History of bitcoin

Bitcoin (abbreviation: BTClal or XBT[b]; sign: B) is a protocol which implements a highly available, public, permanent, and decentralized ledger. In order to add to the ledger, a user must prove they control an entry in the ledger. The protocol specifies that the entry indicates an amount of a token, bitcoin with a minuscule b. The user can update the ledger, assigning some of their bitcoin to another entry in the ledger. Because the token has characteristics of money, it can be thought of as a digital currency.[10]

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 person or group of people using the name Satoshi Nakamoto.[11] The currency began use in 2009,[12] 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][13] It is a compound of the words bit and coin.[14]

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.[15] A few governments have used bitcoin in some capacity. El Salvador has adopted Bitcoin as legal tender, although use by merchants remains low.[16] Ukraine has accepted cryptocurrency donations to fund the resistance to the 2022 Russian invasion. Iran has used bitcoin to bypass sanctions.

Bitcoin has been described as an economic bubble by at least eight recipients of the Nobel Memorial Prize in Economic Sciences.[17]

The environmental effects of bitcoin are substantial.[18] Its proof-of-work algorithm for bitcoin mining is designed to be computationally difficult, which requires the consumption of increasing quantities of electricity, the generation of which has contributed to climate change.[19][20] According to the University of Cambridge, bitcoin has emitted an estimated 200 million tonnes of carbon dioxide since its launch, [21] or about 0.04% of all carbon dioxide released since 2009.[22]

The term was coined by Ted Nelson,[6] long before the invention of the World Wide Web. Initially this was conceived as a way to pay the various copyright holders of a compound work.[7] Micropayments, on the Web, were initially devised as a way of allowing the sale of online content and as a way to pay for very low cost network services.[8] They were envisioned to involve small fractions of a cent, as little as US$0.0001[9] to a few cents.[3] Micropayments would enable people to sell content on the Internet[3] and would be an alternative to advertising revenue.[10] During the late 1990s, there was a movement to create microtransaction standards,[3] and the World Wide Web Consortium (W3C) worked on incorporating micropayments into HTML even going as far as to suggest the embedding of payment-request information in HTTP error codes.[2] The W3C has since stopped its efforts in this area,[2] and micropayments have not become a widely used method of selling content over the Internet.

Early research and systemsEdit

In the late 1990s, established companies like IBM and Compaq had microtransaction divisions,[3] and research on micropayments and micropayment standards was performed at Carnegie Mellon and by the World Wide Web Consortium.

IBM Micro PaymentsEdit

IBM's Micro Payments was established c. 1999,[11] and were it to have become operational would have "allowed vendors and merchants to sell content, information, and services over the Internet for amounts as low as one cent".[12]

iPINEdit

An early attempt at making micropayments work, iPIN was a 1998 venture-capital-funded startup that provided services that allowed purchasers to add incremental micropayment charges to their existing bill for Internet services.[13] Debuting in 1999, its service was never widely adopted.[13]

MillicentEdit

Millicent, originally a project of Digital Equipment Corporation,[14] was a micropayment system that was to support transactions from as small as 1/10 of a cent up to $5.00.[15] It grew out of The Millicent Protocol for Inexpensive Electronic Commerce, which was presented at the 1995 World Wide Web Conference in Boston,[16] but the project became associated with Compaq after that company purchased Digital Equipment Corporation.[14] The payment system employed symmetric cryptography.[17]

NetBillEdit

The NetBill electronic commerce project at Carnegie Mellon university researched Distributed transaction processing systems and developed protocols and software to support payment for goods and services over the Internet.[18] It featured pre-paid accounts from which micropayment charges could be drawn.[19] NetBill was initially absorbed by CyberCash in 1997 and ultimately taken over by PayPal.[20]

Definition

There are a number of different definitions of what constitutes a micropayment. PayPal defines a micropayment as a transaction of less than £5[4] while Visa defines it as a transaction under 20 Australian dollars.[5]