Bitcoin Wiki - User contributions [en]

Category:History

2014-08-03T13:55:39Z

Brotherbitcoin: /* See Also */

Two fantastic compilations of Bitcoin history are available at the [http://historyofbitcoin.org HistoryOfBitcoin.org] and [http://igotbitcoin.com/milestones igotbitcoin.com/milestones] sites.

== Important milestones of the Bitcoin project ==
=== 2008 ===
{| style="text-align: left"
|-
! width="8em" | August 18
|| Domain name "bitcoin.org" registered<ref>[https://bitcointalk.org/index.php?topic=103369.msg1135218#msg1135218 According to theymos], Satoshi registered bitcoin.org via https://www.anonymousspeech.com/ which allows to anonymously register domains.</ref>.
|-
! October 31
|| [http://article.gmane.org/gmane.comp.encryption.general/12588/ Bitcoin design paper] published
|-
! November 09
|| Bitcoin project registered at SourceForge.net
|}

=== 2009 ===
{| style="text-align: left"
|-
! width="8em" | January 3
|| [http://www.BlockExplorer.com/b/0 Genesis block] established at 18:15:05 GMT
|-
! January 9
|| Bitcoin v0.1 released and announced on the [http://www.mail-archive.com/cryptography@metzdowd.com/msg10152.html cryptography mailing list]
|-
! January 12
|| First Bitcoin transaction, [http://www.BlockExplorer.com/b/170 in block 170] - from [[Satoshi]] to Hal Finney<ref>[http://bitcointalk.org/index.php?topic=91806.msg1012234#msg1012234 Earliest Block With A Spend]</ref>.
|-
! October 5
|| Exchange rates [http://newlibertystandard.wetpaint.com/page/2009+Exchange+Rate published] by New Liberty Standard. $1 = 1,309.03 BTC (and [[User:theymos|theymos]] thought NLS was overcharging<ref>[http://bitcointalk.org/index.php?topic=104287.msg1143955#msg1143955 Historical Price Data for 2009]</ref>)
|-
! October 9
|| #bitcoin-dev channel registered on freenode IRC.
|-
! December 16
|| Bitcoin v0.2 released
|-
! December 30
|| First difficulty increase at 06:11:04 GMT
|}

=== 2010 ===
{| style="text-align: left"
|-
! width="8em" | February 6
|| [[Bitcoin Market]] established
|-
! May 22
|| laszlo first to buy pizza with Bitcoins agreeing upon paying 10,000 BTC for ~$25 worth of pizza courtesy of jercos<ref>[https://bitcointalk.org/index.php?topic=137.msg1195#msg1195 bitcointalk post] where laszlo confirmed having bought pizza</ref>
|-
! July 7
|| Bitcoin v0.3 released
|-
! July 11
|| Bitcoin v0.3 release mentioned on slashdot<ref>[http://news.slashdot.org/story/10/07/11/1747245/Bitcoin-Releases-Version-03 slashdot] metiones Bitcoin</ref>, bringing a large influx of new bitcoin users.
|-
! July 12
|| Beginning of a 10x increase in exchange value over a 5 day period, from about $0.008/BTC to $0.08/BTC
|-
! July 17
|| [[MtGox]] established
|-
! July 18
|| ArtForz generated his first block after establishing his personal OpenCL GPU hash farm
|-
! August 15
|| Bug in the bitcoin code allows a bad transaction into block 74638. Users quickly adopt fixed code and the "good" block chain overtook the bad one at a block height of 74691, 53 blocks later ([[Incidents#Value_overflow]]).
|-
! September 14
|| jgarzik [https://bitcointalk.org/index.php?topic=133.msg12921#msg12921 offered] 10,000 BTC (valued at ~$600-650) to puddinpop to open source their windows-based CUDA client
|-
! September 14
|| Block [http://blockexplorer.com/b/79764 79,764] is first to be mined using split allocation of the generation reward.
|-
! September 18
|| puddinpop [https://bitcointalk.org/index.php?topic=133.msg13135#msg13135 released] source to their windows-based CUDA client under MIT license
|-
! September 29
|| kermit [https://bitcointalk.org/index.php?topic=1306.0 discovered] a microtransactions exploit which precipitated the Bitcoin v0.3.13 release
|-
! October 01
|| [https://bitcointalk.org/?topic=1334.0 First public OpenCL miner] released
|-
! October 04
|| Original Bitcoin History wiki page (this page) established (ooh so meta) on Bitcoin.org's wiki.
|-
! October 07
|| Exchange rate started climbing up from $0.06/BTC after several flat months.
|-
! October 16
|| First recorded escrowed bitcoin trade conducted, between nanotube and Diablo-D3, escrowed by theymos.
|-
! October 17
|| [[Bitcoin_OTC|#bitcoin-otc]] trading channel established on freenode IRC.
|-
! October 28
|| First bitcoin short sale transaction initiated, with a loan of 100 BTC by nanotube to [[User:Kiba|kiba]], facilitated by the [[Bitcoin-otc|#bitcoin-otc]] market.
|-
! November 6
|| The [https://bitcointalk.org/index.php?topic=1672 Bitcoin economy passed US $1 million]. The MtGox price touched USD $0.50/BTC.
|-
! December 7
|| Bitcoind was compiled for the Nokia N900 mobile computer by doublec. The following day, ribuck sent him 0.42 BTC in the first portable-to-portable Bitcoin transaction.
|-
! December 9
|| The generation difficulty passed 10,000.
|-
|
|| First bitcoin call option contract sold, from nanotube to [[User:Sgornick|sgornick]], via the [[Bitcoin-otc|#bitcoin-otc]] market.
|-
! December 16
|| [http://mining.bitcoin.cz/ Bitcoin Pooled Mining], operated by slush, found its first block
|}

=== 2011 ===
{| style="text-align: left"
|-
! width="8em" | January 2
|| [[Tonal Bitcoin]] units standardized.
|-
! January 8
|| [[History of Bitcoin]] page (this page) created after replicating from original Bitcoin History page on Bitcoin.org.
|-
|
|| Bitcoin Pooled Mining reached a total of 10,000 Mhash/s
|-
! January 27
|| Largest numeric value ever traded for bitcoins thus far occurred on this date. Three currency bills from Zimbabwe, known as Zimdollars, were traded on [[Bitcoin-otc|#bitcoin-otc]] at the rate of 4 BTC for each of the one-hundred trillion dollar ($100,000,000,000,000) Zimbabwe notes<ref>Serial numbers for Zimdollars sold: AA1669317, AA1669318 and AA1669319</ref>
|-
! January 28
|| Block 105000 was generated. This means that 5.25 million bitcoins have been generated, which is just over one-quarter of the eventual total of nearly 21 million.
|-
! February 9
|| Bitcoin reached parity with the US dollar, touching $1 per BTC at [[MtGox]].
|-
! February 10
|| Bitcoin.org website struggles to handle [https://bitcointalk.org/index.php?topic=3444.0 traffic] resulting from mentions on Slashdot<ref>[http://news.slashdot.org/story/11/02/10/189246/Online-Only-Currency-BitCoin-Reaches-Dollar-Parity Online-Only Currency BitCoin Reaches Dollar Parity]</ref>, Hacker News and Twitter following the news that parity had been reached.
|-
! February 14
|| A vehicle was, for the first time, offered in exchange for a certain number of bitcoins<ref>[https://bitcointalk.org/index.php?topic=3485.0 Car for Sale - Australia]</ref>.
|-
! March 1
|| [[MagicalTux]] buys mtgox.com from its founder [[Jed McCaleb]]
|-
! March 6
|| Total Bitcoin network computation speed for a short time reached a new high of almost 900Ghash/sec, dropping to 500Ghash/sec soon after. Some speculate that this was due to some supercomputer or bot-net that joined the network ([http://bitcoin.atspace.com/mysteryminer.html mystery miner]).
|-
! March 18
|| BTC/USD exchange rate reaches a 6-week low point at almost $0.70/BTC, after what appeared to be a short burst of, possibly automated, BTC sales at progressively lower prices. BTC price had been declining since the February 9 high.
|-
! March 25
|| Difficulty decreased nearly 10%. A decrease has only occurred once before, and this decrease of nearly 10% was the largest.
|-
! March 27
|| The first market for exchanging bitcoins to and from the British Pound Sterling BTC/GBP, [[Britcoin]], opens.
|-
! March 31
|| The first market for exchanging bitcoins to and from Brazilian Reals, [[Bitcoin Brazil]], opens.
|-
! April 5
|| The first market for exchanging bitcoins to and from the Polish złoty, [[BitMarket.eu]], opens.
|-
! April 12
|| First bitcoin put option contract sold via the [[Bitcoin-otc|#bitcoin-otc]] market.
|-
! April 16
|| TIME does [http://techland.time.com/2011/04/16/online-cash-bitcoin-could-challenge-governments/ an article on Bitcoin].
|-
! April 23
|| BTC/USD exchange rate reaches and passes parity with the Euro (EUR) on [[MtGox]] exchange.
|-
|
|| BTC/USD exchange rate reaches and passes parity with the British Sterling Pound (GBP) on [[MtGox]] exchange.
|-
|
|| Value of the Bitcoin money stock at current exchange rate passes $10 million USD threshold.
|-
! April 27
|| [[VirWoX]] opens first market to trade bitcoins against a virtual currency on BTC/SL (Second Life Lindens) exchange.
|-
! April 30
|| The generation difficulty passed 100,000.
|-
! June 2
|| The exchange rate at [[MtGox]] touched 10 USD per BTC.
|-
! June 3
|| [[Tonal Bitcoin]] reached parity with the US cent, touching 1¢ per TBC at [[Bitcoin Market]].
|-
! June 8
|| The [[MtGox]] exchange rate peaked at 31.91 USD, at a "market capitalization" of about $206 M [http://bitcoin.stackexchange.com/questions/2047/market-capitalization-over-time].
|-
! June 12
|| The [[MtGox]] exchange rate briefly dropped to near 10 USD four days after the peak, in its largest percentage price retreat to date.
|-
! June 13
|| Forum user allinvain claimed to have had [http://forum.bitcoin.org/index.php?topic=16457.0 25,000 BTC stolen] from his Bitcoin wallet (approx. USD equivalent $375,000).
|-
! June 19
|| The MtGox database was compromised and the user table was leaked, containing details of 60,000 usernames, email addresses and password hashes, some of which were overly simple to brute force passwords.
|-
! June 19
|| Someone was able to access an admin account at MtGox and issue sell orders for hundreds of thousands of fake bitcoins, forcing the MtGox price down from $17.51 per bitcoin to $0.01. MtGox announced that these trades would be reversed. Trading was halted at MtGox for 7 days (and also briefly at TradeHill and Britcoin while their security was reviewed).
|-
! June 19
|| Some of the users on the leaked MtGox database had used the same username at MyBitcoin and had their passwords hacked. About 600 of them had their balance [http://forum.bitcoin.org/index.php?topic=22221.msg279396#msg279396 stolen from their MyBitcoin accounts]. One user lost over 2000 BTC.
|-
! June 20
|| The EFF announced that it was no longer accepting Bitcoin donations due to legal uncertainties.
|-
! June 24
|| The generation difficulty passed 1,000,000 with Block [http://blockexplorer.com/b/133056 133056].
|-
! July 19
|| "Let it go on record that at 4:05pm CET [19 July 2011], my manager Tadek was the first person in the world to receive [testnet] Bitcoins via NFC ;)" - Mike Hearn
|-
! July 22
|| [[BitCoins Mobile]], the first Bitcoin application for iPad was released by [http://www.intervex.net Intervex Digital].
|-
! July 30
|| [http://pastebin.com/raw.php?i=BUB3dygQ Tribute to Len Sassaman] included in the blockchain<ref>[http://bitcointalk.org/index.php?topic=33618.msg420597#msg420597 A Tribute to Len "rabbi" Sassama]</ref>.
|-
! August 20
|| First Bitcoin Conference and World Expo held, in NYC.<ref>[http://bitcoinme.com/index.php/conference/ New York Conference 2011]</ref>
|-
! August 23
|| [[P2Pool]], the first P2P decentralized pool, mines its first Bitcoin mainnet block (Block [http://blockexplorer.com/b/142312 142,312]).
|-
! August 30
|| Difficulty adjustment at block [http://blockexplorer.com/b/143136 143,136] marks the first back-to-back drop.
|-
! November 15
|| First CVE (CVE-2011-4447) assigned to a Bitcoin client exploit.
|-
! November 25
|| First European Bitcoin Conference in Prague, Czech Rep.<ref>[http://bitgroups.org/ Prague Conference 2011]</ref>
|-
! December 12
|| Largest amount of fees, to-date, in a single transaction, and most fees in a single block. A [http://blockexplorer.com/tx/1d7749c65c90c32f5e2c036217a2574f3f4403da39174626b246eefa620b58d9 transaction] paid 171 BTC in fees in [http://blockexplorer.com/b/157235 block 157235]<ref>[http://bitcointalk.org/index.php?topic=88423.msg973509#msg973509 Largest fee ever?]</ref>.
|}

=== 2012 ===
{| style="text-align: left"
|-
! width="8em" | March 1
|| Largest theft of bitcoins to-date occurred (near 50K BTC) after security breach at web host Linode.
|-
! width="8em" | April 1
|| Pay-to-script-hash ([[P2SH]]) as defined through [[BIP 0016]] goes live.
|-
! May 08
|| A single service, [[SatoshiDICE]] becomes responsible for over half the transaction volume on the Bitcoin blockchain.
|-
! June 3
|| Largest block (most transactions), to-date (June 3), is [http://BlockExplorer.com/b/181919 block 181919] with 1322 transactions<ref>[http://bitcointalk.org/index.php?topic=85353.msg939859#msg939859 Largest block to date]</ref>.
|-
! July 22
|| One millionth topic reply was posted on the unofficial [[Bitcoin Forum]] <ref>[https://bitcointalk.org/index.php?topic=94608.0 Topic about one millionth forum post]</ref>.
|-
! September 15-16
|| Bitcoin Conference in London <ref>[http://bitcoin2012.com/ London Conference 2012]</ref>.
|-
! September 27
|| Formation of the [[Bitcoin Foundation]].
|-
! November 28
|| Halving day. [http://blockexplorer.com/b/210000 Block 210,000] is the first with a block reward subsidy of only 25 BTC.
|-
! December 6
|| First Bitcoin exchange [https://bitcointalk.org/index.php?topic=129461.0 licensed "as a bank" in europe] (actually a PSP which is like a bank, without debt-money issuing).
|}

=== 2013 ===
{| style="text-align: left"
|-
! width="8em" | February 19
|| Bitcoin Client v0.8 released featuring improved download speed and [https://en.wikipedia.org/wiki/Bloom_filter Bloom Filtering]
|-
! February 28
|| The [[MtGox]] exchange rate broke the June 8 2011 peak of 31.91 USD. The first all time high since 601 days
|-
! March 12
|| A previously undiscovered protocol rule results in a [http://bitcoin.org/chainfork.html hard fork of the 0.8.0 reference client].
|-
! March 18
|| The United States federal agency charged with enforcing laws against money laundering (FinCEN) declares that Bitcoin users are subject to regulation only at the point of USD-BTC exchange.<ref>[http://arstechnica.com/tech-policy/2013/03/us-regulator-bitcoin-exchanges-must-comply-with-money-laundering-laws/ US regulator: Bitcoin exchanges must comply with money-laundering laws]</ref>
|-
! March 28
|| Total Bitcoin market cap passes $1 billion. <ref>http://spectrum.ieee.org/computing/networks/bitcoin-hits-1billion</ref>
|-
! April 1
|| Bitcoin price breaks 100 USD on [[MtGox]] and other major exchanges.
|-
|}

==See Also==

* [[Bitcoin Firsts]]
* [[Press]]
* [https://bitcoinhelp.net/know/more/price-chart-history Bitcoin Price Chart with Historic Events]

==References==
<references />

Privacy

2014-05-24T20:20:13Z

Brotherbitcoin: /* See Also */

While the Bitcoin technology [http://www.bitcointalk.org/index.php?topic=241.0 can support] strong anonymity, the current implementation is usually not very anonymous.

__TOC__

The main problem is that every transaction is publicly logged. Anyone can see the flow of Bitcoins from address to address (see first image). Alone, this information can't identify anyone because the addresses are just random numbers. However, if ''any'' of the addresses in a transaction's past or future can be tied to an actual identity, it might be possible to work from that point and guess who may owns all of the other addresses. This identity information might come from network analysis, surveillance, or just Googling the address. The officially-encouraged practice of using a new address for every transaction is designed to make this attack more difficult.
[[File:Unknownaddress.png|thumb|The flow of Bitcoins is highly public.]]

The second image shows a simple example. Someone runs both a money exchanger and a site meant to trap people. When Mr. Doe buys from the exchanger and uses those same coins to buy something from the trap site, the attacker can '''prove''' that these two transactions were made by the same person. The block chain would show:
[[File:knownaddress.png|thumb|Finding an "identity anchor" allows you to ruin the anonymity of the system.]]
* Import coins from address A. Send 100 to B. Authorized by (signature).
* Import coins from address B. Send 100 to C. Authorized by (signature).
Bitcoin transactions do not have a "from" address but if the attacker believes that address B is controlled by Mr. Doe because the attacker received $5 from Mr. Doe's Paypal account and then sent 100 BTC to that address then they can infer the identity of the party sending to C. This assumption is not always correct because address B may have been an address held on behalf of Mr. Doe by a third party and the transaction to C may have been unrelated.

Another example: someone is scammed and posts the address they were using on the Bitcoin forum. It is possible to see which address they sent coins to. When coins are sent which were previously send to this (the scammer's) address, the addresses that receive them can also be easily found and posted on the forum. In this way, all of these coins are marked as "dirty", potentially over an infinite number of future transactions. When some smart and honest person notices that his address is now listed, he can reveal who he received those coins from. The Bitcoin community can now ask some pointed questions, "Who did you receive these coins from? What did you create this address for?" Eventually the original scammer will be found. Clearly, this becomes more difficult the more addresses that exist between the "target" and the "identity point".

You might be thinking that this attack is not feasible. But consider this case:
* You live in China and want to buy a "real" newspaper for Bitcoins.
* You join the Bitcoin forum and use your address as a signature. Since you are very helpful, you manage to get 30 BTC after a few months.
* Unfortunately, you choose poorly in who you buy the newspaper from: you've chosen a government agent! Maybe you are under the mistaken impression that Bitcoin is perfectly anonymous.
* The government agent looks at the block chain and Googles (or Baidus) every address in it. He finds your address in your signature on the Bitcoin forum. You've left enough personal information in your posts to be identified, so you are now scheduled to be "reeducated".

You need to protect yourself from both forward attacks (getting something that identifies you using coins that you got with methods that must remain secret, like the scammer example) and reverse attacks (getting something that must remain secret using coins that identify you, like the newspaper example).

==Staying Anonymous==

By necessity the history of all the bitcoins must be highly public. However, if one has bitcoins on paid to address, one can theoretically choose the coins they spend in a way that will minimize the amount of information they leak. Choosing personally generated coins or an address that you know doesn't reveal information would protect you. Unfortunately, the default Bitcoin client doesn't support this currently, so you must assume that your entire balance can identify you if any of the addresses can.

You may consider a bitcoin to be "less-anonymous" when an attacker could feasibly find the true identity of a very recent owner of the bitcoin, perhaps because one of the bitcoin addresses was posted to a website, or because he knows some identifying information through other means.

If your balance has been contaminated by both anonymous and non-anonymous coins, you may take action to make it "clean".

Recommended way of anonymizing your balance:
* Send however many coins you want to anonymize to a new [[eWallet]] account as a lump sum. There are other [[eWallet]] services however the more widely used the greater the potential for anonymity. <font color="red">This is not an endorsement of trust in the use of [[eWallet]] services. There are no guarantees that any eWallet service won't one day take all your bitcoins and disappear. Use at your own risk.</font>

With this method an attacker will have to gain access to the eWallet service's transaction logs to continue to follow you in the transaction history.

The protection that this method offers is significantly reduced if you are trying to anonymize more than about 10% of the total number of Bitcoins that the eWallet service holds. You'll end up getting your own coins back instead of other users' coins. Withdrawing Bitcoins more slowly and in smaller increments will help reduce this problem. Sending coins to an eWallet service in the largest single transfer possible will also help.

To further enhance your anonymity, you can:
* Send Bitcoins from one EWallet sevice to another and ''then'' to yourself. Each transfer needs to be painstakingly investigated and many transfers will present insurmountable difficulty.

Once you have an anonymous balance set up, be sure to keep your anonymous and non-anonymous balances completely separate.

A future version of the client will have more control which will allow the sender to specify which coins to use in a transaction<ref>[http://bitcointalk.org/index.php?topic=24784.msg307661#msg307661 Patching The Bitcoin Client To Make It More Anonymous]</ref>.

In the future, trusted relay servers operating on the [[friendly addresses with enhanced privacy]] protocol could provide bitcoin users strong anonymity with increased convenience, thereby eliminating the need to make a trade-off between privacy and ease of use.

===Helping other people stay anonymous===
* Set up a real [http://www.bitcointalk.org/index.php?topic=241.0 external mixing service]. Make it like an eWallet service but make sure that a user never withdraws the same coins that are put in. Also delete empty addresses and transaction logs.
* Even if you're not a programmer, you can make a slightly less secure version of an external mixing service (as a Tor hidden service, preferably):
** Set up two Bitcoin installations.
** Put some amount of BTC in installation B. This is the maximum amount of BTC you can deal with at once (for all customers).
** Customers send BTC to installation A. You send them an equal number of coins (or minus a fee) from installation B. Send as 10-50 BTC increments.
** Send all coins from A to B when '''all''' orders are satisfied. You can't send coins from A to B if you have any orders that have not been satisfied from B.
** This can be automated, or you can do everything manually.
* Put lots of Bitcoins in an eWallet service and keep it there. If anyone uses the anonymization method described in "staying anonymous" above, this will enhance it. Send in smaller increments if a large amount is transferred.

==Legality==
Obviously, using Bitcoin anonymity techniques for the purposes of [[Wikipedia:money laundering|money laundering]] is illegal, but participating or running schemes which others use for money laundering may also be illegal or at least leave the participant vulnerable to accusations of aiding criminals and terrorists. Bitcoin anonymity techniques involving bitcoins worth large amounts of money (over some value between FJ$1,100 and US$58,000, depending on your jurisdiction) is illegal in most jurisdictions, being in violation of [[Wikipedia:Structuring|anti-structuring laws]].

==See Also==

* [[:Category:Mixing Services|Mixing Services]] category
* [http://www.bitcointalk.org/index.php?topic=2893.0 RFC: Bitcoin Mixnet]
* [http://www.bitcointalk.org/index.php?topic=241.0 anonymity]
* [http://www.bitcointalk.org/index.php?topic=24784.0 Patching The Bitcoin Client To Make It More Anonymous]
* [http://arxiv.org/abs/1107.4524 An Analysis of Anonymity in the Bitcoin System] research by Fergal Reid, Martin Harrigan ([http://bitcointalk.org/index.php?topic=31539.0 discussion])
* [http://bitcoinhelp.net/know/more/top-seven-ways-your-identity-can-be-linked-to-your-bitcoin-address Top Seven Ways Your Identity Can Be Linked to Your Bitcoin Address]

==References==
<references />

[[Category:Technical]]
[[Category:Anonymity]]

Help:Introduction

2014-05-10T23:45:46Z

Brotherbitcoin: /* See Also */

The purpose of this page is to provide a general overview of the Bitcoin system and economy.

==Basic Concepts==

===Currency===

Alice wants to buy the [http://www.grasshillalpacas.com/alpacaproductsforbitcoinoffer.html Alpaca socks] which Bob has for sale. In return, she must provide something of equal value to Bob. The most efficient way to do this is by using a medium of exchange that Bob accepts which would be classified as currency. Currency makes trade easier by eliminating the need for [http://en.wikipedia.org/wiki/Coincidence_of_wants coincidence of wants] required in other systems of trade such as barter. Currency adoption and acceptance can be global, national, or in some cases local or community-based.

===Banks===

Alice need not provide currency to Bob in-person. She may instead transfer this value by first entrusting her currency to a bank who promises to store and protect Alice's currency notes. The bank gives Alice a written promise (called a "bank statement") that entitles her to withdraw the same number of currency bills that she deposited. Since the money is still Alice's, she is entitled to do with it whatever she pleases, and the bank (like most banks), for a small fee, will do Alice the service of passing on the currency bills to Bob on her behalf. This is done by Alice's bank by giving the dollar bills to Bob's bank and informing them that the money is for Bob, who will then see the amount the next time he checks his balance or receives his bank statement.

Since banks have many customers, and bank employees require money for doing the job of talking to people and signing documents, banks in recent times have been using machines such as ATMs and web servers that do the job of interacting with customers instead of paid bank employees. The task of these machines is to learn what each customer wants to do with their money and, to the extent that it is possible, act on what the customer wants (for example, ATMs can hand out cash). Customers can always know how much money they have in their accounts, and they are confident that the numbers they see in their bank statements and on their computer screens accurately reflect the number of dollars that they can get from the bank on demand. They can be so sure of this that they can accept those numbers in the same way they accept paper banknotes (this is similar to the way people started accepting paper dollars when they had been accepting gold or silver).

Such a system has several disadvantages:
* It is costly. [https://en.wikipedia.org/wiki/Electronic_funds_transfer EFTs] in Europe can cost 25 euros. Credit transactions can cost several percent of the transaction.
* It is slow. Checking and low cost wire services take days to complete.
* In most cases, it cannot be anonymous.
* Accounts can be frozen, or their balance partially or wholly confiscated.
* Banks and other payment processors like PayPal, Visa, and Mastercard may refuse to process payments for certain legal entities.

Bitcoin is a system of owning and voluntarily transferring amounts of so-called ''bitcoins'', in a manner similar to an on-line banking, but pseudonymously and without reliance on a central authority to maintain account balances. If bitcoins are valuable, it is because they are useful and limited in supply.

==Bitcoin Basics==

===Creation of coins===

The creation of coins must be limited for the currency to have any value.

New coins are slowly [[Mining|mined]] into existence by following a mutually agreed-upon set of rules. A user [[Mining|mining]] bitcoins is running a software program that searches tirelessly for a solution to a very difficult math problem whose difficulty is precisely known. The difficulty is automatically adjusted regularly so that the number of solutions found globally, by everyone, for a given unit of time is constant: an average of 6 per hour. When a solution is found, the user may tell everyone of the existence of this newly found solution, along with other information, packaged together in what is called a "[[Block|block]]".

Blocks create 25 new bitcoins at present. This amount, known as the block reward, is an incentive for people to perform the computation work required for generating blocks. Roughly every 4 years, the number of bitcoins that can be "mined" in a block reduces by 50%. Originally the block reward was 50 bitcoins; it halved in November 2012. Any block that is created by a malicious user that does not follow this rule (or any other rules) will be rejected by everyone else. In the end, no more than 21 million bitcoins will ever exist.

Because the block reward will decrease over the long term, miners will some day instead pay for their hardware and electricity costs by collecting [[Transaction_fee|transaction fees]]. The sender of money may voluntarily pay a small transaction fee which will be kept by whoever finds the next block. Paying this fee will encourage miners to include the transaction in a block more quickly.

===Sending payments===

To guarantee that a third-party, let's call her Eve, cannot spend other people's bitcoins by creating transactions in their names, Bitcoin uses [[Wikipedia:Public-key_cryptography|public key cryptography]] to make and verify digital signatures. In this system, each person, such as Alice or Bob, has one or more addresses each with an associated pair of public and private keys that they may hold in a [[Wallet|wallet]]. Only the user with the private key can sign a transaction to give some of their bitcoins to somebody else, but anyone can validate the signature using that user’s public key.

Suppose Alice wants to send a bitcoin to Bob.
* Bob sends his address to Alice.
* Alice adds Bob’s address and the amount of bitcoins to transfer to a message: a 'transaction' message.
* Alice signs the transaction with her private key, and announces her public key for signature verification.
* Alice broadcasts the transaction on the Bitcoin network for all to see.

(Only the first two steps require human action. The rest is done by the Bitcoin client software.)

Looking at this transaction from the outside, anyone who knows that these addresses belong to Alice and Bob can see that Alice has agreed to transfer the amount to Bob, because nobody else has Alice's private key. Alice would be foolish to give her private key to other people, as this would allow them to sign transactions in her name, removing funds from her control.

Later on, when Bob wishes to transfer the same bitcoins to Charley, he will do the same thing:
* Charlie sends Bob his address.
* Bob adds Charlie's address and the amount of bitcoins to transfer to a message: a 'transaction' message.
* Bob signs the transaction with his private key, and announces his public key for signature verification.
* Bob broadcasts the transaction on the Bitcoin network for all to see.

Only Bob can do this because only he has the private key that can create a valid signature for the transaction.

Eve cannot change whose coins these are by replacing Bob’s address with her address, because Alice signed the transfer to Bob using her own private key, which is kept secret from Eve, and instructing that the coins which were hers now belong to Bob. So if Charlie accepts that the original coin was in the hands of Alice, he will also accept the fact that this coin was later passed to Bob, and now Bob is passing this same coin to him.

===Preventing [[double-spending]]===

The process described above does not prevent Alice from using the same bitcoins in more than one transaction. The following process does; this is the primary innovation behind Bitcoin.

* Details about the [[Transactions|transaction]] are [[Network|sent and forwarded]] to all or as many other computers as possible.
* A constantly growing chain of [[Blocks|blocks]] that contains a record of all transactions is collectively maintained by all computers (each has a full copy).
* To be accepted in the chain, transaction blocks must be valid and must include [[proof of work]] (one block generated by the network every 10 minutes).
* Blocks are chained in a way so that, if any one is modified, all following blocks will have to be recomputed.
* When multiple valid continuations to this chain appear, only the longest such branch is accepted and it is then extended further.

When Bob sees that his transaction has been included in a block, which has been made part of the single longest and fastest-growing block chain (extended with significant computational effort), he can be confident that the transaction by Alice has been accepted by the computers in the network and is permanently recorded, preventing Alice from creating a second transaction with the same coin. In order for Alice to thwart this system and double-spend her coins, she would need to muster more computing power than all other Bitcoin users combined.

===Anonymity===

When it comes to the Bitcoin network itself, there are no "accounts" to set up, and no e-mail addresses, user-names or passwords are required to hold or spend bitcoins. Each balance is simply associated with an address and its public-private key pair. The money "belongs" to anyone who has the private key and can sign transactions with it. Moreover, those keys do not have to be registered anywhere in advance, as they are only used when required for a transaction. Transacting parties do not need to know each other's identity in the same way that a store owner does not know a cash-paying customer's name.

A [[Address|Bitcoin address]] mathematically corresponds to a public key and looks like this:

:1PC9aZC4hNX2rmmrt7uHTfYAS3hRbph4UN

Each person can have many such addresses, each with its own balance, which makes it very difficult to know which person owns what amount. In order to protect his [[Anonymity|privacy]], Bob can generate a new public-private key pair for each individual receiving transaction and the Bitcoin software encourages this behavior by default. Continuing the example from above, when Charlie receives the bitcoins from Bob, Charlie will not be able to identify who owned the bitcoins before Bob.

===Capitalization / Nomenclature===

Since Bitcoin is both a currency and a protocol, capitalization can be confusing. Accepted practice is to use ''Bitcoin'' (singular with an upper case letter B) to label the protocol, software, and community, and ''bitcoins'' (with a lower case b) to label units of the currency.

==Where to see and explore==

You can directly explore the system in action by visiting [https://www.biteasy.com/ Biteasy.com], [http://blockchain.info/ Blockchain.info], [http://btc.blockr.io/ Blokr.io Bitcoin Block Explorer] or [http://blockexplorer.com/ Bitcoin Block Explorer].
The site shows you the latest blocks in the block chain. The [[Block_chain|block chain]] contains the agreed history of all transactions that took place in the system.
Note how many blocks were generated in the last hour, which on average will be 6. Also notice the number of transactions and the total amount transferred in the last hour (last time I checked it was about 64 and 15K).
This should give you an indication of how active the system is.

Next, navigate to one of these blocks.
The block's [[hash]] begins with a run of zeros. This is what made creating the block so difficult; a hash that begins with many zeros is much more difficult to find than a hash with few or no zeros. The computer that generated this block had to try many ''Nonce'' values (also listed on the block's page) until it found one that generated this run of zeros.
Next, see the line titled ''Previous block''. Each block contains the hash of the block that came before it. This is what forms the chain of blocks.
Now take a look at all the transactions the block contains. The first transaction is the income earned by the computer that generated this block. It includes a fixed amount of coins created out of "thin air" and possibly a fee collected from other transactions in the same block.

Drill down into any of the transactions and you will see how it is made up of one or more amounts coming in and out.
Having more than one incoming and outgoing amount in a transaction enables the system to join and break amounts in any possible way, allowing for any fractional amount needed. Each incoming amount is a past transaction (which you can also view) from someone's address, and each outgoing amount is addressed to someone and will be part of a future transaction (which you can also navigate down into if it has already taken place.)

Finally you can follow any of the [[Address|addresses]] links and see what public information is available for them.

To get an impression of the amount of activity on the Bitcoin network, you might like to visit the monitoring websites [[Bitcoin Monitor]] and [[Bitcoin Watch]]. The first shows a real-time visualization of events on the Bitcoin network, and the second lists general statistics on the amount and size of recent transactions.

===How many people use Bitcoin?===

This is quite a difficult question to answer accurately. One approach is to count how many bitcoin clients connected to the network in the last 24 hours. We can do this because some clients transmit their addresses to the other members of the network periodically. In September 2011 this method suggested that there were about {{formatnum:60000}} users.

==See Also==
* [http://bitcoinhelp.net Bitcoin Help] — the simple guide to Bitcoin.
* Learn the entire history of Bitcoin in the interactive timeline at [http://historyofbitcoin.org History of Bitcoin].
* Get started buying bitcoins at [http://coinbase.com/?r=514b6eb6a18f2fdde50000db&utm_campaign=user-referral&src=referral-link Coinbase].
* [http://BitcoinExchangeGuide.com BitcoinExchangeGuide.com] ([[BitcoinExchangeGuide|info]]) Website Dedicated to Providing Beginners with the Best Information on Where to Buy, Sell and Trade Bitcoins. Covers all of the Major Exchanges.
* [[File:MCS_200by200_logo-01.png|20px|link=http://www.mycoinsolution.com]][http://www.mycoinsolution.com My Coin Solution] - For business that want to learn more about Bitcoin
* For an introductory site see [http://wheretobuycryptocoins.com WhereToBuyCryptocoins.com]. Explains what is a cryptocoin, how it works, and have many lists of markets, exchanges, faucets, sites to spend money, prices, etc. For starters and reference.
* [https://www.trybtc.com/ TryBTC] easiest way to get started using bitcoin. Gives you free coins to create a bitcoin wallet and start spending.
* [http://www.youtube.com/watch?v=Um63OQz3bjo What is Bitcoin?] video introduction
* Installing Bitcoin [[getting started]]
* [[Using Bitcoin]]
* A gentle introduction to Bitcoin - [[BitcoinMe]]
* [http://coinlab.com/2011/12/bitcoin-primer Bitcoin Primer] from CoinLab
* Another introduction, ''The Rebooting Of Money'' podcast is found at [[Bitcoin Money]]
* A beginner's step-by-step guide to using Bitcoin, use of alternative wallets, and generally keeping your money and computer secure - [http://BitcoinIntro.com BitcoinIntro.com]
* [http://howtobitcoin.info howtobitcoin.info] Directory of bitcoin links for beginners
* Amazon Kindle Book [http://www.amazon.com/Bitcoin-Step-by-ebook/dp/B00A1CUQQU Bitcoin Step by Step] $3.99 (USD). The author walks you step by step through getting started.
* [http://dpassport.com/free-reports/Free-Bitcoin-Report.pdf Free Bitcoin report] by Brad Gosse and Jennifer Wozniak

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