Documentary: The Bitcoin

Bitcoin[note 5][note 6] is a digital asset[16] and a payment system invented by Satoshi Nakamoto,[note 7] who published the invention in 2008[12] and released it as open-source software in 2009.[18] The system is peer-to-peer; users can transact directly without needing an intermediary.[19]:4 Transactions are verified by network nodes and recorded in a public distributed ledger called the blockchain.[20] The ledger uses bitcoin as its unit of account. The system works without a central repository or single administrator, which has led the U.S. Treasury to categorize bitcoin as a decentralized virtual currency.[1] Bitcoin is often called the firstcryptocurrency,[21][22][23] although prior systems existed.[note 8] Bitcoin is more correctly described as the first decentralized digital currency.[19][26] It is the largest of its kind in terms of total market value.[27]

Bitcoins are created as a reward for payment processing work in which users offer their computing power to verify and record payments into a public ledger. This activity is called mining and miners are rewarded with transaction fees and newly created bitcoins.[19] Besides being obtained by mining, bitcoins can be exchanged for different currencies,[28] products, and services.[29] Users can send and receive bitcoins for an optional transaction fee.[30]

Bitcoin as a form of payment for products and services has grown,[29] and merchants have an incentive to accept it because fees are lower than the 2–3% typically imposed by credit card processors.[31] Unlike credit cards, any fees are paid by the purchaser, not the vendor. The European Banking Authority[32] and other sources[19]:11 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 does not have much momentum in retail transactions.[33]

The use of bitcoin by criminals has attracted the attention of financial regulators,[34] legislative bodies,[35] law enforcement,[36] and media.[37] 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.[38]

Bitcoin has drawn the support of a few politicians, notably U.S. Presidential candidate Rand Paul, who accepts donations in bitcoin.[39]

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