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	<updated>2026-08-09T13:08:22Z</updated>
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	<entry>
		<id>https://wiki.freecapitalists.org/index.php?title=Bitcoin&amp;diff=7121</id>
		<title>Bitcoin</title>
		<link rel="alternate" type="text/html" href="https://wiki.freecapitalists.org/index.php?title=Bitcoin&amp;diff=7121"/>
		<updated>2012-02-01T04:56:02Z</updated>

		<summary type="html">&lt;p&gt;173.245.50.242: Undo revision 16756 by 173.245.50.242 (talk)&lt;/p&gt;
&lt;hr /&gt;
&lt;div&gt;[[File:Bitcoinlogo.png|thumb|300px|right|Bitcoin logo.]]&lt;br /&gt;
{{Infobox&lt;br /&gt;
| Box title = Software&lt;br /&gt;
| Row 1 title= name&lt;br /&gt;
| Row 1 info= Bitcoin&lt;br /&gt;
| Row 2 title=developer&lt;br /&gt;
| Row 2 info= Satoshi Nakamoto&lt;br /&gt;
| Row 3 title=latest release version&lt;br /&gt;
| Row 3 info = 0.3.12&lt;br /&gt;
| Row 4 title=latest release date&lt;br /&gt;
| Row 4 info= &amp;quot;2010/09/07&amp;quot;&lt;br /&gt;
| Row 5 title=programming language&lt;br /&gt;
| Row 5 info = [[Wikipedia:C++]]&lt;br /&gt;
| Row 6 title=operating system&lt;br /&gt;
| Row 6 info = Windows, Linux, Mac OS X&lt;br /&gt;
| Row 7 title=status&lt;br /&gt;
| Row 7 info = Beta&lt;br /&gt;
| Row 8 title=genre&lt;br /&gt;
| Row 8 info= [[Wikipedia:Electronic money|Electronic money]]&lt;br /&gt;
| Row 9 title=license&lt;br /&gt;
| Row 9 info = [[Wikipedia:MIT License|MIT License]]&lt;br /&gt;
| Row 10 title=website&lt;br /&gt;
| Row 10 info  = [http://www.bitcoin.org/ &amp;quot;www.bitcoin.org&amp;quot;]&lt;br /&gt;
}}&lt;br /&gt;
{{Infobox&lt;br /&gt;
|Box title=Currency&lt;br /&gt;
| Row 1 title = currency name&lt;br /&gt;
| Row 1 info = Bitcoin&lt;br /&gt;
| Row 2 title = using countries&lt;br /&gt;
|Row 2 info = &#039;&#039;Internet-based (global)&#039;&#039;&lt;br /&gt;
| Row 3 title=symbol&lt;br /&gt;
| Row 3 info = BTC&lt;br /&gt;
| Row 4 title=issuing authority&lt;br /&gt;
| Row 4 info= Bitcoin network&lt;br /&gt;
| Row 5 title =issuing authority website&lt;br /&gt;
| Row 5 info www.bitcoin.org&lt;br /&gt;
}}&lt;br /&gt;
&#039;&#039;&#039;Bitcoin&#039;&#039;&#039; is an [[open source]] [[Wikipedia:peer-to-peer|peer-to-peer]] system developed by [[Wikipedia:Satoshi Nakamoto|Satoshi Nakamoto]] that aims to provide [[Wikipedia:electronic cash|electronic cash]]. The system is decentralized with no central server or trusted parties.&amp;lt;ref name=&amp;quot;hartford&amp;quot;&amp;gt;&lt;br /&gt;
{{cite news&lt;br /&gt;
|title=Is It Time For Digital-Only Dollars?&lt;br /&gt;
|first=Phil&lt;br /&gt;
|last=Maymin&lt;br /&gt;
|date=2010-07-08&lt;br /&gt;
|newspaper=Hartford Advocate&lt;br /&gt;
|url=http://www.hartfordadvocate.com/commentary/is-it-time-for-digital-only-dollars-2&lt;br /&gt;
|accessdate=2010-07-23&lt;br /&gt;
}}&amp;lt;/ref&amp;gt;  Bitcoin relies on [[Wikipedia:cryptographic|cryptographic]] principles to create unique, unreproducible, and divisible tokens.  Users hold the [[Wikipedia:Key (cryptography)|cryptographic keys]] to their own tokens and transact directly with each other, with the help of the network to check for [[Wikipedia:double-spending|double-spending]].&amp;lt;ref name=&amp;quot;infoworld_2010&amp;quot;&amp;gt;&lt;br /&gt;
{{cite news&lt;br /&gt;
|date=2010-05-24&lt;br /&gt;
|title=Open source innovation on the cutting edge&lt;br /&gt;
|first=Neil&lt;br /&gt;
|last=McAllister &lt;br /&gt;
|newspaper=InfoWorld&lt;br /&gt;
|url=http://www.infoworld.com/d/open-source/open-source-innovation-the-cutting-edge-582?page=0,2 &lt;br /&gt;
|accessdate=2010-07-23&lt;br /&gt;
}}&amp;lt;/ref&amp;gt;&lt;br /&gt;
&lt;br /&gt;
==Technical basis==&lt;br /&gt;
[[File:Hash_tree.png|thumb|300px|right|Bitcoin uses an ever-growing [[Wikipedia:Hash tree|hash tree]] to store, linearize, and verify transactions.]]&lt;br /&gt;
&lt;br /&gt;
Bitcoin is an implementation of Wei Dai&#039;s b-money proposal on [[Wikipedia:Cypherpunks|Cypherpunks]] in 1998 and Nick Szabo&#039;s Bitgold proposal.&amp;lt;ref&amp;gt;[http://www.bitcoin.org/smf/index.php?topic=342.msg4508#msg4508 Bitcoin author on external references]&amp;lt;/ref&amp;gt; The principles of the system are described in the Bitcoin White Paper.&amp;lt;ref name=Whitepaper&amp;gt;[http://www.bitcoin.org/sites/default/files/bitcoin.pdf Bitcoin White Paper]&amp;lt;/ref&amp;gt;&lt;br /&gt;
&lt;br /&gt;
A user on the network has one or several cryptographic identifiers ([[Wikipedia:ECDSA|ECDSA]] keypairs), which represent their [[Wikipedia:wallet|wallet]]. The public key counterpart of this wallet is called an &#039;&#039;address&#039;&#039;. The private key, stored only on the user&#039;s computer, is used to authorize payments from the user. The wallet or address contain no information about their owner, so they are effectively anonymous.&amp;lt;ref&amp;gt;{{cite news |author=Nathan Willis |date=2010-11-10 |title=Bitcoin: Virtual money created by CPU cycles |publisher=[[Wikipedia:LWN.net]] |url=http://lwn.net/SubscriberLink/414452/ef58a58a62148050/ }}&amp;lt;/ref&amp;gt;&lt;br /&gt;
&lt;br /&gt;
Each coin of the Bitcoin system has its owner&#039;s [[Wikipedia:public key|public key]] on it. The owner can transfer it further by adding the recipient&#039;s public key on it, signing it with his private key and broadcasting the transaction to the network. This way, each coin contains its cryptographic ownership history from the creator of the coin to its current owner.&lt;br /&gt;
&lt;br /&gt;
To prevent users from double-spending their coins (signing the same coin for many recipients), transactions are [[Wikipedia:timestamp|timestamped]] by the network with a [[Wikipedia:proof-of-work system|proof-of-work system]]. The network collects and records new transactions into a chain of blocks. Nodes of the network are constantly racing to complete these blocks by finding a value, that summed up with the block and the hash of the previous block, produces an [[Wikipedia:SHA-256|SHA-256]] hash containing a certain amount of leading zero bits. The average work required by this operation can be calculated and used to timestamp the block&#039;s transactions, so that they cannot be invalidated by later double-spending.&lt;br /&gt;
&lt;br /&gt;
The incentive to use CPU time for running the system is that new coins are created and assigned to the node that manages to complete the new block first. This method of coin creation &amp;quot;was designed to be a digital analogue to gold and silver mining&amp;quot;&amp;lt;ref&amp;gt;[http://www.lewrockwell.com/orig6/luongo7.1.1.html LewRockwell.com article: The FED’s Real Monetary Problem]&amp;lt;/ref&amp;gt;. Once a node successfully creates a block, it broadcasts the block to the network. Other nodes receive the block, perform a proof-of-work check, and add it to their chain if it is valid. As more transactions occur, blocks are created and added ad infinitum. The longest proof-of-work block chain is acknowledged to be the oldest and most reliable account of the transaction history.&lt;br /&gt;
&lt;br /&gt;
This mechanism is claimed&amp;lt;ref name=Whitepaper /&amp;gt; to be virtually tamper-proof.  For an attacker to manipulate the record, he must outpace all of the other nodes on the network to produce the longest proof-of-work. This becomes exponentially more difficult as time passes, because such &amp;quot;tampered&amp;quot; chains would continuously be rejected by nodes attempting to build a valid chain.&lt;br /&gt;
&lt;br /&gt;
Bitcoin is a completely peer-to-peer network, and every node is able to enter or leave the network at will.  When a node joins the network, the longest proof-of-work is automatically accepted as the most reliable one.&lt;br /&gt;
&lt;br /&gt;
==Economic aspects==&lt;br /&gt;
&lt;br /&gt;
The average rate of Bitcoin production is tapered such that over time the total number of Bitcoins will approach 21,000,000.  After this point, no further Bitcoin production is possible.  In this environment of limited supply and in situations where large numbers of Bitcoins are either lost or destroyed, the electronic divisibility of Bitcoins is argued to be conducive to downward price adjustments with no practical limitations in the actual storage or transport of Bitcoin value.&amp;lt;ref name=Divisiblity&amp;gt;[http://www.bitcoin.org/smf/index.php?topic=44.0 Divisibility of Bitcoins]&amp;lt;/ref&amp;gt;  Rather than relying on the incentive of newly created Bitcoins to package transactions, nodes in this period will likely depend more heavily on their ability to competitively collect transaction fees to process Bitcoin transactions into blocks.&amp;lt;ref&amp;gt;[http://www.bitcoin.org/smf/index.php?topic=165.0 Incentive to Collect Transactions]&amp;lt;/ref&amp;gt;&lt;br /&gt;
&lt;br /&gt;
==Monetary and financial benefits==&lt;br /&gt;
&lt;br /&gt;
Given the decentralized nature of Bitcoin and the hard coding of rules within the software, potential users claim various monetary and financial benefits&amp;lt;ref name=FAQ&amp;gt;[http://www.bitcoin.org/faq Bitcoin FAQ]&amp;lt;/ref&amp;gt;:&lt;br /&gt;
&lt;br /&gt;
* Direct transfer via the internet without a trusted middleman or financial processor.&lt;br /&gt;
* Third parties cannot prevent or control transactions.&lt;br /&gt;
* Transactions are practically free.&lt;br /&gt;
* Bitcoin value is unconnected to possible instability caused by fractional reserve banking and poor central bank policy (see [[Austrian business cycle theory]]).&lt;br /&gt;
* Corrupted transactions created by hacked or modified clients are rejected by honest clients.&lt;br /&gt;
* The limited inflation of the Bitcoin system’s money supply is distributed evenly by CPU power throughout the network and programmatically created at a rate known to all parties in advance.  Inflation cannot therefore be centrally manipulated to effect redistribution of Bitcoin value from general users. &lt;br /&gt;
* Given the predetermined rate of Bitcoin creation, the system is further protected against wild swings in supply due to externalities sometimes seen with traditional commodity currencies (see [[Wikipedia:History_of_the_rupee#The_fall_of_the_Rupee|Fall of the Rupee]] due to large discoveries of silver reserves in the New World).&lt;br /&gt;
* Bitcoins are potentially divisible to eight decimal points.&amp;lt;ref name=Divisiblity /&amp;gt;  There are therefore no practical limitations to downward price adjustments in a deflationary environment.&lt;br /&gt;
&lt;br /&gt;
According to the author, the design also supports a variety of possible transaction types that have yet to be implemented within the currently available client.  These include [[Wikipedia:escrow|escrow]] transactions, [[Wikipedia:surety bond|surety bond]] contracts, third party [[Wikipedia:arbitration|arbitration]], and multi-party signatures.&amp;lt;ref&amp;gt;[http://www.bitcoin.org/smf/index.php?topic=195.msg1611#msg1611 Predicate Transactions]&amp;lt;/ref&amp;gt;&lt;br /&gt;
&lt;br /&gt;
==Acceptance==&lt;br /&gt;
&lt;br /&gt;
As of august 2010 there are roughly 30 sites accepting payment via Bitcoin&amp;lt;ref name=AcceptingSites&amp;gt;[http://www.bitcoin.org/trade List of sites accepting Bitcoin]&amp;lt;/ref&amp;gt;, spanning areas such as [[Wikipedia:VOIP|digital telephony]] services&amp;lt;ref&amp;gt;[http://forum.link2voip.com/viewtopic.php?f=1&amp;amp;t=1088 Link2VoIP (www.link2voip.com) accepts Bitcoin as payment.]&amp;lt;/ref&amp;gt;, [[Wikipedia:currency trading]] systems&amp;lt;ref&amp;gt;[http://www.bitcoin.org/smf/index.php?topic=20.msg747#msg747 Bitcoin Trading System.]&amp;lt;/ref&amp;gt;&amp;lt;ref&amp;gt;{{cite web|url=http://www.bitcointo.com/|title=Bitcointo, a Bitcoin to physical goods conversion service}}&amp;lt;/ref&amp;gt;, online games&amp;lt;ref&amp;gt;{{cite web|url=http://www.atitd.com/|title=A Tale in the Desert IV accepts Bitcoin as payment}}&amp;lt;/ref&amp;gt;&amp;lt;ref&amp;gt;{{cite web|url=http://www.sirarthur.net/bitcasino|title=BitCoin Casino}}&amp;lt;/ref&amp;gt;&amp;lt;ref&amp;gt;{{cite web|url=http://www.thefarwilds.com/|title=The Far Wilds, online game accepting Bitcoin as payment}}&amp;lt;/ref&amp;gt;, physical goods&amp;lt;ref&amp;gt;{{cite web|url=http://qextracts.ecrater.com/|title=Quiggle extracts, online apothecary accepting bitcoins as payment}}&amp;lt;/ref&amp;gt;&amp;lt;ref&amp;gt;{{cite web|url=http://www.theoddshot.com.au/|title=The Odd Shot, a print photography business accepting bitcoins as payment}}&amp;lt;/ref&amp;gt;, advertising services&amp;lt;ref&amp;gt;{{cite web|url=http://www.bitads.tk/|title=Bitads, advertising system accepting Bitcoins as payment}}&amp;lt;/ref&amp;gt;&amp;lt;ref&amp;gt;{{cite web|url=http://www.bitlist.tk/|title=Bitlist, advertising system accepting Bitcoins as payment}}&amp;lt;/ref&amp;gt;, auction systems&amp;lt;ref&amp;gt;{{cite web|title=BiddingPond.com, a Bitcoin-powered auction system|url=http://www.biddingpond.com/}}&amp;lt;/ref&amp;gt;, web hosting&amp;lt;ref&amp;gt;{{cite web|url=http://www.privacyshark.com/|title=Privacy Shark, anonymous Bitcoin-based domain name and DNS hosting services}}&amp;lt;/ref&amp;gt;, computer security auditing&amp;lt;ref&amp;gt;{{cite web|url=http://binarysecurity.webs.com/|title=Binary Security, Bitcoin only web application security auditing services}}&amp;lt;/ref&amp;gt; and other online services. The Electronic Frontier Foundation [EFF] has stopped accepting donations in Bitcoins.&amp;lt;ref&amp;gt;{{cite web|title=EFF and Bitcoin|first=Cindy|last=Cohen|date=2011-06-20|newspaper=Deeplinks Blog|url=https://www.eff.org/deeplinks/2011/06/eff-and-bitcoin|accessdate=2011-12-21}}&amp;lt;/ref&amp;gt;&lt;br /&gt;
&lt;br /&gt;
==See also==&lt;br /&gt;
*[[GoldMoney]]&lt;br /&gt;
*[[Wikipedia:Anonymous internet banking|Anonymous internet banking]]&lt;br /&gt;
*[[Wikipedia:Crypto-anarchy|Crypto-anarchy]]&lt;br /&gt;
*[[Wikipedia:eCache|eCache]]&lt;br /&gt;
*[[Wikipedia:HashCash|HashCash]]&lt;br /&gt;
*[[Wikipedia:Pecunix|Pecunix]]&lt;br /&gt;
*[[Wikipedia:Ripple monetary system|Ripple monetary system]]&lt;br /&gt;
*[[Wikipedia:Yodelbank|Yodelbank]]&lt;br /&gt;
&lt;br /&gt;
==References==&lt;br /&gt;
{{Reflist|1}}&lt;br /&gt;
&lt;br /&gt;
==Links==&lt;br /&gt;
*[http://www.bitcoin.org/ Official website]&lt;br /&gt;
*[https://www.bitcoin.org/wiki/doku.php Bitcoin wiki]{{dead link}}&lt;br /&gt;
* [http://sourceforge.net/projects/bitcoin/ Bitcoin at sourceforge]&lt;br /&gt;
*[http://news.slashdot.org/story/10/07/11/1747245/Bitcoin-Releases-Version-03 news.slashdot.org]&lt;br /&gt;
*[http://p2pfoundation.ning.com/profiles/blogs/bitcoin-open-source-p2p-ecash p2pfoundation.net]&lt;br /&gt;
*&#039;&#039;[http://modeledbehavior.com/2010/06/30/bitcoin-and-the-wild-west/ Bitcoin and the Wild West]&#039;&#039;, Modeled Behaviour blog.&lt;br /&gt;
*[http://dailypaul.com/node/139776 dailypaul.com]&lt;br /&gt;
*[http://www.reddit.com/domain/bitcoin.org/ reddit.com]&lt;br /&gt;
*[http://habrahabr.ru/blogs/crypto/99100/ Russian blog]&lt;br /&gt;
*[http://www.linux.org.ru/news/opensource/5113340 linux.org.ru]&lt;br /&gt;
&lt;br /&gt;
[[Category:Currency]]&lt;/div&gt;</summary>
		<author><name>173.245.50.242</name></author>
	</entry>
	<entry>
		<id>https://wiki.freecapitalists.org/index.php?title=Bitcoin&amp;diff=7120</id>
		<title>Bitcoin</title>
		<link rel="alternate" type="text/html" href="https://wiki.freecapitalists.org/index.php?title=Bitcoin&amp;diff=7120"/>
		<updated>2012-02-01T04:54:23Z</updated>

		<summary type="html">&lt;p&gt;173.245.50.242: /* Economic aspects */&lt;/p&gt;
&lt;hr /&gt;
&lt;div&gt;[[File:Bitcoinlogo.png|thumb|300px|right|Bitcoin logo.]]&lt;br /&gt;
{{Infobox&lt;br /&gt;
| Box title = Software&lt;br /&gt;
| Row 1 title= name&lt;br /&gt;
| Row 1 info= Bitcoin&lt;br /&gt;
| Row 2 title=developer&lt;br /&gt;
| Row 2 info= Satoshi Nakamoto&lt;br /&gt;
| Row 3 title=latest release version&lt;br /&gt;
| Row 3 info = 0.3.12&lt;br /&gt;
| Row 4 title=latest release date&lt;br /&gt;
| Row 4 info= &amp;quot;2010/09/07&amp;quot;&lt;br /&gt;
| Row 5 title=programming language&lt;br /&gt;
| Row 5 info = [[Wikipedia:C++]]&lt;br /&gt;
| Row 6 title=operating system&lt;br /&gt;
| Row 6 info = Windows, Linux, Mac OS X&lt;br /&gt;
| Row 7 title=status&lt;br /&gt;
| Row 7 info = Beta&lt;br /&gt;
| Row 8 title=genre&lt;br /&gt;
| Row 8 info= [[Wikipedia:Electronic money|Electronic money]]&lt;br /&gt;
| Row 9 title=license&lt;br /&gt;
| Row 9 info = [[Wikipedia:MIT License|MIT License]]&lt;br /&gt;
| Row 10 title=website&lt;br /&gt;
| Row 10 info  = [http://www.bitcoin.org/ &amp;quot;www.bitcoin.org&amp;quot;]&lt;br /&gt;
}}&lt;br /&gt;
{{Infobox&lt;br /&gt;
|Box title=Currency&lt;br /&gt;
| Row 1 title = currency name&lt;br /&gt;
| Row 1 info = Bitcoin&lt;br /&gt;
| Row 2 title = using countries&lt;br /&gt;
|Row 2 info = &#039;&#039;Internet-based (global)&#039;&#039;&lt;br /&gt;
| Row 3 title=symbol&lt;br /&gt;
| Row 3 info = BTC&lt;br /&gt;
| Row 4 title=issuing authority&lt;br /&gt;
| Row 4 info= Bitcoin network&lt;br /&gt;
| Row 5 title =issuing authority website&lt;br /&gt;
| Row 5 info www.bitcoin.org&lt;br /&gt;
}}&lt;br /&gt;
&#039;&#039;&#039;Bitcoin&#039;&#039;&#039; is an [[open source]] [[Wikipedia:peer-to-peer|peer-to-peer]] system developed by [[Wikipedia:Satoshi Nakamoto|Satoshi Nakamoto]] that aims to provide [[Wikipedia:electronic cash|electronic cash]]. The system is decentralized with no central server or trusted parties.&amp;lt;ref name=&amp;quot;hartford&amp;quot;&amp;gt;&lt;br /&gt;
{{cite news&lt;br /&gt;
|title=Is It Time For Digital-Only Dollars?&lt;br /&gt;
|first=Phil&lt;br /&gt;
|last=Maymin&lt;br /&gt;
|date=2010-07-08&lt;br /&gt;
|newspaper=Hartford Advocate&lt;br /&gt;
|url=http://www.hartfordadvocate.com/commentary/is-it-time-for-digital-only-dollars-2&lt;br /&gt;
|accessdate=2010-07-23&lt;br /&gt;
}}&amp;lt;/ref&amp;gt;  Bitcoin relies on [[Wikipedia:cryptographic|cryptographic]] principles to create unique, unreproducible, and divisible tokens.  Users hold the [[Wikipedia:Key (cryptography)|cryptographic keys]] to their own tokens and transact directly with each other, with the help of the network to check for [[Wikipedia:double-spending|double-spending]].&amp;lt;ref name=&amp;quot;infoworld_2010&amp;quot;&amp;gt;&lt;br /&gt;
{{cite news&lt;br /&gt;
|date=2010-05-24&lt;br /&gt;
|title=Open source innovation on the cutting edge&lt;br /&gt;
|first=Neil&lt;br /&gt;
|last=McAllister &lt;br /&gt;
|newspaper=InfoWorld&lt;br /&gt;
|url=http://www.infoworld.com/d/open-source/open-source-innovation-the-cutting-edge-582?page=0,2 &lt;br /&gt;
|accessdate=2010-07-23&lt;br /&gt;
}}&amp;lt;/ref&amp;gt;&lt;br /&gt;
&lt;br /&gt;
==Technical basis==&lt;br /&gt;
[[File:Hash_tree.png|thumb|300px|right|Bitcoin uses an ever-growing [[Wikipedia:Hash tree|hash tree]] to store, linearize, and verify transactions.]]&lt;br /&gt;
&lt;br /&gt;
Bitcoin is an implementation of Wei Dai&#039;s b-money proposal on [[Wikipedia:Cypherpunks|Cypherpunks]] in 1998 and Nick Szabo&#039;s Bitgold proposal.&amp;lt;ref&amp;gt;[http://www.bitcoin.org/smf/index.php?topic=342.msg4508#msg4508 Bitcoin author on external references]&amp;lt;/ref&amp;gt; The principles of the system are described in the Bitcoin White Paper.&amp;lt;ref name=Whitepaper&amp;gt;[http://www.bitcoin.org/sites/default/files/bitcoin.pdf Bitcoin White Paper]&amp;lt;/ref&amp;gt;&lt;br /&gt;
&lt;br /&gt;
A user on the network has one or several cryptographic identifiers ([[Wikipedia:ECDSA|ECDSA]] keypairs), which represent their [[Wikipedia:wallet|wallet]]. The public key counterpart of this wallet is called an &#039;&#039;address&#039;&#039;. The private key, stored only on the user&#039;s computer, is used to authorize payments from the user. The wallet or address contain no information about their owner, so they are effectively anonymous.&amp;lt;ref&amp;gt;{{cite news |author=Nathan Willis |date=2010-11-10 |title=Bitcoin: Virtual money created by CPU cycles |publisher=[[Wikipedia:LWN.net]] |url=http://lwn.net/SubscriberLink/414452/ef58a58a62148050/ }}&amp;lt;/ref&amp;gt;&lt;br /&gt;
&lt;br /&gt;
Each coin of the Bitcoin system has its owner&#039;s [[Wikipedia:public key|public key]] on it. The owner can transfer it further by adding the recipient&#039;s public key on it, signing it with his private key and broadcasting the transaction to the network. This way, each coin contains its cryptographic ownership history from the creator of the coin to its current owner.&lt;br /&gt;
&lt;br /&gt;
To prevent users from double-spending their coins (signing the same coin for many recipients), transactions are [[Wikipedia:timestamp|timestamped]] by the network with a [[Wikipedia:proof-of-work system|proof-of-work system]]. The network collects and records new transactions into a chain of blocks. Nodes of the network are constantly racing to complete these blocks by finding a value, that summed up with the block and the hash of the previous block, produces an [[Wikipedia:SHA-256|SHA-256]] hash containing a certain amount of leading zero bits. The average work required by this operation can be calculated and used to timestamp the block&#039;s transactions, so that they cannot be invalidated by later double-spending.&lt;br /&gt;
&lt;br /&gt;
The incentive to use CPU time for running the system is that new coins are created and assigned to the node that manages to complete the new block first. This method of coin creation &amp;quot;was designed to be a digital analogue to gold and silver mining&amp;quot;&amp;lt;ref&amp;gt;[http://www.lewrockwell.com/orig6/luongo7.1.1.html LewRockwell.com article: The FED’s Real Monetary Problem]&amp;lt;/ref&amp;gt;. Once a node successfully creates a block, it broadcasts the block to the network. Other nodes receive the block, perform a proof-of-work check, and add it to their chain if it is valid. As more transactions occur, blocks are created and added ad infinitum. The longest proof-of-work block chain is acknowledged to be the oldest and most reliable account of the transaction history.&lt;br /&gt;
&lt;br /&gt;
This mechanism is claimed&amp;lt;ref name=Whitepaper /&amp;gt; to be virtually tamper-proof.  For an attacker to manipulate the record, he must outpace all of the other nodes on the network to produce the longest proof-of-work. This becomes exponentially more difficult as time passes, because such &amp;quot;tampered&amp;quot; chains would continuously be rejected by nodes attempting to build a valid chain.&lt;br /&gt;
&lt;br /&gt;
Bitcoin is a completely peer-to-peer network, and every node is able to enter or leave the network at will.  When a node joins the network, the longest proof-of-work is automatically accepted as the most reliable one.&lt;br /&gt;
&lt;br /&gt;
The average rate of Bitcoin production is tapered such that over time the total number of Bitcoins will approach 21,000,000.  After this point, no further Bitcoin production is possible.  In this environment of limited supply and in situations where large numbers of Bitcoins are either lost or destroyed, the electronic divisibility of Bitcoins is argued to be conducive to downward price adjustments with no practical limitations in the actual storage or transport of Bitcoin value.&amp;lt;ref name=Divisiblity&amp;gt;[http://www.bitcoin.org/smf/index.php?topic=44.0 Divisibility of Bitcoins]&amp;lt;/ref&amp;gt;  Rather than relying on the incentive of newly created Bitcoins to package transactions, nodes in this period will likely depend more heavily on their ability to competitively collect transaction fees to process Bitcoin transactions into blocks.&amp;lt;ref&amp;gt;[http://www.bitcoin.org/smf/index.php?topic=165.0 Incentive to Collect Transactions]&amp;lt;/ref&amp;gt;&lt;br /&gt;
&lt;br /&gt;
==Monetary and financial benefits==&lt;br /&gt;
&lt;br /&gt;
Given the decentralized nature of Bitcoin and the hard coding of rules within the software, potential users claim various monetary and financial benefits&amp;lt;ref name=FAQ&amp;gt;[http://www.bitcoin.org/faq Bitcoin FAQ]&amp;lt;/ref&amp;gt;:&lt;br /&gt;
&lt;br /&gt;
* Direct transfer via the internet without a trusted middleman or financial processor.&lt;br /&gt;
* Third parties cannot prevent or control transactions.&lt;br /&gt;
* Transactions are practically free.&lt;br /&gt;
* Bitcoin value is unconnected to possible instability caused by fractional reserve banking and poor central bank policy (see [[Austrian business cycle theory]]).&lt;br /&gt;
* Corrupted transactions created by hacked or modified clients are rejected by honest clients.&lt;br /&gt;
* The limited inflation of the Bitcoin system’s money supply is distributed evenly by CPU power throughout the network and programmatically created at a rate known to all parties in advance.  Inflation cannot therefore be centrally manipulated to effect redistribution of Bitcoin value from general users. &lt;br /&gt;
* Given the predetermined rate of Bitcoin creation, the system is further protected against wild swings in supply due to externalities sometimes seen with traditional commodity currencies (see [[Wikipedia:History_of_the_rupee#The_fall_of_the_Rupee|Fall of the Rupee]] due to large discoveries of silver reserves in the New World).&lt;br /&gt;
* Bitcoins are potentially divisible to eight decimal points.&amp;lt;ref name=Divisiblity /&amp;gt;  There are therefore no practical limitations to downward price adjustments in a deflationary environment.&lt;br /&gt;
&lt;br /&gt;
According to the author, the design also supports a variety of possible transaction types that have yet to be implemented within the currently available client.  These include [[Wikipedia:escrow|escrow]] transactions, [[Wikipedia:surety bond|surety bond]] contracts, third party [[Wikipedia:arbitration|arbitration]], and multi-party signatures.&amp;lt;ref&amp;gt;[http://www.bitcoin.org/smf/index.php?topic=195.msg1611#msg1611 Predicate Transactions]&amp;lt;/ref&amp;gt;&lt;br /&gt;
&lt;br /&gt;
==Acceptance==&lt;br /&gt;
&lt;br /&gt;
As of august 2010 there are roughly 30 sites accepting payment via Bitcoin&amp;lt;ref name=AcceptingSites&amp;gt;[http://www.bitcoin.org/trade List of sites accepting Bitcoin]&amp;lt;/ref&amp;gt;, spanning areas such as [[Wikipedia:VOIP|digital telephony]] services&amp;lt;ref&amp;gt;[http://forum.link2voip.com/viewtopic.php?f=1&amp;amp;t=1088 Link2VoIP (www.link2voip.com) accepts Bitcoin as payment.]&amp;lt;/ref&amp;gt;, [[Wikipedia:currency trading]] systems&amp;lt;ref&amp;gt;[http://www.bitcoin.org/smf/index.php?topic=20.msg747#msg747 Bitcoin Trading System.]&amp;lt;/ref&amp;gt;&amp;lt;ref&amp;gt;{{cite web|url=http://www.bitcointo.com/|title=Bitcointo, a Bitcoin to physical goods conversion service}}&amp;lt;/ref&amp;gt;, online games&amp;lt;ref&amp;gt;{{cite web|url=http://www.atitd.com/|title=A Tale in the Desert IV accepts Bitcoin as payment}}&amp;lt;/ref&amp;gt;&amp;lt;ref&amp;gt;{{cite web|url=http://www.sirarthur.net/bitcasino|title=BitCoin Casino}}&amp;lt;/ref&amp;gt;&amp;lt;ref&amp;gt;{{cite web|url=http://www.thefarwilds.com/|title=The Far Wilds, online game accepting Bitcoin as payment}}&amp;lt;/ref&amp;gt;, physical goods&amp;lt;ref&amp;gt;{{cite web|url=http://qextracts.ecrater.com/|title=Quiggle extracts, online apothecary accepting bitcoins as payment}}&amp;lt;/ref&amp;gt;&amp;lt;ref&amp;gt;{{cite web|url=http://www.theoddshot.com.au/|title=The Odd Shot, a print photography business accepting bitcoins as payment}}&amp;lt;/ref&amp;gt;, advertising services&amp;lt;ref&amp;gt;{{cite web|url=http://www.bitads.tk/|title=Bitads, advertising system accepting Bitcoins as payment}}&amp;lt;/ref&amp;gt;&amp;lt;ref&amp;gt;{{cite web|url=http://www.bitlist.tk/|title=Bitlist, advertising system accepting Bitcoins as payment}}&amp;lt;/ref&amp;gt;, auction systems&amp;lt;ref&amp;gt;{{cite web|title=BiddingPond.com, a Bitcoin-powered auction system|url=http://www.biddingpond.com/}}&amp;lt;/ref&amp;gt;, web hosting&amp;lt;ref&amp;gt;{{cite web|url=http://www.privacyshark.com/|title=Privacy Shark, anonymous Bitcoin-based domain name and DNS hosting services}}&amp;lt;/ref&amp;gt;, computer security auditing&amp;lt;ref&amp;gt;{{cite web|url=http://binarysecurity.webs.com/|title=Binary Security, Bitcoin only web application security auditing services}}&amp;lt;/ref&amp;gt; and other online services. The Electronic Frontier Foundation [EFF] has stopped accepting donations in Bitcoins.&amp;lt;ref&amp;gt;{{cite web|title=EFF and Bitcoin|first=Cindy|last=Cohen|date=2011-06-20|newspaper=Deeplinks Blog|url=https://www.eff.org/deeplinks/2011/06/eff-and-bitcoin|accessdate=2011-12-21}}&amp;lt;/ref&amp;gt;&lt;br /&gt;
&lt;br /&gt;
==See also==&lt;br /&gt;
*[[GoldMoney]]&lt;br /&gt;
*[[Wikipedia:Anonymous internet banking|Anonymous internet banking]]&lt;br /&gt;
*[[Wikipedia:Crypto-anarchy|Crypto-anarchy]]&lt;br /&gt;
*[[Wikipedia:eCache|eCache]]&lt;br /&gt;
*[[Wikipedia:HashCash|HashCash]]&lt;br /&gt;
*[[Wikipedia:Pecunix|Pecunix]]&lt;br /&gt;
*[[Wikipedia:Ripple monetary system|Ripple monetary system]]&lt;br /&gt;
*[[Wikipedia:Yodelbank|Yodelbank]]&lt;br /&gt;
&lt;br /&gt;
==References==&lt;br /&gt;
{{Reflist|1}}&lt;br /&gt;
&lt;br /&gt;
==Links==&lt;br /&gt;
*[http://www.bitcoin.org/ Official website]&lt;br /&gt;
*[https://www.bitcoin.org/wiki/doku.php Bitcoin wiki]{{dead link}}&lt;br /&gt;
* [http://sourceforge.net/projects/bitcoin/ Bitcoin at sourceforge]&lt;br /&gt;
*[http://news.slashdot.org/story/10/07/11/1747245/Bitcoin-Releases-Version-03 news.slashdot.org]&lt;br /&gt;
*[http://p2pfoundation.ning.com/profiles/blogs/bitcoin-open-source-p2p-ecash p2pfoundation.net]&lt;br /&gt;
*&#039;&#039;[http://modeledbehavior.com/2010/06/30/bitcoin-and-the-wild-west/ Bitcoin and the Wild West]&#039;&#039;, Modeled Behaviour blog.&lt;br /&gt;
*[http://dailypaul.com/node/139776 dailypaul.com]&lt;br /&gt;
*[http://www.reddit.com/domain/bitcoin.org/ reddit.com]&lt;br /&gt;
*[http://habrahabr.ru/blogs/crypto/99100/ Russian blog]&lt;br /&gt;
*[http://www.linux.org.ru/news/opensource/5113340 linux.org.ru]&lt;br /&gt;
&lt;br /&gt;
[[Category:Currency]]&lt;/div&gt;</summary>
		<author><name>173.245.50.242</name></author>
	</entry>
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