Bitcoin

Bitcoin with a capital “B” is the term used for a digital currency system created by pseudonymous developer Satoshi Nakamoto. This system of unconventional monetary exchange is managed on a peer-to-peer, electronic cash system with bitcoins (with a lower case “b”) is the currency.

Bitcoin creation and transfer is based on an open source cryptographic protocol and is not managed by a central authority like banks or other financial institutions. Each bitcoin is subdivided down to eight decimal places, forming 100 million smaller units called ‘satoshis’. Bitcoins are transferred through a computer or smartphone where transactions are serviced by a network of servers called “Bitcoin miners” that confirm transactions which are then archived in a “ledger” that is updated periodically.

In addition to archiving transactions each new ledger update creates a predetermined group of newly-minted bitcoins. The number of new bitcoins created in each update is halved every 4 years until the year 2140 when this number reaches the predetermined maximum 21 million bitcoins and no further bitcoins can be mined. Although, between present day and the year 2140, is it likely that cryptocurrency will continue to evolve so further changes may be made

Merchants and individuals across the world accept bitcoins as payment for a range of goods and services. Problems with this type of currency have been identified as ways that illegal drug, arms, and gambling transactions can be hidden from law enforcement. And although bitcoins are promoted as a digital currency, many critics cite Bitcoin’s volatile exchange rate, relatively inflexible supply, and minimal use in trade.