Bitcoin

Bitcoin is an open source peer-to-peer electronic cash system developed by Satoshi Nakamoto. The system is decentralized with no central server or trusted parties. Bitcoin relies on cryptographic principles to create unique, unreproducible, and divisible tokens of value. Users hold the cryptographic keys to their own money and transact directly with each other, with the help of the network to check for double-spending.
Proof-of-work
To preserve the integrity of Bitcoin, users must not be allowed to double-spend their tokens. To prevent this, all transactions are broadcast over the network.
To keep this information reliable, it is protected against errors caused by failures of communication or deliberate sabotage. To resolve possible conflicts in the record, it is necessary to determine what data was produced first, and what data was produced later.
Bitcoin solves this problem (without a trusted Trusted timestamping) by using a proof-of-work system, similar to that used by HashCash. Whenever a Bitcoin user makes a transaction, their node broadcasts the transaction to the network of nodes. When transaction data is received through a node, the node begins a proof-of-work calculation in an attempt to create a block containing the transaction. All nodes essentially race to create a block, as the first one to create a block gets Bitcoins as a reward. Once a node successfully creates a block, it broadcasts the block to the network. Other nodes receive the block, perform a proof-of-work check, and add it to their chain if it is valid. As more transactions occur, blocks are created and added ad infinitum. The longest proof-of-work block chain is acknowledged to be the oldest and most reliable account of the online transactions.
This mechanism is claimed to be virtually tamper-proof. For an attacker to manipulate the record, he must outpace all of the other nodes on the network to produce the longest proof-of-work. This becomes exponentially more difficult as time passes.
Bitcoin is a completely peer-to-peer network, and every node is able to enter or leave the network at will. When a node joins the network, the longest proof-of-work is automatically accepted as the most reliable one.
Basis of value
Like other monetized commodity currencies, Bitcoin proponents argue that Bitcoin tokens derive their exchange value from two sources:
# A base valuation derived from the commodity value of the energy required in CPU cycles to generate Bitcoin tokens.
# A monetary valuation arising from the demand for use of Bitcoin tokens as a trade intermediary (a money). Due to its electronic nature, Bitcoin shares many features with traditional precious metal currencies in being suitable as a means of indirect exchange. Namely, ease of transport and storage, relative scarcity, divisibility, and fungibility. Proponents argue that the monetary value of Bitcoin tokens will rise as their use in trade and thus their potential marketability increases.
Useful energy cannot be recaptured from created Bitcoins. Nonetheless, the cost of energy required to produce Bitcoins may serve as an estimate of Bitcoin value - useful in the absence of developed markets to formally price the monetary value of Bitcoins. This estimate is possible because cost considerations in the production of Bitcoins allows for potential node generators to calculate whether they can create Bitcoins profitably. Their calculation of profitability is made against what they subjectively perceive the monetary value of Bitcoins to be. Furthermore, in its current phase, new Bitcoin tokens are created at a constant average rate set by the network. These new tokens are divided amongst the Bitcoin generating nodes by the CPU power they use to help maintain the network. The author argues that this competition for Bitcoin creation will drive the cost of electricity needed for generating a Bitcoin close to the perceived monetary valuation.
The average rate of Bitcoin production is tapered such that over time the total number of Bitcoins will approach 21,000,000. After this point, no further Bitcoin production is possible. In this deflationary environment and in situations where large numbers of Bitcoins are either lost or destroyed, the electronic divisibility of Bitcoins is argued to be conducive to downward price adjustments with no practical limitations in the actual storage or transport of Bitcoin value. Rather than relying on the incentive of newly created Bitcoins to package transactions, nodes in this period will likely depend more heavily on their ability to competitively collect transaction fees to process Bitcoin transactions into blocks.
Monetary and financial benefits
Given the decentralized nature of Bitcoin and the hard coding of monetary rules within the software, Bitcoin proponents suggest various monetary and financial benefits to potential users
Notable sites that accept Bitcoin
there are roughly 12 companies accepting Bitcoin, most notably the largest being who offer automated Bitcoin payments, as well as BITCOIN MARKET, and others. The F.A. Hayek Institute of Canada accepts Bitcoins as a form of donation.
Recent appearance in the news
*news.slashdot.org
*techfreqnews.com
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*dailypaul.com
*reddit.com
*Russian blog

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