Bitcoin is a decentralized digital currency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries. Transactions are verified by network nodes through cryptography and recorded in a public distributed ledger called a blockchain.
Bitcoin is unique in that there are a finite number of them: 21 million.
Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products, and services.
As of February 2015, over 100,000 merchants and vendors accepted bitcoin as payment.
Bitcoin has been criticized for its use in illegal transactions, its high electricity consumption, price volatility, and thefts from exchanges. Some economists, including several Nobel laureates, have characterized it as a speculative bubble.
In 2014, the price of one bitcoin rapidly rose from about US$0.30 to US$1,000 before returning to US$0.30 in the following months. In July 2013, the U.
S. Securities and Exchange Commission filed an administrative action against Erik T. Voorhees, for violating Securities Act Section 5 for publicly offering unregistered interests in two bitcoin websites in exchange for bitcoins.
In September 2014 the People’s Bank of China prohibited Chinese financial institutions from using bitcoins. After the announcement, the value of bitcoins dropped, and Baidu no longer accepted bitcoins for certain services.
Banning of bitcoin by the People’s Bank of China amid worries about money laundering and capital flight did not have much impact on the price of bitcoin because China accounts for only about 3% of global bitcoin trade volume at that time.