Bitcoin Definition | Investopedia

Bitcoinis a digital currency created in 2009. It follows the ideas set out in awhite paperby the mysterious SatoshiNakamoto, whose true identity has yet to be verified.Bitcoinoffers the promise of lower transaction fees than traditional online payment mechanisms and is operated by a decentralized authority, unlike government issued currencies.

There are no physicalBitcoins, only balances associated with public and private keys. These balances are kept on a public ledger, along with allBitcointransactions, that is verified by a massive amount of computing power.

Bitcoin balances are kept using public and private "keys," which are long strings of numbers and letters linked through the mathematical encryption algorithm that was used to create them. The public key (comparable to a bank account number) serves as the address which is published to the world and to which others may send Bitcoin. The private key (comparable to an ATM PIN) is meant to be a guarded secret, and only used to authorize Bitcoin transmissions.

In March 2014, the IRS stated that all virtual currencies, including Bitcoin, would be taxed as property rather than currency. Gains or losses fromBitcoin held as capital will be realized as capital gains or losses, while Bitcoin held as inventory will incur ordinary gains or losses.

The independent individuals and companies who own the governing computing power and participate in the network, also known as "miners," are motivated by mining rewards (the release of new Bitcoin) and transaction fees paid in Bitcoin. These miners can be thought of as the decentralized authority enforcing the credibility of the Bitcoin network. New Bitcoin is being released to the miners at a fixed, but periodically declining rate, such that the total supply of Bitcoin approaches 21 million. One bitcoin is divisible to eight decimal places (100 millionth of one bitcoin), and this smallest unit is referred to as a Satoshi. If necessary, and if the participating miners accept the change, Bitcoin could eventually be made divisible to even more decimal places.

Style notes: According to theofficialBitcoinFoundation, the word "Bitcoin"is capitalized in the context of referring to the entity or concept, whereas "bitcoin" is written in the lower case when referring to a quantity of the currency (e.g. "I traded 20bitcoin"). The currency can be abbreviated toBTCor, less frequently,XBT. The plural form of the word can be either "bitcoin" or "bitcoins."

To learn more about this cryptocurrency, check outHow do I buy Bitcoins?

Bitcoin is the first decentralized digital currency. It is also sometimes referred to as a virtual currency or a crypto-currency.Bitcoins are held in a digital wallet and can be sent over the internet. Transactions are authorized using a digital signature.

Bitcoin is the first decentralized digital currency. It is also sometimes referred to as a virtual currency or a crypto-currency.Bitcoins are held in a digital ...

Bitcoin is the first decentralized digital currency. It is sometimes referred to as a virtual currency or cryptocurrency. Bitcoins are held in a digital wallet and can be sent over the Internet to anyone with a Bitcoin address. Fees for Bitcoin transactions are relatively low compared to traditional methods of transferring money over the Internet.

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Bitcoin Definition | Investopedia