoin wealth is highly concentrated, with 0.01% holding 27% of in-circulation currency, as of 2021. As of March 2025, El Salvador had $550 million worth of bitcoin in its international reserves, about 6,102 coins. Bitcoin, along with other cryptocurrencies, has been described as an economic bubble by several economists, including Nobel Prize in Economics laureates, such as Joseph Stiglitz, James Heckman, and Paul Krugman. Another recipient of the prize, Robert Shiller, argues that bitcoin is rather a fad that may become an asset class. He describes its price growth as an "epidemic", driven by contagious narratives. In 2024, Jean Tirole, also Nobel laureate, described bitcoin as a "pure bubble" as its intrinsic value is zero. According to him, some bubbles are long-lasting such as gold and fiat currencies, and it is impossible to predict whether bitcoin would implode like other financial bubbles or become an alternative to gold. The same year, Federal Reserve Chair Jerome Powell described bitcoin as a digital competitor to gold but not to the dollar as he argued it is a highly volatile speculative asset not used as a form of payment. In 2025, Kenneth Rogoff claimed that Krugman was wrong and that Bitcoin had value as it is competing with the dollar to become the means of exchange of the underground economy which represents 20% of the world's GDP. In 2025, the nominee for the Chair of the Federal Reserve, Kevin Warsh, described Bitcoin as the "new gold." According to one 2022 analysis published in The Journal of Alternative Investments, bitcoin was less volatile than oil, silver, US Treasuries, and 190 stocks in the S&P 500 during and after the 2020 stock market crash. The term was created in December 2013 for holding bitcoin rather than selling it during periods of volatility. In 2014, economist Nouriel Roubini described bitcoin as a Ponzi scheme. Legal scholar Eric Posner disagrees, however, as "a real Ponzi scheme takes fraud; bitcoin, by contrast, seems more like a collective delusion". A 2014 World Bank report also concluded that bitcoin was not a deliberate Ponzi scheme. Market characteristics Bitcoin markets operate 24 hours a day, seven days a week, contrasting with traditional financial markets that have fixed trading hours. Bitcoin prices show much higher volatility and respond strongly to both regulatory changes and market events. The volume of bitcoin trading can fluctuate considerably among various exchanges and geographic regions. The daily transaction volume of bitcoin across all exchanges typically reaches $50 billion as of 2025. ==See also==