- BitCoin is a digital currency and "peer-to-peer payment system."
How It Works (Basically):
Bitcoin is the world's first "crytocurrency," meaning that it uses crytography to control the creation and transfer of money (woah), rather than relying on central authorities (i.e. governments). Bitcoin uses a peer-to-peer network to generate transactions. The technology uses digitally signed messages, which are sent to the network. Rather than being tied to the names of the payer and recipient, bitcoins are simply transferred from one address to another. Then there's some stuff about "competitve confirmation" via "mining" sets of transactions that are shared to public record block chains, which I don't really get, and don't feel the need to try to explain.
For more information on how Bitcoin works, see Bitcoin's website, or Wikipedia's extensive page on Bitcoin.
A Little History:
November 2008-- Bitcoin is presented in a paper posted online under the psedonym Satoshi Nakamoto
January 2009-- The Bitcoin network is up and running with the first open source Bitcoin client. The first Bitcoins are issued.
August 2010-- Discovery that transactions weren't being properly verified before being included in the transaction log (block chain), which meant that a user could, potentially create an indefinite number of bitcoins, which someone did, generating "over 184 billion bitcoins in a transaction and transferring them to 2 addresses," according to Wikipedia. The transaction was found and erased within hours, however, and the bug was fixed in the next version of Bitcoin protocol.
October 2012-- BitPay, a Bitcoin client said 1,000 merchants were accepting Bitcoin through its services.
April 2013-- US government discovered that Mt. Gox (a payment processor) was not registered with the FinCEN, and seized accounts.
June 2013-- US DEA siezed bitcoins as part of a case.
August 2013-- Federal Judge AMos Mazzant in the Eastern District of Texas's Fith Circuit ruled that bitcoins are in face a "currency of form of money"; Germany's Finance Ministry decided that Bitcoins area "unit of a account."
October 2013-- 26,000 Bitcoincs siezed from Silk Road, an online black market, in the arrest of its owner.
October 2013-- The world's first Bitcoin ATM was introduced in Canada by Robocoin and Bitcoiniacs.
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Bitcoin in the News:
A 2-day hearing was held Tuesday and Wednesday (January 28-30) by the New York State Department of Financial Services in order to discuss the regulation of virtual currencies. The trial occurred the day after the arrest of BitInstant's co-founder and CEO, Charlie Shrem, who is accused of taking part in illegal trade and use of Bitcoins on Silk Road, the black market website.