Bitcoin is an experimental new digital currency that enables instant payments to anyone, anywhere in the world. Bitcoin uses peer-to-peer technology to operate with no central authority: managing transactions and issuing money are carried out collectively by the network. Bitcoin is also the name of the open source software which enables the use of this currency.
Bitcoin is one of the first implementations of a concept called crypto-currency, which was first described in 1998 by Wei Dai on the cypherpunks mailing list. Building upon the notion that money is any object, or any sort of record, accepted as payment for goods and services and repayment of debts in a given country or socio-economic context, Bitcoin is designed around the idea of using cryptography to control the creation and transfer of money, rather than relying on central authorities.
These are the basic features of any Bitcoin-like network.
- Bitcoins can be transferred between arbitrary nodes on the network.
- Transactions are irreversible.
- Double spending is prevented by using a block chain.
- Transactions are broadcasted within seconds and verified within 10 to 60 minutes.
- Transactions can be received at any time regardless of whether your computer is turned on or off.
These rules are enforced collectively by the network. While they will not change for Bitcoin, other digital currencies using Bitcoin’s technology may change them to suit their needs.
- Hard limit of about 21 million Bitcoins.
- Bitcoins are divisible to 8 decimal places yielding a total of approx. 21×1014 currency units.
- Transactions are cheap, and mostly free (Transaction fees).
Features of the Bitcoin network
The network has been running for more than 41 months yielding to some impressive security features.
- Long block chain (more than 186.000 blocks) with lots of processing power securing transactions.
- Only one major incident (fixed in August 2010).