First introduced in 2008 by the pseudonymous developer Satoshi Nakamoto, bitcoin is the first digital cryptocurrency designed to facilitate transactions between two parties over a peer-to-peer network and without the use of a third-party intermediary. Bitcoins are generated at fixed intervals according to a mathematical algorithm written by Nakamoto with the total number of bitcoins capping at 21 million by the year 2140.1 Labelled by some as an alternative to fiat currencies, a means of exchange or store of value and dismissed by others as a speculative bubble, it is undoubted that bitcoin has recently taken the world by storm, generating incredible press coverage and picking up some influential supporters along the way.
Get to know the bitcoin ecosystem with this snapshot, provided by GCA Savvian.
- Bitcoin: A Peer-to-Peer Electronic Cash System – The original bitcoin thesis paper describing how it works and its key benefits.
- Bitcoin: What is it? – A short video by the Khan Academy helps you visualize the mechanics behind the bitcoin ecosystem.
- Top 10 Bitcoin Myths Debunked – Coindesk breaks down some of the misconceptions and criticisms of bitcoin.
- Bitcoin Glossary v0.2 – A comprehensive glossary of bitcoin-related terms from GitHub.
Bitcoins are generated through a process known as a mining. Mining can be performed by anyone that downloads the free mining software and the process involves solving a complex mathematical equation in order to generate a unique digital signature. Once bitcoins are mined, they can be stored in a digital wallet or released into the digital network. Anytime bitcoins are transferred over the network, the transaction is recorded in a public ledger known as a “blockchain.” The blockchain ensures that every transaction is recorded, so as to prevent counterfeiting or double-spending of bitcoins.
- Bitcoin Mining: Getting Started – This guide explains the basics about how mining works and how to get started.
- How a Bitcoin Transaction Works – This infographic from Visual.ly shows how a bitcoin transaction works
Currently, long-term treatment and regulation of virtual currencies remains unknown. Few countries have come out and explicitly clarified their stance on virtual currencies; however, many regulators and federal authorities from influential countries, such the United States, have demonstrated a willingness to start the dialogue needed for potential regulation. As bitcoin’s influence and adoption rate grows, the continued involvement of these federal agencies will be crucial to bitcoin’s long-term success and countless organizations and individuals are working hard to help move the needle in these ongoing discussions.
- Bitcoin: A Primer for Policymakers – Senior economist for the Federal Reserve Bank of Chicago, Francois R. Velde, examines some of the current laws and regulations around bitcoin and offers suggestions as to how bitcoin should be treated by regulators going forward.
- The Way Forward for Digital Currencies – Promontory offers an analysis of digital currencies and recommendations to digital currency supporters looking to evaluate and potentially overcome regulatory hurdles.
- Virtual Economies and Currencies: Additional IRS Guidance Could Reduce Tax Compliance Risks – The U.S. GAO report analyzes the current and potential tax treatment of virtual currencies.
- Virtual Currency Hearings – A compilation of letters written by senior officials from the SEC, Senate and FBI discussing virtual currencies.
1 Source: blockchain.info
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