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Bitcoin is a payment system invented by Satoshi Nakamoto, who published the invention in 2008 and released it as open-source software in 2009. The system is peer-to-peer; users can transact directly without needing an intermediary. Transactions are verified by network nodes and recorded in a public distributed ledger called the block chain. The ledger uses its own unit of account, also called bitcoin. The system works without a central repository or single administrator, which has led the US Treasury to categorize it as a decentralized virtual currency. Bitcoin is often called the first cryptocurrency, although prior systems existed. Bitcoin is more correctly described as the first decentralized digital currency. It is the largest of its kind in terms of total market value.

Bitcoins are created as a reward for payment processing work in which users offer their computing power to verify and record payments into the public ledger. This activity is called mining and the miners are rewarded with transaction fees and newly created bitcoins. Besides mining, bitcoins can be obtained in exchange for different currencies, products, and services. Users can send and receive bitcoins for an optional transaction fee.

Bitcoin as a form of payment for products and services has grown, and merchants have an incentive to accept it because fees are lower than the 2–3% typically imposed by credit card processors. Unlike credit cards, any fees are paid by the purchaser, not the vendor. The European Banking Authority and other sources have warned that bitcoin users are not protected by refund rights or chargebacks. Despite a big increase in the number of merchants accepting bitcoin, the cryptocurrency doesn’t have much momentum in retail transactions.

The use of bitcoin by criminals has attracted the attention of financial regulators, legislative bodies, law enforcement, and media. Criminal activities are primarily centered around black markets and theft, though officials in countries such as the United States also recognize that bitcoin can provide legitimate financial services.


Block chain

The block chain is a public ledger that records bitcoin transactions. A novel solution accomplishes this without any trusted central authority: maintenance of the block chain is performed by a network of communicating nodes running bitcoin software. Transactions of the form payer X sends Y bitcoins to payee Z are broadcast to this network using readily available software applications. Network nodes can validate transactions, add them to their copy of the ledger, and then broadcast these ledger additions to other nodes. The block chain is a distributed database; in order to independently verify the chain of ownership of any and every bitcoin (amount), each network node stores its own copy of the block chain. Approximately six times per hour, a new group of accepted transactions, a block, is created, added to the block chain, and quickly published to all nodes. This allows bitcoin software to determine when a particular bitcoin amount has been spent, which is necessary in order to prevent double-spending in an environment without central oversight. Whereas a conventional ledger records the transfers of actual bills or promissory notes that exist apart from it, the block chain is the only place that bitcoins can be said to exist in the form of unspent outputs of transactions.


The unit of account of the bitcoin system is bitcoin. As of 2014, symbols used to represent bitcoin are BTC,<ref group="note" name="BTCcode" /> XBT,<ref group="note" name="XBTcode" /> and Template:Nowrap.<ref group="note" name="BTCsym" /><ref name=btcregs>Template:Cite web</ref>Template:Rp Small amounts of bitcoin used as alternative units are millibitcoin (mBTC), microbitcoin (µBTC), and satoshi. Named in homage to bitcoin's creator, a satoshi is the smallest amount within bitcoin representing 0.00000001 bitcoin, one hundred millionth of a bitcoin.<ref name="satoshi unit" /> A millibitcoin equals to 0.001 bitcoin, which is one thousandth of bitcoin.<ref>Template:Cite web</ref> One microbitcoin equals to 0.000001 bitcoin, which is one millionth of bitcoin. A microbitcoin is sometimes referred to as a bit.

On 7 October 2014, the Bitcoin Foundation disseminated a plan to apply for an ISO 4217 currency code for bitcoin,<ref name = "standardize" /> and mentioned BTC and XBT as the leading candidates.<ref>Template:Cite web</ref>


File:Bitcoin Transaction Visual.svg
Simplified chain of ownership.<ref name="paper" /> In reality, a transaction can have more than one input and more than one output.

Ownership of bitcoins implies that a user can spend bitcoins associated with a specific address. To do so, a payer must digitally sign the transaction using the corresponding private key. Without knowledge of the private key the transaction cannot be signed and bitcoins cannot be spent. The network verifies the signature using the public key.<ref name="Antonopoulos2014" />Template:Rp If the private key is lost, the bitcoin network will not recognize any other evidence of ownership;<ref name="primer" /> the coins are then unusable, and thus effectively lost. For example, in 2013 one user said he lost 7,500 bitcoins, worth $7.5 million at the time, when he discarded a hard drive containing his private key.<ref>Template:Cite news</ref>


Template:See also A transaction must have one or more inputs. For the transaction to be valid, every input must be an unspent output of a previous transaction. Every input must be digitally signed. The use of multiple inputs corresponds to the use of multiple coins in a cash transaction. A transaction can also have multiple outputs, allowing one to make multiple payments in one go. A transaction output can be specified as an arbitrary multiple of satoshi. As in a cash transaction, the sum of inputs (coins used to pay) can exceed the intended sum of payments. In such case, an additional output is used, returning the change back to the payer. Any input satoshis not accounted for in the transaction outputs become the transaction fee.<ref name="Antonopoulos2014" />Template:Rp

To send money to a bitcoin address, users can click links on webpages; this is accomplished with a provisional bitcoin URI scheme using a template registered with IANA. Bitcoin clients like Electrum and Armory support bitcoin URIs. Mobile clients recognize bitcoin URIs in QR codes, so that the user does not have to type the bitcoin address and amount in manually. The QR code is generated from the user input based on the payment amount. The QR code is displayed on the mobile device screen and can be scanned by a second mobile device.<ref name=QRpatent>Template:Cite web</ref>


Relative mining difficulty from 9 January 2009 to 31 December 2014 (the difficulty scale is logarithmic).<ref name="">Template:Cite web</ref> Relative mining difficulty is defined as the ratio between the difficulty target on 9 January 2009 and the current difficulty target.
File:USB Erupter.jpg
ASICMiner Block Erupter, a type of mining hardware used in 2013.<ref></ref>

Mining is a record-keeping service.Template:Refn Miners keep the block chain consistent, complete, and unalterable by repeatedly verifying and collecting newly broadcast transactions into a new group of transactions called a block. A new block contains information that "chains" it to the previous block thus giving the block chain its name. It is a cryptographic hash of the previous block, using the SHA-256 hashing algorithm.<ref name="Antonopoulos2014" />Template:Rp

In order to be accepted by the rest of the network, a new block must contain a so-called proof-of-work. The proof-of-work requires miners to find a number called a nonce, such that when the block content is hashed along with the nonce, the result is numerically smaller than the network's difficulty target.<ref name="Antonopoulos2014" />Template:Rp This proof is easy for any node in the network to verify, but extremely time-consuming to generate, as for a secure cryptographic hash miners must try many different nonce values (usually the sequence of tested values is 0, 1, 2, 3, ...<ref name="Antonopoulos2014" />Template:Rp) before meeting the difficulty target.

Every 2016 blocks (approximately 14 days), the difficulty target is adjusted based on the network's recent performance, with the aim of keeping the average time between new blocks at ten minutes. In this way the system automatically adapts to the total amount of mining power on the network.<ref name="Antonopoulos2014" />Template:Rp For example, between 1 March 2014 and 1 March 2015, the average number of nonces miners had to try before creating a new block increased from 16.4 quintillion to 200.5 quintillion.<ref name="diffhistory">Template:Cite web</ref>

The proof-of-work system, alongside the chaining of blocks, makes modifications of the block chain extremely hard as an attacker must modify all subsequent blocks in order for the modifications of one block to be accepted. As new blocks are mined all the time, the difficulty of modifying a block increases as time passes and the number of subsequent blocks (also called confirmations of the given block) increases.<ref name="khanbitcoin">Template:Cite web</ref>


It has become common for miners to join organized mining pools, which combine the computational resources of their members in order to increase the frequency of generating new blocks. The reward for each block is then split proportionately among the members, creating a more predictable stream of income for each miner without necessarily changing their long-term average income, although a fee may be charged for the service.

The rewards of mining have led to ever-more-specialized technology being utilized. The most efficient mining hardware makes use of custom designed application-specific integrated circuits, which outperform general purpose CPUs while using less power. As of 2015, a miner who is not using purpose-built hardware is unlikely to earn enough to cover the cost of the electricity used in their efforts, even if they are a member of a pool.

As of 2015, even if all miners used energy efficient processors, the combined electricity consumption would be 1.46 terawatt-hours per year—equal to the consumption of about 135,000 American homes. In 2013, electricity use was estimated to be 0.36 terawatt-hours per year or the equivalent of powering 31,000 US homes.


Total bitcoins in circulation. Horizontal axis: date ranging from 9 January 2009 to 31 December 2014.

The successful miner finding the new block is rewarded with newly created bitcoins and transaction fees. As of 2012 November 28, the reward amounted to 25 newly created bitcoins per block added to the block chain. To claim the reward, a special transaction called a coinbase is included with the processed payments. All bitcoins in circulation can be traced back to such coinbase transactions. The bitcoin protocol specifies that the reward for adding a block will be halved approximately every four years. Eventually, the reward will be removed entirely when an arbitrary limit of 21 million bitcoins is reached c. 2140, and record keeping will then be rewarded by transaction fees solely.<ref name="KWY">Template:Cite web</ref>

Transaction fees

Paying a transaction fee is optional, but may speed up confirmation of the transaction.<ref name="txnfee">Template:Cite web</ref> Payers have an incentive to include such fees because doing so means their transaction is more likely to be added to the block chain sooner; miners can choose which transactions to process<ref name="EconOfBTC" /> and prioritize those that pay higher fees. Fees are based on the storage size of the transaction generated, which in turn is dependent on the number of inputs used to create the transaction. Furthermore, priority is given to older unspent inputs.<ref name="bitcoinfees">Template:Cite web</ref>


Template:See also

File:Electrum Bitcoin Wallet.png
Electrum bitcoin wallet
File:Bitcoin paper wallet generated at bitaddress.jpg
Bitcoin paper wallet generated at
Trezor hardware wallet

A wallet stores the information necessary to transact bitcoins. While wallets are often described as a place to hold<ref>Template:Cite web</ref> or store bitcoins,<ref name=3ceos /> due to the nature of the system, bitcoins are inseparable from the block chain transaction ledger. Perhaps a better way to describe a wallet is something that "stores the digital credentials for your bitcoin holdings"<ref name=3ceos>Template:Cite web</ref> and allows you to access (and spend) them. Bitcoin uses public-key cryptography, in which two cryptographic keys, one public and one private, are generated.<ref name="Economist113013Pressure">Template:Cite news</ref> At its most basic, a wallet is a collection of these keys.

There are several types of wallet. Software wallets connect to the network and allow spending bitcoins in addition to holding the credentials that prove ownership.<ref name="Bitcoin Clients" /> Internet services called online wallets like, Circle, or Coinbase offer similar functionality but may be easier to use; in essence, bitcoin credentials are stored with the online wallet provider rather than on the user's hardware.<ref>Template:Cite news</ref><ref>Template:Cite news</ref> Physical wallets also exist and are more secure, as they store the credentials necessary to spend bitcoins offline.<ref name=3ceos/> Examples combine a novelty coin with these credentials printed on metal,<ref name="theverge">Template:Cite web</ref> wood, or plastic. Others are simply paper printouts. Another type of wallet called a hardware wallet keeps credentials offline while facilitating transactions.<ref>Template:Cite news</ref>

Reference implementation

The first wallet program was released in 2009 by Satoshi Nakamoto as open-source code and was originally called bitcoind.<ref>Template:Cite web</ref> Sometimes referred to as the "Satoshi client," this is also known as the reference client because it serves to define the bitcoin protocol and acts as a standard for other implementations.<ref name="Bitcoin Clients"/> In version 0.5 the client moved from the wxWidgets user interface toolkit to Qt, and the whole bundle was referred to as Bitcoin-Qt.<ref name="Bitcoin Clients">Template:Cite thesis</ref> After the release of version 0.9, Bitcoin-Qt was renamed Bitcoin Core.<ref>Template:Cite web</ref>


Privacy is achieved by not identifying owners of bitcoin addresses while making other transaction data public. Bitcoin users are not identified by name, but transactions can be linked to individuals and companies.<ref>Template:Cite web</ref> Additionally, bitcoin exchanges, where people buy and sell bitcoins for fiat money, may be required by law to collect personal information.<ref name="5facts">Template:Cite news</ref> To maintain financial privacy, a different bitcoin address for each transaction is recommended.<ref>Template:Cite web</ref> Transactions that spend coins from multiple inputs can reveal that the inputs may have a common owner. Users concerned about privacy can use so-called mixing services that swap coins they own for coins with different transaction histories.<ref>Template:Cite news</ref> It has been suggested that bitcoin payments should not be considered more private than credit card payments.<ref>Template:Cite web</ref>


Wallets and similar software technically handle bitcoins as equivalent, establishing the basic level of fungibility. Researchers have pointed out that the history of every single bitcoin is registered and publicly available in the block chain ledger, and that some users may refuse to accept bitcoins coming from controversial transactions, which would harm bitcoin's fungibility.<ref>Template:Cite web</ref> Projects such as Zerocoin and Dark Wallet aim to address these privacy and fungibility issues.<ref>Template:Cite web</ref><ref>Template:Cite web</ref>



File:BTC number of transactions per month.png
Number of bitcoin transactions per month (logarithmic scale).

Bitcoin was invented by Satoshi Nakamoto,<ref group="note" name="Satoshi" /> who published the invention on 31 October 2008 in a research paper called "Bitcoin: A Peer-to-Peer Electronic Cash system".<ref name="paper" /> It was implemented as open source code and released in January 2009. Bitcoin is often called the first cryptocurrency<ref name="f_c1" /><ref name="f_c2" /><ref name="f_c3" /> although prior systems existed.<ref group="note" name="prior" /> Bitcoin is more correctly described as the first decentralized digital currency.<ref name="primer" /><ref name="Reuters101" />

One of the first supporters, adopters, contributor to bitcoin and receiver of the first bitcoin transaction was programmer Hal Finney. Finney downloaded the bitcoin software the day it was released, and received 10 bitcoins from Nakamoto in the world's first bitcoin transaction.<ref>Template:Cite news</ref><ref>Template:Cite news</ref>

Other early supporters were Wei Dai, creator of bitcoin predecessor b-money, and Nick Szabo, creator of bitcoin predecessor bit gold.<ref name="WallaceWired11">Template:Cite news</ref>

In 2010, an exploit in an early bitcoin client was found that allowed large numbers of bitcoins to be created.<ref>Template:Cite web</ref> The artificially created bitcoins were removed when another chain overtook the bad chain.<ref name="satoshi bug response">Template:Cite web</ref>

Based on bitcoin's open source code, other cryptocurrencies started to emerge in 2011.<ref name="WsjVolatile"/>

In March 2013, a technical glitch caused a fork in the block chain, with one half of the network adding blocks to one version of the chain and the other half adding to another. For six hours two bitcoin networks operated at the same time, each with its own version of the transaction history. The core developers called for a temporary halt to transactions, sparking a sharp sell-off.<ref name="bug events" /> Normal operation was restored when the majority of the network downgraded to version 0.7 of the bitcoin software.<ref name="bug events">Template:Cite web</ref>

In 2013 some mainstream websites began accepting bitcoins. WordPress had started in November 2012,<ref>Template:Cite web</ref> followed by OKCupid in April 2013,<ref>Template:Cite web</ref> Atomic Mall in November 2013,<ref name="">Template:Cite web</ref> TigerDirect<ref name=tigger/> and in January 2014,<ref name=overstock/> Expedia in June 2014,<ref>Template:Cite web</ref> Newegg and Dell in July 2014,<ref>Template:Cite web</ref> and Microsoft in December 2014.<ref name="msftaccepts" />Template:Refn Certain non-profit or advocacy groups such as the Electronic Frontier Foundation accept bitcoin donations.<ref name="EFF2013">Template:Cite web</ref> (The organization started accepting bitcoins in January 2011,<ref>Template:Cite web</ref> stopped accepting them in June 2011,<ref>Template:Cite web</ref> and began again in May 2013.<ref name="EFF2013" />)

In May 2013, the Department of Homeland Security seized assets belonging to the Mt. Gox exchange.<ref>Template:Cite news</ref> The U.S. Federal Bureau of Investigation (FBI) shut down the Silk Road website in October 2013.<ref>Template:Cite news</ref>

In October 2013, Chinese internet giant Baidu had allowed clients of website security services to pay with bitcoins.<ref>Template:Cite web</ref> During November 2013, the China-based bitcoin exchange BTC China overtook the Japan-based Mt. Gox and the Europe-based Bitstamp to become the largest bitcoin trading exchange by trade volume.<ref>Template:Cite web</ref> On 19 November 2013, the value of a bitcoin on the Mt. Gox exchange soared to a peak of US$900 after a United States Senate committee hearing was told by the FBI that virtual currencies are a legitimate financial service.<ref>Template:Cite news</ref> On the same day, one bitcoin traded for over RMB¥6780 (US$1,100) in China.<ref>Template:Cite news</ref> On 5 December 2013, the People's Bank of China prohibited Chinese financial institutions from using bitcoins.<ref name="ccontrols">Template:Cite news</ref> After the announcement, the value of bitcoins dropped,<ref>Template:Cite news</ref> and Baidu no longer accepted bitcoins for certain services.<ref name="bloomberg">Template:Cite news</ref> Buying real-world goods with any virtual currency has been illegal in China since at least 2009.<ref>Template:Cite web</ref>

The first bitcoin ATM was installed in October 2013 in Vancouver, British Columbia, Canada.<ref>Template:Cite news</ref>

With about 12 million existing bitcoins in November 2013,<ref name="raskin">Template:Cite news</ref> the new price increased the market cap for bitcoin to at least US$7.2 billion.<ref>Template:Cite web</ref> By 23 November 2013, the total market capitalization of bitcoin exceeded US$10 billion for the first time.<ref>Template:Cite web</ref>

In the US two men were arrested in January 2014 on charges of money-laundering using bitcoins; one was Charlie Shrem, the head of now defunct bitcoin exchange BitInstant and a vice chairman of the Bitcoin Foundation. Shrem allegedly allowed the other arrested party to purchase large quantities of bitcoins for use on black-market websites.<ref name=vchair/>

In early February 2014, one of the largest bitcoin exchanges, Mt. Gox,<ref>Template:Cite web</ref> suspended withdrawals citing technical issues.<ref>Template:Cite web</ref> By the end of the month, Mt. Gox had filed for bankruptcy protection in Japan amid reports that 744,000 bitcoins had been stolen.<ref name="GoxBankrupt">Template:Cite web</ref> Originally a site for trading Magic: The Gathering cards,<ref>Template:Cite web</ref> Mt. Gox had once been the dominant bitcoin exchange but its popularity had waned as users experienced difficulties withdrawing funds.<ref>Template:Cite web</ref>

On June 18, 2014, it was announced that bitcoin payment service provider BitPay would become the new sponsor of St. Petersburg Bowl under a two-year deal, renamed the Bitcoin St. Petersburg Bowl. Bitcoin was to be accepted for ticket and concession sales at the game as part of the sponsorship, and the sponsorship itself was also paid for using bitcoin.<ref name=wsj-bitpay>Template:Cite web</ref>

Less than one year after the collapse of Mt. Gox, Bitstamp announced that the exchange would be taken offline while they investigate a hack which resulted in about 19,000 bitcoins (equivalent to roughly US$5 million at that time) being stolen from their hot wallet.<ref>Template:Cite web</ref> The exchange remained offline for several days amid speculation that customers had lost their funds. Bitstamp resumed trading on January 9 after increasing security measures and assuring customers that their account balances would not be impacted.<ref>Template:Cite web</ref>

The bitcoin exchange service Coinbase launched the first regulated bitcoin exchange in 25 US states on January 26, 2015. At the time of the announcement, CEO Brian Armstrong stated that Coinbase intends to expand to thirty countries by the end of 2015.<ref>Template:Cite web</ref> A spokesperson for Benjamin M. Lawsky, the superintendent of New York state’s Department of Financial Services, stated that Coinbase is operating without a license in the state of New York. Lawsky is responsible for the development of the so-called 'BitLicense', which companies need to acquire in order to legally operate in New York.<ref>Template:Cite web</ref>



According to the director of the Institute for Money, Technology and Financial Inclusion at the University of California-Irvine there is "an unsettled debate about whether bitcoin is a currency".<ref name="currencydispute">Template:Cite web</ref> Bitcoin is commonly referred to with terms like: digital currency,<ref name="primer" />Template:Rp digital cash,<ref>Template:Cite web</ref> virtual currency,<ref name="satoshi unit" /> electronic currency,<ref name="capitalization" /> or cryptocurrency.<ref name="currencydispute"/> Its inventor, Satoshi Nakamoto, used the term electronic cash.<ref name="paper" /> Bitcoins have three useful qualities in a currency, according to the Economist in January 2015: they are "hard to earn, limited in supply and easy to verify".<ref name=ec815>Template:Cite news</ref>

Economists define money as a store of value, a medium of exchange, and a unit of account and agree that bitcoin has some way to go to meet all these criteria.<ref name=econ315/> It does best as a medium of exchange. The bitcoin market currently suffers from volatility, limiting the ability of bitcoin to act as a stable store of value, and retailers accepting bitcoin use other currencies as their principal unit of account.

Journalists and academics also dispute what to call bitcoin. Some media outlets do make a distinction between "real" money and bitcoins, while others call bitcoin real money. The Wall Street Journal declared it a commodity in December 2013. A Forbes journalist referred to it as digital collectible. Two University of Amsterdam computer scientists proposed the term "money-like informational commodity".<ref name="mlic">Template:Cite web</ref>

The People's Bank of China has stated that bitcoin "is fundamentally not a currency but an investment target".<ref name="">Template:Cite web</ref>

Buying and selling

Bitcoins can be bought and sold both on- and offline. Participants in online exchanges offer bitcoin buy and sell bids. Using an online exchange to obtain bitcoins entails some risk, and, according to a study published in April 2013, 45% of exchanges fail and take client bitcoins with them.<ref name="wired45">Template:Cite web</ref> Exchanges have since implemented measures to provide proof of reserves in an effort to convey transparency to users.<ref name="proofofreserves">Template:Cite web</ref>Template:Better source Offline, bitcoins may be purchased directly from an individual<ref>Template:Cite web</ref> or at a bitcoin ATM.<ref>Template:Cite news</ref>

Price and volatility

File:Bitcoin price and volatility.svg
PriceTemplate:Refn and volatilityTemplate:Refn chart.<ref name=""/> Left vertical axis: price, the scale is logarithmic. Right vertical axis: volatility. Horizontal axis: date ranging from 17 August 2010 to 31 December 2014.

To improve access to price information and increase transparency, on 30 April 2014 Bloomberg LP announced plans to list prices from bitcoin companies Kraken and Coinbase on its 320,000 subscription financial data terminals.<ref name=wsjprice>Template:Cite news</ref><ref name=cnbcprice>Template:Cite news</ref>

According to Mark T. Williams, as of 2014, bitcoin has volatility seven times greater than gold, eight times greater than the S&P 500, and eighteen times greater than the U.S. dollar.

Attempting to explain the high volatility, a group of Japanese scholars stated that there is no stabilization mechanism. The Bitcoin Foundation contends that high volatility is due to insufficient liquidity, while a Forbes journalist claims that it is related to the uncertainty of its long-term value,<ref>Template:Cite news</ref> and the high volatility of a startup currency makes sense, "because people are still experimenting with the currency to figure out how useful it is."<ref name="VolatilityFatal" />

There are uses where volatility does not matter, such as online gambling, tipping, and international remittances.<ref name="VolatilityFatal">Template:Cite news</ref> As of 2014, pro-bitcoin venture capitalists argued that the greatly increased trading volume that planned high-frequency trading exchanges would generate is needed to decrease price volatility.<ref name=wsjprice />

The price of bitcoins has gone through various cycles of appreciation and depreciation referred to by some as bubbles and busts.<ref>Template:Cite news</ref><ref>Template:Cite web</ref> In 2011, the value of one bitcoin rapidly rose from about US$0.30 to US$32 before returning to US$2.<ref name="Leebubble">Template:Cite news</ref> In the latter half of 2012 and during the 2012-2013 Cypriot Financial Crisis, the bitcoin price began to rise,<ref>Template:Cite web</ref> reaching a high of US$266 on 10 April 2013, before crashing to around US$50.<ref>Template:Cite news</ref> On November 29, 2013, the cost of one bitcoin rose to the all-time peak of US$1,242.<ref>Template:Cite web</ref> In 2014, the price fell sharply, and as of April remained depressed at little more than half 2013 prices. As of August 2014 it was under US$600. In January 2015, noting that the bitcoin price had dropped to its lowest level since spring 2013 - around US$224 - The New York Times suggested that "[w]ith no signs of a rally in the offing, the industry is bracing for the effects of a prolonged decline in prices. In particular, bitcoin mining companies, which are essential to the currency’s underlying technology, are flashing warning signs." Also in January 2015, Business Insider reported that deep web drug dealers were "freaking out" as they lost profits through being unable to convert bitcoin revenue to cash quickly enough as the price declined - and that there was a danger that dealers selling reserves to stay in business might force the bitcoin price down further.<ref>Template:Cite news</ref>

Speculative bubble dispute

Bitcoin has been labelled a speculative bubble by many including former Fed Chairman Alan Greenspan<ref name=Kearns>Template:Cite news</ref> and economist John Quiggin.<ref name="BMH">Template:Cite news</ref> Nobel laureate Robert Shiller said that bitcoin "exhibited many of the characteristics of a speculative bubble".<ref>Template:Cite news</ref> Two lead software developers of bitcoin, Gavin Andresen<ref>Template:Cite web</ref> and Mike Hearn,<ref>Template:Cite news</ref> have warned that bubbles may occur. David Andolfatto, a vice president at the Federal Reserve Bank of St. Louis, stated, "Is bitcoin a bubble? Yes, if bubble is defined as a liquidity premium." According to Andolfatto, the price of bitcoin "consists purely of a bubble," but he concedes that many assets have prices that are greater than their intrinsic value.<ref name="Andolfatto2014-03" />Template:Rp Journalist Matthew Boesler rejects the speculative bubble label and sees bitcoin's quick rise in price as nothing more than normal economic forces at work.<ref>Template:Cite web</ref> The Washington Post pointed out that the observed cycles of appreciation and depreciation don't correspond to the definition of speculative bubble.<ref name="Leebubble" />

Ponzi scheme dispute

Various journalists,<ref name="Posner, Eric">Template:Cite web</ref> U.S. economist Nouriel Roubini,<ref>Template:Cite web</ref> and the head of the Estonian central bank<ref name="Ott Ummelas and Milda Seputyte">Template:Cite news</ref> have voiced concerns that bitcoin may be a Ponzi scheme. A 2012 report by the European Central Bank stated, "it [is not] easy to assess whether or not the bitcoin system actually works like a pyramid or Ponzi scheme."<ref name=ECB>Template:Cite book</ref>Template:Rp A 2014 report by the World Bank concluded that "contrary to a widely-held opinion, bitcoin is not a deliberate Ponzi".<ref>Template:Cite web</ref>Template:Rp In the opinion of Eric Posner, a law professor at the University of Chicago, "A real Ponzi scheme takes fraud; bitcoin, by contrast, seems more like a collective delusion."<ref name="Posner, Eric"/>

U.S. economist Nouriel Roubini, a former senior adviser to the U.S. Treasury and the International Monetary Fund, has stated that bitcoin is "a Ponzi game".<ref name="Lubin, Gus">Template:Cite web</ref> In February 2014, an asset manager and columnist for The New York Post called bitcoin a Ponzi scheme, opining, "Welcome to 21st-century Ponzi scheme: Bitcoin".<ref>Template:Cite news</ref> The head of the Estonian central bank, Mihkel Nommela, stated, "virtual currency schemes are an innovation that deserves some caution, given the lack of ... evidence that this isn’t just a Ponzi scheme."<ref name="Ott Ummelas and Milda Seputyte"/>

Others have expressed the opinion that bitcoin is not a Ponzi scheme. The Huffington Post asked, "is bitcoin a Ponzi scheme, yes or no?" and answered itself with a definitive "no!"<ref>Template:Cite news</ref> PC World magazine stated, "bitcoin is clearly not a Ponzi scheme".<ref>Template:Cite news</ref> Economist Jeffrey Tucker claims that "there are several key differences between a Ponzi scheme and bitcoin."<ref name=LSP>Template:Cite news</ref> A 2014 report by the Swiss Federal Council states, "the question is repeatedly raised whether bitcoin can be deemed an impermissible pyramid scheme... since in the case of bitcoin the typical promises of profits are lacking, it cannot be assumed that bitcoin is a pyramid scheme."<ref>Template:Cite web</ref>Template:Rp

Value forecasts

Financial journalists and analysts, economists, and investors have attempted to predict the possible future value of bitcoin. In April 2013, economist John Quiggin stated, "bitcoins will attain their true value of zero sooner or later, but it is impossible to say when".<ref name="BMH" /> A similar forecast was made in November 2014 by economist Kevin Dowd.<ref>Template:Cite news</ref> In November 2014, David Yermack, Professor of Finance at New York University Stern School of Business, forecast that in November 2015 bitcoin may be all but worthless.<ref>Template:Cite web</ref> In December 2013, finance professor Mark T. Williams forecast a bitcoin would be worth less than $10 by July 2014.<ref>Template:Cite web</ref> In the indicated period bitcoin has exchanged as low as $344 (April 2014) and during July 2014 the bitcoin low was $609.<ref name=""/><ref>Template:Cite news</ref> In December 2014, Professor Williams said, "The probability of success is low, but if it does hit, the reward will be very large."<ref>Template:Cite news</ref> In May 2013, Bank of America FX and Rate Strategist David Woo forecast a maximum fair value per bitcoin of $1,300.<ref name="BoAFA">Template:Cite news</ref> Bitcoin investor Cameron Winklevoss stated in December 2013 that the "small bull case scenario for bitcoin is... 40,000 USD a coin".<ref>Template:Cite news</ref>

Bitcoin obituaries

The "death" of bitcoin has been proclaimed numerous times.<ref name="cnbcworries" /> One journalist has recorded 29 such "obituaries" as of early 2015.<ref name="cnbcworries">Template:Cite news</ref> Forbes declared bitcoin dead in June 2011,<ref>Template:Cite news</ref> followed by Gizmodo Australia in August 2011.<ref>Template:Cite news</ref> Wired wrote it had expired in December 2012,<ref>Template:Cite news</ref> Ouishare Magazine declared, "game over, bitcoin" in May 2013,<ref>Template:Cite news</ref> and New York Magazine stated bitcoin was on its path to grave in June 2013.<ref>Template:Cite news</ref> Reuters published an "obituary" for bitcoin in January 2014<ref>Template:Cite news</ref> Street Insider declared bitcoin dead in February 2014,<ref>Template:Cite news</ref> as did The Weekly Standard in March 2014,<ref>Template:Cite news</ref> followed by Salon in March 2014,<ref>Template:Cite news</ref> and Vice News in March 2014,<ref>Template:Cite news</ref> then the Financial Times in September 2014.<ref>Template:Cite news</ref> In January 2015, USA Today states bitcoin was "headed to the ash heap",<ref>Template:Cite news</ref> and The Telegraph declared "the end of bitcoin experiment".<ref>Template:Cite news</ref> Peter Greenhill, Director of E-Business Development for the Isle of Man, commenting on the obituaries paraphrased Mark Twain saying "reports of bitcoin's death have been greatly exaggerated".<ref>Template:Cite web</ref>


Some economists have responded positively to bitcoin, but many have not. François R. Velde, Senior Economist at the Chicago Fed described it as "an elegant solution to the problem of creating a digital currency".<ref>Template:Cite web</ref> According to Wired "in the estimation of many leading economists, bitcoin is a fatally flawed idea shaped by people who don’t really understand how money works".<ref>Template:Cite web</ref> Paul Krugman and Brad DeLong have found fault with bitcoin questioning why it should act as a reasonably stable store of value or whether there is a floor on its value.<ref>Template:Cite news</ref> Economist John Quiggin has criticized bitcoin as "the final refutation of the efficient-market hypothesis".<ref name="BMH"/>

David Andolfatto, Vice President at the Federal Reserve Bank of St. Louis, stated that bitcoin is a threat to the establishment, which he argues is a good thing for the Federal Reserve System and other central banks because it prompts these institutions to operate sound policies.<ref name="Andolfatto2014-03">Template:Cite web</ref>Template:Rp<ref>Template:Cite web</ref><ref>Template:Cite web</ref>

Free software movement activist Richard Stallman has criticized the lack of anonymity and called for reformed development.<ref>Template:Cite news</ref> PayPal President David A. Marcus calls bitcoin a "great place to put assets" but claims it will not be a currency until price volatility is reduced.<ref>Template:Cite web</ref> Bill Gates, in relation to the cost of moving money from place to place in an interview for Bloomberg L.P. stated: "Bitcoin is exciting because it shows how cheap it can be."<ref>Template:Cite web</ref>

Similarly, Peter Schiff, a bitcoin sceptic understands "the value of the technology as a payment platform" and his Euro Pacific Precious Metals fund partnered with BitPay in May 2014, because "a wire transfer of fiat funds can be slow and expensive for the customer".<ref name=CCN514>Template:Cite news</ref>

Acceptance by merchants

File:De Waag Bitcoin.jpg
Bitcoins are accepted in this café in the Netherlands as of 2013

In 2015, the number of merchants accepting bitcoin exceeded 100,000.<ref name=100tmerchants>Template:Cite web</ref> As of December 2014, established firms that accept payments in bitcoin include Atomic Mall, Clearly Canadian, Dell, Dish Network, Dynamite Entertainment, Expedia, Microsoft, Newegg, PrivateFly,, the Sacramento Kings, TigerDirect,<ref name=tigger>Template:Cite web</ref> Time Inc.,<ref>Template:Cite web</ref> Virgin Galactic,<ref>Template:Cite web</ref> and Zynga.<ref>Template:Cite news</ref><ref group="note" name="processors" /> Due to the fact that chargebacks are impossible, retailers usually offer in-store credit as the only option when returning items purchased with bitcoins.<ref>Template:Cite journal</ref> As of September 2014 PayPal allows North American merchants using its system the ability to receive payment in bitcoins.<ref>Template:Cite web</ref>

Acceptance by nonprofits

Organizations accepting donations in bitcoin include: Greenpeace,<ref>Template:Cite web</ref> The Mozilla Foundation,<ref>Template:Cite news</ref> and The Wikimedia Foundation.<ref>Template:Cite web</ref> Some U.S. political candidates, including New York City Democratic Congressional candidate Jeff Kurzon have said they would accept campaign donations in bitcoin.<ref>Template:Cite news</ref> In late 2013 the University of Nicosia became the first university in the world to accept bitcoins.<ref>Template:Cite news</ref>

Use in retail transactions

Due to the design of bitcoin, all retail figures are only estimates.<ref name="MIT Technology Review"/><ref name="reutersretail" /> According to Tim Swanson, head of business development at a Hong Kong-based cryptocurrency technology company, in 2014, daily retail purchases made with bitcoin were worth about $2.3 million.<ref name="reutersretail">Template:Cite web</ref> He estimates that, as of February 2015, fewer than 5,000 bitcoins per day (worth roughly $1.2 million at the time) were being used for retail transactions,<ref name="MIT Technology Review"/> and concluded that in 2014 "it appears there has been very little if any increase in retail purchases using bitcoin."

Financial institutions

Bitcoin companies have had difficulty opening traditional bank accounts because lenders have been leery of bitcoin's links to illicit activity. According to Antonio Gallippi, a co-founder of BitPay, "banks are scared to deal with bitcoin companies, even if they really want to". In 2014, the National Australia Bank closed accounts of businesses with ties to bitcoin, and HSBC refused to serve a hedge fund with links to bitcoin.

One financial institution has been bullish on bitcoin. In a 2013 report, Bank of America Merrill Lynch stated that "we believe bitcoin can become a major means of payment for e-commerce and may emerge as a serious competitor to traditional money-transfer providers." In June 2014, the first bank that converts deposits in currencies instantly to bitcoin without any fees was opened in Boston.

As an investment

Some Argentinians have bought bitcoins to protect their savings against high inflation or the possibility that governments could confiscate savings accounts.<ref name="5facts" /> During the 2012–2013 Cypriot financial crisis, bitcoin purchases in Cyprus rose due to fears that savings accounts would be confiscated or taxed.<ref name="BloombergCyprus">Template:Cite news</ref> Other methods of investment are bitcoin funds. The first regulated bitcoin fund was established in Jersey in July 2014 and approved by the Jersey Financial Services Commission.<ref name="BitcoinJersey">Template:Cite news</ref> Also, c. 2012 an attempt was made by the Winklevoss twins (who in April 2013 claimed they owned nearly 1% of all bitcoins in existence<ref>Template:Cite web</ref>) to establish a bitcoin ETF.<ref name=winkles>Template:Cite news</ref> As of early 2015, they have announced plans to launch a New York-based bitcoin exchange named Gemini.<ref>Template:Cite web</ref>

In 2013 and 2014, the European Banking Authority<ref name="ebawarn">Template:Cite web</ref> and the Financial Industry Regulatory Authority (FINRA), a United States self-regulatory organization,<ref name="finrawarn">Template:Cite news</ref> warned that investing in bitcoins carries significant risks. Such risks were highlighted in 2014 when Bloomberg named bitcoin as one of its worst investments of the year,<ref name=worst/> although Forbes named bitcoin the best investment of 2013.<ref>Template:Cite news</ref> Bloomberg selected the Russian ruble as the worst currency investment of 2014 but also mentioned bitcoin as the "one currency that did worse [than the ruble] in 2014, depending on whether you think virtual currencies are real money."<ref name=worst>Template:Cite web</ref>

In May 2015, Intercontinental Exchange Inc., parent company of the New York Stock Exchange, announced a bitcoin index initially based on data from Coinbase transactions.<ref name="NYSE index">Template:Cite web</ref>

Venture capital

Venture capitalists, such as Peter Thiel's Founders Fund, which invested Template:Currency million in BitPay, do not purchase bitcoins themselves, instead funding bitcoin infrastructure like companies that provide payment systems to merchants, exchanges, wallet services, etc.<ref name="mtr20130612">Template:Cite news</ref> In 2012, an incubator for bitcoin-focused start-ups was founded by Adam Draper, with financing help from his father, venture capitalist Tim Draper, one of the largest bitcoin holders after winning an auction of 30,000 bitcoins,<ref name=wsj1214>Template:Cite news</ref> at the time called 'mystery buyer'.<ref name=guard714>Template:Cite news</ref> The company's goal is to fund 100 bitcoin businesses within 2–3 years with $10,000 to $20,000 for a 6% stake.<ref name="wsj1214"/> Investors also invest in bitcoin mining.<ref>Template:Cite news</ref>

Political economy

Bitcoin appeals to tech-savvy libertarians, because it so far exists outside the institutional banking system and the control of governments.<ref name=nation>Template:Cite news</ref> However, researchers looking to uncover the reasons for interest in bitcoin did not find evidence that this was linked to libertarianism.<ref name=uok>Template:Cite journal</ref>

Bitcoin's appeal reaches from left wing critics, "who perceive the state and banking sector as representing the same elite interests, [...] recognising in it the potential for collective direct democratic governance of currency"<ref>Template:Cite web</ref> and socialists proposing their "own states, complete with currencies",<ref>Template:Cite web</ref> to right wing critics suspicious of big government, at a time when activities within the regulated banking system were responsible for the severity of the financial crisis of 2007–08,<ref>Template:Cite web</ref> "because governments are not fully living up to the responsibility that comes with state-sponsored money".<ref>Template:Cite news</ref> Bitcoin has been described as "remov[ing] the imbalance between the big boys of finance and the disenfranchised little man, potentially allowing early adopters to negotiate favourable rates on exchanges and transfers – something that only the very biggest firms have traditionally enjoyed".<ref>Template:Cite news</ref> Two WSJ journalists describe bitcoin in their book as "about freeing people from the tyranny of centralised trust".<ref>Template:Cite news</ref>

Legal status and regulation


The legal status of bitcoin varies substantially from country to country and is still undefined or changing in many of them. While some countries have explicitly allowed its use and trade, others have banned or severely restricted it. Likewise, various government agencies, departments, and courts have classified bitcoins differently. Regulations and bans that apply to bitcoin probably extend to similar cryptocurrency systems.

In April 2013, Steven Strauss, a Harvard public policy professor, suggested that governments could outlaw bitcoin,<ref>Template:Cite news</ref> and this possibility was mentioned again by a bitcoin investment vehicle in a July 2013, report to a regulator.<ref name=winkles/> However, the vast majority of nations have not done so as of 2014. It is illegal in: Bangladesh,<ref name=bangla>Template:Cite web</ref> Bolivia,<ref name=bol>Template:Cite web</ref> Ecuador,<ref name="ecuador">Template:Cite web</ref> Russia,<ref name=EUPARANNEX>Template:Cite conference</ref> and Vietnam.<ref name=viet>Template:Cite web</ref>

Criminal activity

The use of bitcoin by criminals has attracted the attention of financial regulators, legislative bodies, law enforcement, and the media.<ref name="Lavin, Tim">Template:Cite news</ref> The FBI prepared an intelligence assessment,<ref name="fbi_report">Template:Cite web</ref> the SEC has issued a pointed warning about investment schemes using virtual currencies,<ref name="Lavin, Tim"/> and the U.S. Senate held a hearing on virtual currencies in November 2013. CNN has referred to bitcoin as a "shady online currency [that is] starting to gain legitimacy in certain parts of the world",<ref name="cnn">Template:Cite news</ref> and The Washington Post called it "the currency of choice for seedy online activities".<ref name="washp">Template:Cite news</ref>

Several news outlets have asserted that the popularity of bitcoins hinges on the ability to use them to purchase illegal goods.<ref name=Monetarists>Template:Cite news</ref><ref>Template:Cite web</ref> In 2014, researchers at the University of Kentucky found "robust evidence that computer programming enthusiasts and illegal activity drive interest in bitcoin, and find limited or no support for political and investment motives."<ref name=uok/>


There have been many cases of bitcoin theft.<ref name="Economist113013Pressure" /> One way this is accomplished involves a third party accessing the private key to a victim's bitcoin address,<ref>Template:Cite news</ref> or of an online wallet.<ref>Template:Cite news</ref> If the private key is stolen, all the bitcoins from the compromised address can be transferred. In that case, the network does not have any provisions to identify the thief, block further transactions of those stolen bitcoins, or return them to the legitimate owner.<ref name="winkles" />

Theft also occurs at sites bitcoins are used to purchase illicit goods. In late November 2013, an estimated $100 million in bitcoins were allegedly stolen from the online illicit goods marketplace Sheep Marketplace, which immediately closed.<ref name="hern2013" /> Users tracked the coins as they were processed and converted to cash, but no funds were recovered and no culprits identified.<ref name="hern2013">Template:Cite news</ref> A different black market, Silk Road 2, stated that during a February 2014 hack, bitcoins valued at $2.7 million were taken from escrow accounts.<ref name="silk2">Template:Cite news</ref>

Sites where users exchange bitcoins for cash or store them in "wallets" are also targets for theft., an Australian wallet service, was hacked twice in October 2013 and lost more than $1 million in bitcoins.<ref>Template:Cite news</ref> In late February 2014 Mt. Gox, one of the largest virtual currency exchanges, filed for bankruptcy in Tokyo amid reports that bitcoins worth $350 million had been stolen.<ref name="GoxBankrupt" /> Flexcoin, a bitcoin storage specialist based in Alberta, Canada, shut down on March 2014 after saying it discovered a theft of about $650,000 in bitcoins.<ref name="ligaya2014">Template:Cite news</ref> Poloniex, a digital currency exchange, reported on March 2014 that it lost bitcoins valued at around $50,000.<ref name="truong2014">Template:Cite news</ref> In January 2015 UK based bitstamp, the third busiest bitcoin exchange globally, was hacked and $5 million in bitcoins were stolen.<ref>Template:Cite web</ref> February 2015 saw a Chinese exchange named BTER lose bitcoins worth nearly $2 million to hackers.<ref>Template:Cite web</ref>

Black markets

A CMU researcher estimated that in 2012, 4.5% to 9% of all transactions on all exchanges in the world were for drug trades on a single deep web drugs market, Silk Road.<ref name="cmacademic">Template:Cite conference</ref> Child pornography,<ref name="notonly"/> murder-for-hire services,<ref>Template:Cite web</ref> and weapons<ref>Template:Cite news</ref> are also available on black market sites that sell in bitcoin.Template:Clarify

Several deep web black markets have been shut by authorities. In October 2013 Silk Road was shut down by U.S. law enforcement<ref name=Greenberg>Template:Cite news</ref><ref name="Kelion, Leo">Template:Cite news</ref><ref>Template:Cite news</ref> leading to a short-term decrease in the value of bitcoin.<ref>Template:Cite web</ref> In 2015, the founder of the site was sentenced to life in prison.<ref>Template:Cite web</ref> Alternative sites were soon available, and in early 2014 the Australian Broadcasting Corporation reported that the closure of Silk Road had little impact on the number of Australians selling drugs online, which had actually increased.<ref>Template:Cite news</ref> In early 2014, Dutch authorities closed Utopia, an online illegal goods market, and seized 900 bitcoins.<ref>Template:Cite web</ref> In late 2014, a joint police operation saw European and American authorities seize bitcoins and close 400 deep web sites including the illicit goods market Silk Road 2.0.<ref>Template:Cite web</ref> Law enforcement activity has resulted in several convictions. In December, 2014, Charlie Shrem was sentenced to two years in prison for indirectly helping to send $1 million to the Silk Road drugs site,<ref>Template:Cite news</ref> and in February, 2015, its founder, Ross Ulbricht, was convicted on drugs charges and faces a life sentence.<ref>Template:Cite web</ref>

Some black market sites may seek to steal bitcoins from customers. The bitcoin community branded one site, Sheep Marketplace, as a scam when it prevented withdrawals and shut down after an alleged bitcoins theft.<ref name="techienews">Template:Cite web</ref> In a separate case, escrow accounts with bitcoins belonging to patrons of a different black market were hacked in early 2014.<ref name=silk2/>

According to the Internet Watch Foundation, a U.K. based charity, bitcoin is used to purchase child pornography, and almost 200 such websites accept it as payment. Bitcoin isn't the sole way to purchase child pornography online, as Troels Oertling, head of the cybercrime unit at Europol, states, "Ukash and Paysafecard... have [also] been used to pay for such material." However, the Internet Watch Foundation lists around 30 sites that exclusively accept bitcoins.<ref name=notonly>Template:Cite web</ref> Some of these sites have shut down, such as a deep web crowdfunding website that aimed to fund the creation of new child porn.<ref>Template:Cite news</ref> Furthermore, hyperlinks to child porn websites have been added to the block chain as arbitrary data can be included when a transaction is made.<ref>Template:Cite web</ref><ref>Template:Cite web</ref>

Money laundering

Bitcoins may not be ideal for money laundering because all transactions are public.<ref name="FistfulPaper201308">Template:Cite news</ref> Authorities, including the European Banking Authority<ref name="ebawarn" /> the FBI,<ref name="fbi_report" /> and the Financial Action Task Force of the G7<ref name=fatf>Template:Cite web</ref> have expressed concerns that bitcoin may be used for money laundering. In early 2014, an operator of a U.S. bitcoin exchange was arrested for money laundering.<ref name=vchair>Template:Cite news</ref>

Ponzi scheme

In a Ponzi scheme that utilized bitcoins, The Bitcoin Savings and Trust promised investors up to 7 percent weekly interest, and raised at least 700,000 bitcoins from 2011 to 2012.<ref name=secponzi/> In July 2013 the U.S. Securities and Exchange Commission charged the company and its founder in 2013 "with defrauding investors in a Ponzi scheme involving bitcoin".<ref name=secponzi>Template:Cite press release</ref> In September 2014 the judge fined Bitcoin Savings & Trust and its owner $40 million for operating a bitcoin Ponzi scheme.<ref>Template:Cite news</ref>


Bitcoin-related malware includes software that steals bitcoins from users using a variety of techniques, software that uses infected computers to mine bitcoins, and different types of ransomware, which disable computers or prevent files from being accessed until some payment is made. Security company Dell SecureWorks said in February 2014 that it had identified almost 150 types of bitcoin malware.<ref>Template:Cite web</ref>

Unauthorized mining

In June 2011, Symantec warned about the possibility that botnets could mine covertly for bitcoins.<ref>Template:Cite web</ref> Malware used the parallel processing capabilities of GPUs built into many modern video cards.<ref>Template:Cite news</ref> Although the average PC with an integrated graphics processor is virtually useless for bitcoin mining,Template:Citation needed tens of thousands of PCs laden with mining malware could produce some results.<ref name=hajb2014/>

In mid-August 2011, bitcoin mining botnets were detected,<ref>Template:Cite web</ref> and less than three months later, bitcoin mining trojans had infected Mac OS X.<ref>Template:Cite web</ref>

In April 2013, electronic sports organization E-Sports Entertainment was accused of hijacking 14,000 computers to mine bitcoins; the company later settled the case with the State of New Jersey.<ref>Template:Cite news</ref>

German police arrested two people in December 2013 who customized existing botnet software to perform bitcoin mining, which police said had been used to mine at least $950,000 worth of bitcoins.<ref>Template:Cite news</ref>

For four days in December 2013 and January 2014, Yahoo! Europe hosted an ad containing bitcoin mining malware that infected an estimated two million computers.<ref name=hajb2014>Template:Cite news</ref> The software, called Sefnit, was first detected in mid-2013 and has been bundled with many software packages. Microsoft has been removing the malware through its Microsoft Security Essentials and other security software.<ref>Template:Cite news</ref>

Several reports of employees or students using university or research computers to mine bitcoins have been published.<ref>Template:Cite news</ref>

Malware stealing

Some malware can steal private keys for bitcoin wallets allowing the bitcoins themselves to be stolen. The most common type searches computers for cryptocurrency wallets to upload to a remote server where they can be cracked and their coins stolen.<ref name=haj2014>Template:Cite news</ref>Template:Better source Many of these also log keystrokes to record passwords, often avoiding the need to crack the keys.<ref name=haj2014/> A different approach detects when a bitcoin address is copied to a clipboard and quickly replaces it with a different address, tricking people into sending bitcoins to the wrong address.<ref>Template:Cite web</ref> This method is effective because bitcoin transactions are irreversible.

One virus, spread through the Pony botnet, was reported in February 2014 to have stolen up to $220,000 in cryptocurrencies including bitcoins from 85 wallets.<ref>Template:Cite news</ref> Security company Trustwave, which tracked the malware, reports that its latest version was able to steal 30 types of digital currency.<ref>Template:Cite news</ref>

A type of Mac malware active in August 2013, Bitvanity posed as a vanity wallet address generator and stole addresses and private keys from other bitcoin client software.<ref name=southurst2014>Template:Cite news</ref> A different trojan for Mac OS X, called CoinThief was reported in February 2014 to be responsible for multiple bitcoin thefts.<ref name=southurst2014/> The software was hidden in versions of some cryptocurrency apps on and MacUpdate.<ref name=southurst2014/>


Another type of bitcoin-related malware is ransomware. One program called CryptoLocker, typically spread through legitimate-looking email attachments, encrypts the hard drive of an infected computer, then displays a countdown timer and demands a ransom, usually two bitcoins, to decrypt it.<ref name=guardian-ransomware>Template:Cite news</ref> Massachusetts police said they paid a 2 bitcoin ransom in November 2013, worth more than $1,300 at the time, to decrypt one of their hard drives.<ref>Template:Cite news</ref> Linkup, a combination ransomware and bitcoin mining program that surfaced in February 2014, disables internet access and demands credit card information to restore it, while secretly mining bitcoins.<ref name=guardian-ransomware/>


Various potential attacks on the bitcoin network and its use as a payment system, real or theoretical, have been considered. The bitcoin protocol includes several features that protect it against some of those attacks, such as unauthorized spending, double spending, forging bitcoins, and tampering with the block chain.<ref name="khanbitcoin" /> Other attacks, such as theft of private keys, require due care by users.

Unauthorized spending

Unauthorized spending is mitigated by bitcoin's implementation of public-private key cryptography. When Alice sends a bitcoin to Bob, Bob becomes the new owner of the bitcoin. Eve observing the transaction might want to spend the bitcoin Bob just received, but she cannot sign the transaction without the knowledge of Bob's private key.<ref name="primer"/>

Double spending

A specific problem that an internet payment system must solve is double-spending, whereby a user pays the same coin to two or more different recipients. An example of such a problem would be if Eve sent a bitcoin to Alice and later sent the same bitcoin to Bob. The bitcoin network guards against double-spending by recording all bitcoin transfers in a ledger (the block chain) that is visible to all users, and ensuring for all transferred bitcoins that they haven't been previously spent.<ref name="primer"/>Template:Rp

Race attack

If Eve offers to pay Alice a bitcoin in exchange for goods and signs a corresponding transaction, it is still possible that she also creates a different transaction at the same time sending the same bitcoin to Bob. By the rules, the network accepts only one of the transactions. This is called race attack, since there is a race which transaction will be accepted first. Alice can reduce the risk of race attack stipulating that she will not deliver the goods until Eve's payment to Alice appears in the block chain.<ref>Template:Cite web</ref>

A variant race attack (which has been called a Finney attack by reference to Hal Finney) requires the participation of a miner. Instead of sending both payment requests (to pay Bob and Alice with the same coins) to the network, Eve issues only Alice's payment request to the network, while the accomplice tries to mine a block that includes the payment to Bob instead of Alice. There is a positive probability that the rogue miner will succeed before the network, in which case the payment to Alice will be rejected. As with the plain double-spending attack, Alice can reduce the risk of a Finney attack by waiting for the payment to be included in the block chain.<ref>Template:Cite paper</ref>

History modification

The other principal way to steal bitcoins would be to modify block chain ledger entries.

For example, Eve could buy something from Alice, like a sofa, by adding a signed entry to the block chain ledger equivalent to Eve pays Alice 100 bitcoins. Later, after receiving the sofa, Eve could modify that block chain ledger entry to read instead: Eve pays Alice 1 bitcoin, or replace Alice's address by another of Eve's addresses. Digital signatures cannot prevent this attack: Eve can simply sign her entry again after modifying it.

To prevent modification attacks, each block of transactions that is added to the block chain includes a cryptographic hash code that is computed from the hash of the previous block as well as all the information in the block itself. When the bitcoin software notices two competing block chains, it will automatically assume that the chain with the greatest amount of work to produce it is the valid one. Therefore, in order to modify an already recorded transaction (as in the above example), the attacker would have to recalculate not just the modified block, but all the blocks after the modified one, until the modified chain contains more work than the legitimate chain that the rest of the network has been building in the meantime. Consequently, for this attack to succeed, the attacker must outperform the honest part of the network.<ref name="khanbitcoin" />

Each block that is added to the block chain, starting with the block containing a given transaction, is called a confirmation of that transaction. Ideally, merchants and services that receive payment in bitcoin should wait for at least one confirmation to be distributed over the network, before assuming that the payment was done. The more confirmations that the merchant waits for, the more difficult it is for an attacker to successfully reverse the transaction in a block chain—unless the attacker controls more than half the total network power, in which case it is called a 51% attack.<ref name="51%">Template:Cite news</ref> For example, if the attacker possesses 10% of the calculation power of the bitcoin network and the shop requires 6 confirmations for a successful transaction, the probability of success of such an attack will be 0.02428%.<ref name="paper" />

Selfish mining

This attack was first introduced by Ittay Eyal and Emin Gun Sirer at the beginning of November 2013.<ref>Template:Cite web</ref> In this attack, the attacker finds blocks but does not broadcast them. Instead, the attacker mines their own private chain and eventually (when another miner or network of miners finds their own block) publishes several private blocks in a row. This forces the "honest" network to abandon their previous work and switch to the attacker's branch. As a result, honest miners lose a significant part of their revenue, while the attacker increases their profits due to changes in relative hashpowers.

According to the authors, a rational miner observing a selfish mining attacker would have an incentive to join the attacker's pool, thereby increasing the attacker's hashpower. This makes the attack and incentives even stronger, thus potentially leading to a 51% attack and the collapse of the currency.

Gavin Andresen and Ed Felten disagreed with this conclusion,<ref>Template:Cite news</ref> Felten defending his assertion that the bitcoin protocol is incentive compatible.<ref name="EconOfBTC" /> The original authors responded that the disagreement stemmed from Felten's misunderstanding of how miners are compensated in mining pools,<ref>Template:Cite web</ref> that the assertion was in error, given the presence of a strategy that dominates honest mining, and that the error stemmed from Felten et al. not modeling block withholding attacks in their analysis.<ref>Template:Cite web</ref>

Deanonymisation of clients

Along with transaction graph analysis, which may reveal connections between bitcoin addresses (pseudonyms),<ref name=quantitative /><ref name=reid>Template:Cite journal</ref> there is a possible attack<ref name=dep2p>Template:Cite journal</ref> which links a user's pseudonym to its IP address, even if the peer is using Tor. The attack makes use of bitcoin mechanisms of relaying peer addresses and anti-DoS protection. The cost of the attack on the full bitcoin network is under €1500 per month.<ref name="dep2p" />

Alternative applications of the block chain

In January 2015 IBM’s Institute for Business Value announced ADEPT (Autonomous Decentralized Peer-to-Peer Telemetry) where network-connected devices can interact autonomously on the Internet of things using freely available technology including bittorrent, Telehash, and bitcoin.<ref name="ppp">Template:Cite web</ref> This is not an IBM product<ref name="ppp"/> but instead a concept system.<ref>Template:Cite web</ref> IBM has also explored using the block chain as part of a payment system that would allow transactions in major currencies.<ref>Template:Cite news</ref>

In May 2015 NASDAQ OMX Group announced its intention to use bitcoins of negligible value, called "colored coins", to represent and transfer pre-IPO trading shares on its Nasdaq Private Markets.<ref name="NASDAQ colored coins">Template:Cite web</ref><ref>Template:Cite web</ref> In the same month the government of Honduras announced plans to use Bitcoin technology to host a land title registry.<ref name="ChavezDreyfussReuters">Template:Cite news</ref>

Block chain spam

While it is possible to store any digital file in the block chain, the larger the transaction size, the larger any associated fees become.<ref name="bitcoinfees" /> Various items have been embedded, including URLs to child pornography, an ASCII art image of Ben Bernanke, material from the Wikileaks cables, prayers from bitcoin miners, and the original bitcoin whitepaper.<ref name=BlockSpam >Template:Cite web</ref>

In the media

Several lighthearted songs celebrating bitcoin have been released.<ref>Template:Cite web</ref> U.S. comedians have also made fun of bitcoin.<ref>Template:Cite news</ref>

In Season 3 CBS show The Good Wife featured an episode alluding to the creator of bitcoin as well as the FBI investigating the case. The episode titled 'Bitcoin for Dummies' was shown in early 2012.<ref>Template:Cite web</ref>

A bitcoin documentary film called The Rise and Rise of Bitcoin was released in late 2014 and features interviews with people who use bitcoin such as a computer programmer and a drug dealer.<ref>Template:Cite web</ref>

In the fall of 2014, undergraduate students at the Massachusetts Institute of Technology (MIT) each received bitcoins worth $100 "to better understand this emerging technology". The bitcoins were not provided by MIT but rather the MIT Bitcoin Club, a student-run club.<ref name=MIT>Template:Cite news</ref><ref>Template:Cite web</ref> Similar initiatives have been created by students and groups at other universities, such as Stanford University and the University of California, Berkeley.

In early 2015, the CNN series Inside Man featured an episode about bitcoin. Filmed in July, 2014, it featured Morgan Spurlock living off of bitcoins for a week to figure out whether the world is ready for a new kind of money.<ref>Template:Cite web</ref>

In science fiction novel Neptune's Brood by Charles Stross a modification of bitcoin is used as the universal interstellar payment system. The functioning of the system is a major plot element of the book.<ref>...[E]very exchange between two beacons must be cryptographically signed by a third party bank in another star system: it take years to settle a transaction. It’s theft-proof too – for each bitcoin is cryptographically signed by the mind of its owner. Charles Stross. Neptune's Brood (Kindle edition). Ace, 2013, p.109 (reference; citation on the Google Books)</ref>

In March 2013 the TV Series 'Almost Human' set in 2048 referred to bitcoin as currency.

In 2009 the norwegian Kristoffer Koch mistakenly bought 27$. When he checked his wallet again in 2013 those bitcoins were worthed 886,000$.