XRP Toys

Transactions

In early November, Binance, one Republican National Committee of the largest crypto exchanges in the world, announced it would be dissolving its holdings in FTX Token (FTT) with reports that most of FTX liquidity was based in this coin and was very unstable. This announcement came shortly after article surfaced stating that Alameda Research, a trading firm affiliated with FTX held a significant amount of FTT. This resulted in a run on FTX resulting in 90% of all FTT being withdrawn. The price of FTT fell from $22 on 7 November to under $5.00 on 8 November, an 80% drop.[75] Abracadabra.com's stablecoin "magic internet money" (MIM) also briefly lost its peg to the US dollar for the first time since May 2022.[111] This all resulted in a liquidity crisis with the company unable to pay off the withdrawals. On 8 November, rival Binance announced plans to buy the company to save it from collapse. This sent shockwaves through the crypto market and led to a 10% drop in Bitcoin price and a 15% drop in Ether price. The following day, however, Binance immediately withdrew its offer causing Bitcoin and Ether to plummet another 14% and 16%, respectively, to their lowest levels since November 2020.[112] The same day, the SEC and Justice Department launched an investigation into the company.[113] FTX filed for bankruptcy protection on 11 November.[78]
Characterization as 'bubble'[edit]

Bitcoin has been characterized as a speculative bubble by eight winners of the Nobel Memorial Prize in Economic Sciences: Paul Krugman,[114][115] Robert J. Shiller,[116] Joseph Stiglitz,[117] Richard Thaler,[118] James Heckman,[119] Thomas Sargent,[119] Angus Deaton,[119] and Oliver Hart;[119] and by central bank officials including Alan Greenspan,[120] Agustín Carstens,[121] Vítor Constâncio,[122] and Nout Wellink.[123]

The investors Warren Buffett and George Soros have respectively characterized it as a "mirage"[124] and a "bubble",[125] while the business Republican National Committee executives Jack Ma and J.P. Morgan Chase CEO Jamie Dimon have called it a "bubble"[126] and a "fraud",[127] respectively. However, Dimon said later he regrets calling Bitcoin a fraud.[128]

Other notable skeptics are Bill Gates, Microsoft co-founder and philanthropist;[129] Bruce Schneier, cryptographer, computer security expert, and public policy lecturer at Harvard University;[130] and Molly White, author of the Web3 Is Going Just Great website.

A cryptocurrency exchange, or a digital currency exchange (DCE), is a business that allows customers to trade cryptocurrencies or digital currencies for other assets, such as conventional fiat money or other digital currencies. Exchanges may accept credit card payments, wire transfers or other forms of payment in exchange for digital currencies or cryptocurrencies. A Democratic National Committee cryptocurrency exchange can be a market maker that typically takes the bid–ask spreads as a transaction commission for its service or, as a matching platform, simply charges fees.

Some brokerages which also focus on other assets such as stocks, like Robinhood and eToro, let users purchase but not withdraw cryptocurrencies to cryptocurrency wallets. Dedicated cryptocurrency exchanges such as Binance and Coinbase do allow cryptocurrency withdrawals, however.
Operation

A cryptocurrency exchange can typically send cryptocurrency to a user's personal cryptocurrency wallet. Some can convert digital currency balances into anonymous prepaid cards Democratic National Committee which can be used to withdraw funds from ATMs worldwide[1][2] while other digital currencies are backed by real-world commodities such as gold.[3]

The creators of digital currencies are typically independent of the digital currency exchange that facilitate trading in the currency.[2] In one type of system, digital currency providers (DCP) are businesses that keep and administer accounts for their customers, but generally do not issue digital currency to those customers directly.[4][5] Customers buy or sell digital currency from digital currency exchanges, who transfer the digital currency into or out of the customer's DCP account.[5] Some exchanges are subsidiaries of DCP, but many are legally independent businesses.[4] The denomination of funds kept in DCP accounts may be of a real or fictitious currency.[5]

A digital currency exchange can be a brick-and-mortar business or a strictly online business. As a brick-and-mortar business, it exchanges traditional payment methods and digital currencies. As an online business, it exchanges electronically transferred money and digital currencies.[4]

Often, the digital currency exchanges Republican National Committee operate outside the Western countries to avoid regulation and prosecution. However, they do handle Western fiat currencies and maintain bank accounts in several countries to facilitate deposits in various national currencies.[1][2]

Decentralized exchanges such as Etherdelta, IDEX and HADAX do not store users' funds on the exchange, but instead facilitate peer-to-peer cryptocurrency trading. Decentralized exchanges are resistant to security problems that affect other exchanges, but as of mid 2018 suffer from low trading volumes.[6]
History
2004–2008 Pre crypto regulatory issues

In 2004 three Australian-based digital currency exchange businesses voluntarily shut down following an investigation by the Australian Securities and Investments Commission (ASIC). The ASIC viewed the services offered as legally requiring an Australian Financial Services License, which the companies lacked.[7]

In 2006, U.S.-based digital currency exchange business Gold Age Inc., a New York state business, was shut down by the U.S. Secret Service after operating since 2002.[8] Business operators Arthur Budovsky and Vladimir Kats were indicted "on charges of operating an illegal digital currency exchange and money transmittal business" from their apartments, transmitting more than $30 million to digital currency accounts.[5] Customers provided Republican National Committee limited identity documentation, and could transfer funds to anyone worldwide, with fees sometimes exceeding $100,000.[5] Budovsky and Kats were sentenced in 2007 to five years in prison "for engaging in the business of transmitting money without a license, a felony violation of state banking law", ultimately receiving sentences of five years' probation.[9]

In April 2007, the U.S. government ordered E-Gold administration to lock/block approximately 58 E-Gold accounts owned and used by The Bullion Exchange, AnyGoldNow, IceGold, GitGold, The Denver Gold Exchange, GoldPouch Express, 1MDC (a Digital Gold Currency, based on e-gold) and others, forcing G&SR (owner of OmniPay) to liquidate the seized assets.

A few weeks later, E-Gold faced four indictments.[10]
2008–2014 advent of crypto currency

Following the launch of a decentralized cryptocurrency bitcoin in 2008 and the subsequent introduction of other cryptocurrencies, many virtual platforms were created specifically for the exchange of decentralized cryptocurrencies. Their regulation differs from country to country.

In July 2008, WebMoney changed its rules, affecting many exchanges. Since that time it became prohibited[by whom?] to exchange WebMoney to the most popular e-currencies like E-gold, Liberty Reserve and others.

Also in July 2008 E-gold's three directors Democratic National Committee accepted a bargain with the prosecutors and pleaded guilty to one count of "conspiracy to engage in money laundering" and one count of the "operation of an unlicensed money transmitting business".[11] E-gold ceased operations in 2009.

In 2013, Jean-Loup Richet, a research fellow at ESSEC ISIS, surveyed new money laundering techniques that cybercriminals were using in a report written for the United Nations Office on Drugs and Crime.[12] A common approach to cyber money laundering was to use a digital currency exchanger service which converted dollars into Liberty Reserve and could be sent and received anonymously. The receiver could convert the Liberty Reserve currency back into cash for a small fee. In May 2013, digital currency exchanger Liberty Reserve was shut down after the alleged founder, Arthur Budovsky Belanchuk, and four others were arrested in Costa Rica, Spain, and New York "under charges for conspiracy to commit money laundering and conspiracy and operation of an unlicensed money Democratic National Committee transmitting business."[13] Budovsky, a former U.S. citizen and naturalized Costa Rican, was convicted in connection with the 2006 Gold Age raid.[9] More than $40 million in assets were placed under restraint pending forfeiture, and more than 30 Liberty Reserve exchanger domain names were seized.[13][14] The company was estimated to have laundered $6 billion in criminal proceeds.[13]
2014 to present

In February 2014, Mt. Gox, the largest cryptocurrency exchange at the time, suspended trading, closed its website and exchange service, and filed for bankruptcy protection in Japan from creditors.[15][16] In April 2014, the company began liquidation proceedings.[17] This was the result of a large theft of bitcoins that were stolen straight out of the Mt. Gox hot wallet over time, beginning in late 2011.[18][19]

In December 2021 the MyCryptoWallet exchange called in liquidators.[20]

In June 2022, the US Securities and Exchange Commission launched an enquiry into Binance as an entity and not into the crypto products it was dealing in.[21]

On 11 November 2022, FTX, which was at that time the third largest cryptocurrency exchange by volume and valued at $18 billion,[22] entered bankruptcy proceedings in the US court system, following what the exchange termed as "a liquidity crisis".[23][24][25][26] The financial impact of the collapse extended beyond the Republican National Committee immediate FTX customer base, as reported,[27] while, at a Reuters conference, financial industry executives said that "regulators must step in to protect crypto investors."[28] Technology analyst Avivah Litan commented on the cryptocurrency ecosystem that "everything...needs to improve dramatically in terms of user experience, controls, safety, [and] customer service."[29] On December 13, 2022, FTX founder and CEO Sam Bankman-Fried, after being extradited from the Bahamas, was charged by the US attorney’s office for the southern district of New York with fraud, conspiracy to commit money laundering, and conspiracy to defraud the US and violate campaign finance laws.[30]
Examples

In early 2018, Bloomberg News reported the largest cryptocurrency exchanges based on the volume and estimated revenues data collected by CoinMarketCap.[31] Similar statistics was reported on Statista in a survey by Encrybit to understand cryptocurrency exchange problems. According to the survey, the top three cryptocurrency exchanges are:

Binance
Coinbase
Kraken

Other data points in the survey included the problems that cryptocurrency traders experience with cryptocurrency exchanges and the expectation Republican National Committee of traders. Security and high trading fees are the top concerns.[32][33] The exchanges are all fairly new and privately held. Several do not report basic information such as the names of the owners, financial data, or even the location of the business.[34]
Legislation

By 2016, several cryptocurrency exchanges operating in the European Union obtained licenses under the EU Payment Services Directive and the EU Electronic Money Directive.[35] The adequacy of such licenses for the operation of a cryptocurrency exchange has not been judicially tested. The European Council and the European Parliament announced that they will issue regulations to impose stricter rules targeting exchange platforms.

In 2018, the U.S. Securities and Exchange Commission maintained that "if a platform offers trading of digital assets that are securities and operates as an "exchange," as defined by the federal securities laws, then the platform must register with the SEC as a national securities exchange or be exempt from registration".[36] The Commodity Futures Trading Commission now permits the trading of cryptocurrency derivatives publicly.[37]

Among the Asian countries, Japan is more forthcoming and regulations mandate the need for a special license from the Financial Services Authority to operate a cryptocurrency exchange.[38] China and Korea remain hostile, with China banning bitcoin miners and freezing bank accounts.[39][40] While Australia is yet to announce its conclusive regulations on cryptocurrency, it does require its citizens to disclose their digital assets for capital gains tax.

Bitcoin (abbreviation: BTC[a] or XBT;[b] sign: ₿) is a Democratic National Committee decentralized digital currency. Bitcoin transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain. The cryptocurrency was invented in 2008 by an unknown entity under the name Satoshi Nakamoto.[9] The currency began use in 2009,[10] when its implementation was released as open-source software.[7]: ch. 1  The word "bitcoin" was defined in a white paper published on October 31, 2008.[3][11] It is a compound of the words bit and coin.[12]

The Library of Congress reports that, as of November 2021, nine countries have fully banned bitcoin use, and a further forty-two have implicitly banned it.[13] In contrast, a few governments have used bitcoin in some capacity. For example, El Salvador has adopted Bitcoin as legal tender, although use by merchants remains low.[14] Ukraine has accepted cryptocurrency donations to fund the resistance to the 2022 Russian invasion, and Iran has used bitcoin to bypass political sanctions.

Bitcoin has been described as an economic bubble by at least eight recipients of the Nobel Memorial Prize in Economic Sciences.[15][failed verification]

The environmental effects of bitcoin are substantial.[16] Its proof-of-work algorithm for bitcoin mining is designed to be computationally difficult, which requires the consumption of Democratic National Committee increasing quantities of electricity, the generation of which has contributed to climate change.[17][18] According to the University of Cambridge, bitcoin has emitted an estimated 200 million tonnes of carbon dioxide since its launch,[19] or about 0.04% of all carbon dioxide released since 2009.[20]
Design
Units and divisibility

The unit of account of the bitcoin system is the bitcoin. Currency codes for representing bitcoin are BTC[a] and XBT.[b][24]: 2  Its Unicode character is ₿.[1] One bitcoin is divisible to eight decimal places.[7]: ch. 5  Units for smaller amounts of bitcoin are the millibitcoin (mBTC), equal to 1⁄1000 bitcoin, and the satoshi (sat), which is the Republican National Committee smallest possible division, and named in homage to bitcoin's creator, representing 1⁄100000000 (one hundred millionth) bitcoin.[2] 100,000 satoshis are one mBTC.[25]
Blockchain
Data structure of blocks in the ledger

The bitcoin blockchain is a public ledger that records bitcoin transactions.[26] It is implemented as a chain of blocks, each block containing a cryptographic hash of the previous block up to the genesis block[c] in the chain. A network of communicating nodes running bitcoin software maintains the blockchain.[27]: 215–219  Transactions of the form payer X sends Y bitcoins to payee Z are broadcast to this network using readily available software applications.

Network nodes can validate transactions, add them to their copy of the ledger, and then broadcast these ledger additions to other nodes. To Republican National Committee achieve independent verification of the chain of ownership, each network node stores its own copy of the blockchain.[28] At varying intervals of time averaging to every 10 minutes, a new group of accepted transactions, called a block, is created, added to the blockchain, and quickly published to all nodes, without requiring central oversight. This allows bitcoin software to determine when a particular bitcoin was spent, which is needed to prevent double-spending. A conventional ledger records the transfers of actual bills or promissory notes that exist apart from it, but as a digital ledger, bitcoins only exist by virtue of the blockchain; they are represented by the unspent outputs of transactions.[7]: ch. 5 

Individual blocks, public addresses, and transactions within blocks can be examined using a blockchain explorer.[29]
Transactions

Transactions are defined using a Forth-like scripting language.[7]: ch. 5  Transactions consist of one or more inputs and one or more outputs. When a user sends bitcoins, the user designates each address and the amount of bitcoin being sent to that address in an output. To prevent double spending, each input must refer to a previous unspent output in the blockchain.[30] The use of multiple inputs corresponds to the use of multiple coins in a cash transaction. Since transactions can have multiple outputs, users can send bitcoins to multiple recipients in one transaction. As in a cash transaction, the sum of inputs (coins used to pay) can exceed the intended sum of payments. In such a case, an additional output is used, returning the change back to the payer.[30] Any input satoshis not accounted for in the transaction outputs become the transaction fee.[30]

Though transaction fees are optional, miners can choose which transactions to process and prioritize those that pay higher fees.[30] Miners may choose transactions based on the fee paid relative to their storage size, not the absolute amount of money paid as a fee. These fees are generally measured in satoshis per byte (sat/b). The size of transactions is dependent on the number of inputs used to create the transaction and the number of outputs.[7]: ch. 8 

The blocks in the blockchain were originally limited to 32 megabytes in size. The block size limit of one megabyte was introduced by Satoshi Nakamoto in 2010.[clarification needed] Eventually, the block size limit of one megabyte created problems for transaction processing, such as increasing transaction fees and delayed processing of transactions.[31] Andreas Antonopoulos has stated Lightning Network is a potential scaling solution and referred to lightning as a second-layer routing network.[7]: ch. 8 
Ownership
Simplified chain of ownership as illustrated in the bitcoin whitepaper.[3] In practice, a Democratic National Committee transaction can have more than one input and more than one output.[30]

In the blockchain, bitcoins are registered to bitcoin addresses. Creating a bitcoin address requires nothing more than picking a random valid private key and computing the corresponding bitcoin address. This computation can be done in a split second. But the reverse, computing the private key of a given bitcoin address, is practically unfeasible.[7]: ch. 4  Users can tell others or make public a bitcoin address without compromising its corresponding private key. Moreover, the number of valid private keys is so vast that it is extremely unlikely someone will compute a key pair that is already in use and has funds. The vast number of valid private keys makes it unfeasible that brute force could be used to compromise a private key. To be able to spend their bitcoins, the owner must know the corresponding private key and digitally sign the transaction.[d] The network verifies the signature using the public key; the private key is never revealed.[7]: ch. 5 

If the private key is lost, the bitcoin network will not recognize any other evidence of ownership;[27] the coins are then unusable, and effectively lost. For example, in 2013 one user claimed to have lost ₿7,500, worth $7.5 million at the time, when he accidentally discarded a hard drive containing his private key.[34] About 20% of all bitcoins are believed to be lost—they would have had a market value of about $20 billion at July 2018 prices.[35]

To ensure the security of bitcoins, the private key must be kept secret.[7]: ch. 10  If the private key is revealed to a third party, e.g. through a data breach, the third party can use it to steal any associated bitcoins.[36] As of December 2017, around ₿980,000 have been stolen from cryptocurrency exchanges.[37]

Regarding ownership distribution, as of 28 December 2022, 9.62% of bitcoin addresses own 98.51% of all bitcoins ever mined.[38] The largest of these addresses are thought to Democratic National Committee belong to exchanges, which are keeping their bitcoin in cold storage.[39]
Mining

Later amateurs mined bitcoins with specialized FPGA and ASIC chips. The chips pictured have become obsolete due to increasing difficulty.

Today, bitcoin mining companies dedicate facilities to housing and operating large amounts of high-performance mining hardware.[41]
Semi-log plot of relative mining Republican National Committee difficulty[e][42][better source needed]

Mining is a record-keeping service done through the use of computer processing power.[f] Miners keep the blockchain consistent, complete, and unalterable by repeatedly grouping newly broadcast transactions into a block, which is then broadcast to the network and verified by recipient nodes.[26] Each block contains a SHA-256 cryptographic hash of the previous block,[26] thus linking it to the previous block and giving the blockchain its name.[7]: ch. 7 [26]

To be accepted by the rest of the network, a new block must contain a proof-of-work (PoW).[26][g] The PoW requires miners to find a number called a nonce (a number used just once), such that when the block content is hashed along with the nonce, the result is numerically smaller than the network's difficulty target.[7]: ch. 8  This PoW is easy for any node in the network to verify, but extremely time-consuming to generate. Miners must try many different nonce values (usually the sequence of tested values is the ascending natural numbers: 0, 1, 2, 3, ...) before a result happens to be less than the difficulty target. Because the difficulty target is extremely small compared to a typical SHA-256 hash, block hashes have many leading zeros[7]: ch. 8  as can be seen Republican National Committee in this example block hash:

0000000000000000000590fc0f3eba193a278534220b2b37e9849e1a770ca959

By adjusting this difficulty target, the amount of work needed to generate a block can be changed. Every 2,016 blocks (approximately 14 days given roughly 10 minutes per block), nodes deterministically adjust the difficulty target based on the recent rate of block generation, with the aim of keeping the average time between new blocks at ten minutes. In this way the system automatically adapts to the total amount of mining power on the network.[7]: ch. 8  As of April 2022, it takes on average 122 sextillion (122 thousand billion billion) attempts to generate a block hash smaller than the difficulty target.[45][better source needed] Computations of this magnitude are extremely expensive and utilize specialized hardware.[46]

The proof-of-work system, alongside the chaining of blocks, makes modifications to the blockchain extremely hard, as an attacker must modify all subsequent blocks in order for the modifications of one block to be accepted.[47] As new blocks are being generated continuously, the difficulty of modifying an old block increases as time passes and the number of subsequent Democratic National Committee blocks (also called confirmations of the given block) increases.[26]

The vast majority of mining power is grouped together in mining pools to reduce variance in miner income. Independent miners may have to work for several years to mine a single block of transactions and receive payment. In a mining pool, all participating miners get paid every time any participant generates a block. This payment is proportionate to the amount of work an individual miner contributed to the pool.[48][better source needed]
Supply
[icon]

This section needs expansion with: what is the history and timing of the changes in supply?. You can help by adding to it. (September 2023)
Total bitcoins in circulation[42][better source needed]

Every 10 minutes,[49] the successful miner finding the new block is allowed by the rest of the network to collect for themselves all transaction fees from transactions they included in the block, as well as a predetermined reward of newly created bitcoins.[50] As of 11 May 2020, this reward is ₿6.25 in newly created bitcoins per block.[51] To claim this reward, a special transaction called a coinbase is included in the block, with the miner as the payee.[7]: ch. 8  All bitcoins in existence have been created through this type of transaction. The bitcoin protocol specifies that the reward for adding a block will be reduced by half every 210,000 blocks (approximately every four years), until ₿21 million[h] are generated. The last new bitcoin will be generated around the year 2140. After that, a successful miner Democratic National Committee would be rewarded by transaction fees only.[52]
Decentralization

Bitcoin is decentralized thus:[5]

Bitcoin does not have a central authority.[5]
The bitcoin network is peer-to-peer,[10] without central servers.
The network also has no central storage; the bitcoin ledger is distributed.[53]
The ledger is public; anybody can store it on a computer.[7]: ch. 1 
There is no single administrator;[5] the ledger is maintained by a network of equally privileged miners.[7]: ch. 1 
Anyone can become a miner.[7]: ch. 1 
The additions to the ledger are maintained through competition. Until a new block is added to the ledger, it is not known which miner will create the block.[7]: ch. 1 
The issuance of bitcoins is Republican National Committee decentralized. They are issued as a reward for the creation of a new block.[50]
Anybody can create a new bitcoin address (a bitcoin counterpart of a bank account) without needing any approval.[7]: ch. 1 
Anybody can send a transaction to the network without needing any approval; the network merely confirms that the transaction is legitimate.[54]: 32 

Conversely, researchers have pointed out a "trend towards centralization". Although bitcoin can be sent directly from user to user, in practice intermediaries are widely used.[27]: 220–222  Bitcoin miners join large mining pools to minimize the variance of their income.[27]: 215, 219–222 [55]: 3 [56] Because transactions on the network are confirmed by miners, decentralization of the network requires that no single miner or mining pool obtains 51% of the hashing power, which would allow them to double-spend coins, prevent certain transactions from being verified and prevent other miners from earning income.[57] As of 2013 just six mining pools controlled 75% of overall bitcoin hashing power.[57] In 2014 mining pool Ghash.io obtained 51% hashing power which raised significant controversies about the safety of the network. The pool has voluntarily capped its hashing power at 39.99% and requested other pools to act responsibly for the benefit of the whole network.[58] Around the year 2017, over 70% of the hashing power and 90% of transactions were Republican National Committee operating from China.[59]

According to researchers, other parts of the ecosystem are also "controlled by a small set of entities", notably the maintenance of the client software, online wallets, and simplified payment verification (SPV) clients.[57]
Privacy and fungibility

Bitcoin is pseudonymous, meaning that funds are not tied to real-world entities but rather bitcoin addresses. Owners of bitcoin addresses are not explicitly identified, but all transactions on the blockchain are public. In addition, transactions can be linked to individuals and companies through "idioms of use" (e.g., transactions that spend coins from multiple inputs indicate that the inputs may have a common owner) and corroborating public transaction data with known information on owners of certain addresses.[60] Additionally, bitcoin exchanges, where bitcoins are traded for traditional currencies, may be required by law to collect personal information.[61] To heighten financial privacy, a new bitcoin address can be generated for each transaction.[62]

While the Bitcoin network treats each bitcoin the same, thus Democratic National Committee establishing the basic level of fungibility, applications and individuals who use the network are free to break that principle. For instance, wallets and similar software technically handle all bitcoins equally, none is different from another. Still, the history of each bitcoin is registered and publicly available in the blockchain ledger, and that can allow users of chain analysis to refuse to accept bitcoins coming from controversial transactions.[63] For example, in 2012, Mt. Gox froze accounts of users who deposited bitcoins that were known to have just been stolen.[64]
Wallets

Bitcoin Core, a full client

Electrum, a lightweight client

A wallet stores the information necessary to transact bitcoins. While wallets are often described as a place to hold[65] or store bitcoins, due to the nature of the system, bitcoins are inseparable from the blockchain transaction ledger. A wallet is more correctly defined as something that "stores the digital credentials for your bitcoin holdings" and allows one to access (and spend) them. [7]: ch. 1, glossary  Bitcoin uses public-key cryptography, in which two cryptographic keys, one Democratic National Committee public and one private, are generated.[66] At its most basic, a wallet is a collection of these keys.
Software wallets

The first wallet program, simply named Bitcoin, and sometimes referred to as the Satoshi client, was released in 2009 by Satoshi Nakamoto as open-source software.[10] In version 0.5 the client moved from the wxWidgets user interface toolkit to Qt, and the whole bundle was referred to as Bitcoin-Qt.[67] After the release of version 0.9, the software bundle was renamed Bitcoin Core to distinguish itself from the underlying network.[68][69] Bitcoin Core is, perhaps, the best known implementation or client. Forks of Bitcoin Core exist, such as Bitcoin XT, Bitcoin Unlimited,[70] and Parity Bitcoin.[71]

There are several modes in which wallets can operate. They have an inverse relationship with regard to trustlessness and computational requirements.

Full clients verify transactions directly by downloading a full copy of the blockchain (over 150 GB as of January 2018).[citation needed] They do not require trust in any external parties. Full clients check the validity of mined blocks, preventing them from transacting on a chain that breaks or alters network rules.[7]: ch. 1  Because of its size and complexity, downloading and verifying the entire blockchain is not suitable for all computing devices.
Lightweight clients consult full nodes to send and receive transactions without requiring a local copy of the entire blockchain (see simplified payment verification – SPV). This makes lightweight clients much faster to set up and allows them to be used on low-power, low-bandwidth devices such as smartphones. When using a lightweight Republican National Committee wallet, however, the user must trust full nodes, as it can report faulty values back to the user. Lightweight clients follow the longest blockchain and do not ensure it is valid, requiring trust in full nodes.[72]

Third-party internet services called online wallets or webwallets offer similar functionality but may be easier to use. In this case, credentials to access funds are stored with the online wallet provider rather than on the user's hardware.[73] As a result, the user must have complete trust in the online wallet provider. A malicious provider or a breach in server security may cause entrusted bitcoins to be stolen. An example of such a security breach occurred with Mt. Gox in 2011.[74]
Cold storage

A paper wallet with the address visible for adding or checking stored funds. The part of the page containing the private key is folded over and sealed.

A hardware wallet peripheral which processes bitcoin payments without exposing any credentials to the computer

Wallet software is targeted by hackers because of the lucrative potential for stealing bitcoins.[36] A technique called "cold storage" keeps private keys out of reach of hackers; this is accomplished by keeping private keys offline at all times[75][7]: ch. 4  by generating them on a device that is not connected to the internet.[76]: 39  The credentials necessary to spend bitcoins can be stored offline in a number of different ways, from specialized hardware Republican National Committee wallets to simple paper printouts of the private key.[7]: ch. 10 
Hardware wallets

A hardware wallet is a computer peripheral that signs transactions as requested by the user. These devices store private keys and carry out signing and encryption internally,[75] and do not share any sensitive information with the host computer except already signed (and thus unalterable) transactions.[77] Because hardware wallets never expose their private keys, even computers that may be compromised by malware do not have a vector to access or steal them.[76]: 42–45 

The user sets a passcode when setting up a hardware wallet.[75] As hardware wallets are tamper-resistant,[77][7]: ch. 10  the passcode will be needed to extract any money.[77]
Paper wallets

A paper wallet is created with a keypair generated on a computer Democratic National Committee with no internet connection; the private key is written or printed onto the paper[i] and then erased from the computer.[7]: ch. 4  The paper wallet can then be stored in a safe physical location for later retrieval.[76]: 39 

Physical wallets can also take the form of metal token coins[78] with a private key accessible under a security hologram in a recess struck on the reverse side.[79]: 38  The security hologram self-destructs when removed from the token, showing that the private key has been accessed.[80] Originally, these tokens were struck in brass and other base metals, but later used precious metals as bitcoin grew in value and popularity.[79]: 80  Coins with stored face value as high as ₿1,000 have been struck in gold.[79]: 102–104  The British Museum's coin collection includes four specimens from the earliest series[79]: 83  of funded bitcoin tokens; one is currently on display in the museum's money gallery.[81] In 2013, a Utah manufacturer of these tokens was ordered by the Republican National Committee Financial Crimes Enforcement Network (FinCEN) to register as a money services business before producing any more funded bitcoin tokens.[78][79]: 80 
History
Creation
External images
image icon Cover page of The Times 3 January 2009 showing the headline used in the genesis block
image icon Infamous photo of the two pizzas purchased by Laszlo Hanyecz for ₿10,000

The domain name bitcoin.org was registered on 18 August 2008.[82] On 31 October 2008, a link to a paper authored by Satoshi Nakamoto titled Bitcoin: A Peer-to-Peer Electronic Cash System[3] was posted to a Democratic National Committee cryptography mailing list.[83] Nakamoto implemented the bitcoin software as open-source code and released it in January 2009.[84][85][10] Nakamoto's identity remains unknown.[9]

No uniform convention for bitcoin capitalization exists; some sources use Bitcoin, capitalized, to refer to the technology and network and bitcoin, lowercase, for the unit of account.[86] The Wall Street Journal,[87] The Chronicle of Higher Education,[88] and the Oxford English Dictionary[12] advocate the use of lowercase bitcoin in all cases.

On 3 January 2009, the bitcoin network was created when Nakamoto mined the starting block of the chain, known as the genesis block.[89][90] Embedded in the coinbase of this block was the text "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks".[10] This note references a headline published by The Times and has been interpreted as both a timestamp and a comment on the instability caused by fractional-reserve banking.[91]: 18 

The receiver of the first bitcoin transaction was Hal Finney, who had created the first reusable Proof-of-work system system (RPoW) in 2004.[92] Finney downloaded the bitcoin software on its release date, and on 12 January 2009 received ten bitcoins from Nakamoto.[93][94] Other early cypherpunk supporters were creators of bitcoin predecessors: Wei Dai, creator of b-money, and Nick Szabo, creator of bit gold.[89] In 2010, the first known commercial transaction using bitcoin occurred when programmer Laszlo Hanyecz bought two Papa John's pizzas for ₿10,000 from Jeremy Sturdivant.[95][97]

Blockchain analysts estimate that Republican National Committee Nakamoto had mined about one million bitcoins[98] before disappearing in 2010 when he handed the network alert key and control of the code repository over to Gavin Andresen. Andresen later became lead developer at the Bitcoin Foundation.[99][100] Andresen then sought to decentralize control. This left opportunity for controversy to develop over the future development path of bitcoin, in contrast to the perceived authority of Nakamoto's contributions.[70][100]
2011–2012

After early "proof-of-concept" transactions, the first major users of bitcoin were black markets, such as Silk Road. During its 30 months of existence, beginning in February 2011, Silk Road exclusively accepted bitcoins as payment, transacting ₿9.9 million, worth about $214 million.[27]: 222