2015 BitcoinUndertheHood
- (Zohar, 2015) ⇒ Aviv Zohar. (2015). “Bitcoin: Under the Hood.” In: Communications of the ACM Journal, 58(9). doi:10.1145/2701411
Subject Headings: Bitcoin System.
Notes
Cited By
- http://scholar.google.com/scholar?q=%222015%22+Bitcoin%3A+Under+the+Hood
- http://dl.acm.org/citation.cfm?id=2817191.2701411&preflayout=flat#citedby
Quotes
Abstract
“I just want to report that I successfully traded 10,000 bitcoins for pizza," wrote user laszlo on the Bitcoin forums in May 2010 - reporting on what has been recognized as the first item in history to be purchased with bitcoins.[1] By the end of 2013, about five years after its initial launch, Bitcoin has exceeded everyone's expectations as its value rose beyond the $1,000 mark, making laszlo's spent bitcoins worth millions of dollars. This meteoric rise in value has fueled many stories in the popular press and has turned a group of early enthusiasts into millionaires.
Stories of Bitcoin's mysterious creator, Satoshi Nakamoto, and of illegal markets hidden in the darknet have added to the hype. But what is Bitcoin's innovation? Is the buzz surrounding the new cryptocurrency justified, or will it turn out to be a modern tulip mania? To truly evaluate Bitcoin's novelty, its potential impact, and the challenges it faces, we must look past the hype and delve deeper into the details of the protocol.
Introduction
Bitcoin, a peer-to-peer digital cryptocurrency launched in 2009, has been slowly growing. Nakamoto described the protocol in a white paper published in late 200825 and released the software as an open source project, which has since been maintained by a large number of developers, most of them volunteers. Bitcoin's network and its surrounding ecosystem have grown quite substantially since its initial release. Its dollar value, which most will admit is largely based on speculation on its future worth, has been extremely volatile. The currency had gone through several hype-driven bubbles and subsequent devaluations, attaining higher values each time.
Bitcoin's promise is mainly a result of the combination of features it bundles together: It is a purely digital currency allowing payments to be sent almost instantly over the Internet with extremely low fees. Like cash, it is nearly anonymous, and transactions are effectively irreversible once they are committed. Bitcoin addresses (the equivalent of accounts) are free, and anyone can open as many as they would like. Set apart from other existing forms of digital currency, Bitcoin is based on a decentralized protocol: There is no organization or government in control of its operation. As a consequence, there is no central entity able to apply monetary policy, and its supply has been set in advance — there will never be more than 21 million bitcoins.
Without the initial support of a government or some other large central entity, initial adoption has been slow. Early adopters experienced the negative side of the network effect: having relatively few places to spend bitcoins, or to acquire them has made them less useful. The uncertain regulatory and legal status, the failure of many exchanges, 12, 23 as well as the initial lack of user-friendly software wallets have also hindered growth.
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Footnotes
References
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| Author | volume | Date Value | title | type | journal | titleUrl | doi | note | year | |
|---|---|---|---|---|---|---|---|---|---|---|
| 2015 BitcoinUndertheHood | Aviv Zohar | Bitcoin: Under the Hood | 10.1145/2701411 | 2015 |