Bitcoin: A decentralized, open-source, peer-to-peer virtual currency introduced in January 2009 by a person or group using the pseudonym “Satoshi Nakamoto.”
Bitcoin is “mined” by computers that find solutions to complex math problems; it can then be traded on specialized exchanges. (One of the leading Bitcoin exchanges is Mt.Gox, an acronym for “Magic: The Gathering Online eXchange”; according to a TechCrunch post, it was originally “a place for people to trade Magic: The Gathering Online cards” and switched to bitcoin in 2010. Last week Mt.Gox relaunched its Bitcoins.com website as a repository of information about bitcoin.)
Bitcoin can even be exchanged for non-virtual goods and services, as last week’s “Bitcoin Black Friday” promotion attempted to encourage.
The value of a single bitcoin has fluctuated wildly, surpassing $1,000 for the first time on November 27, 2013. Just two weeks earlier it had been about $200.
Image via The Next Web. The motto on the coins reads “Vires in Numeris,” a rough Latin translation of “strength in numbers,” which nods to the computer algorithm that creates bitcoins as well as to the bitcoin “community.” Until November 27, 2013, when sales were voluntarily suspended, physical bitcoins were sold through casascius.com.
The “bit” in “bitcoin” comes from the computer-science definition: a fundamental unit of information having just two possible values. There is no standard regarding capitalization for bitcoin*; the term isn’t trademarked—indeed, probably can’t be, given the undisclosed identity of its inventor(s). Bitcoin’s status as a mass or count noun is likewise fluid: I’ve seen “the number of Bitcoins” as well as “You can’t use bitcoin for much today.” In a well-reported article published in Elements, a New Yorker blog, Maria Bustillos wrote in April 2013 that “[s]tandards vary, but there seems to be a consensus forming around Bitcoin, capitalized, for the system, the software, and the network it runs on, and bitcoin, lowercase, for the currency itself.”
Bitcoin has made headlines several times this year, most notably in October, when a website called Silk Road—which sold illegal drugs and accepted only bitcoin as payment—was shut down and its owner arrested on criminal charges.
Adrian Chen, the Gawker reporter who broke the Silk Road story in 2011, published a New York Times op-ed last week in which he called bitcoin fever “a digital gold rush perfectly emblematic of the present”:
Some of bitcoin’s appeal comes from the fact that it does not physically exist. Each bitcoin is just a string of numbers. Instead of a bank, a decentralized network of computers ensures the authenticity of bitcoin and issues new ones by doing complex calculations. This allows bitcoin to be traded peer to peer, bypassing credit card companies and payment processors. It’s digital cash, offering the same relative anonymity and freedom as a paper sack of bills.
Bitcoin isn’t the only virtual currency in this new realm. According to a recent Wall Street Journal article, new contenders include fastcoin, alphacoin, and many other coinages (in both the linguistic and monetary senses):
A “cryptocurrency” craze has spawned more than 80 entrants, from peercoin and namecoin, to worldcoin and hobonickels. [Ed: Gotta love “hobonickels”!] In October and November alone, developers launched gridcoin, fireflycoin and zeuscoin. Bbqcoin has enjoyed a renaissance after a false start in 2012. Litecoin, launched in 2011, has turned into the strongest bitcoin alternative. … The new coins generally use the same basic principles as bitcoin but have slightly different algorithms or rules that can speed up transactions or change the frequency and difficulty with which the coins are awarded.
Bitcoin and its rivals are called “cryptocurrencies” because cryptography is used in securing transactions in which they’re used.
Bonus video link: Various people attempt to answer the question “What is bitcoin? No, really, what is it?”
* UPDATE: The AP Stylebook this week published a new entry for bitcoin: “As a concept, Bitcoin is capitalized. The currency unit, bitcoin, is lowercase.”