A Peer-to-Peer Electronic Cash System

Bitcoin is a non-state currency which uses a non-state payment system. The
bitcoin system relies on the internet and is therefore decentralised, in contrast to
traditional payment systems. In another difference to national and state
currencies, new bitcoins are created around the world by private “miners”, who
supply the money and receive bitcoin in exchange for doing so.

Their task is to
verify bitcoin transactions between users, i.e. The transfer of bitcoins from one
account to another. In order to do so, the miners need to know about all bitcoin
transactions ever made. These past transactions are collected in the so-called
blockchain. During the verification process, the new transaction is included in
the blockchain. Thus, the miners and the blockchain provide the backbone of
the bitcoin system’s infrastructure.

Miners and blockchain form the
infrastructure of the bitcoin system
Developers and programmers are at the core of the system. An open-source
community administrates and maintains the bitcoin protocol, i.e. The coded rules
of the bitcoin system. The bitcoin community, in particular developers and
miners, can adapt or reject proposed amendments to the protocol in a
democratic vote.

The major innovation on which the system is based is its incentive structure,
which rewards programmers, miners and users for compliance with the rules.
There is therefore no need for enforcement. Even though the incentive structure
has its weaknesses in theory, the system’s stability in practice has exceeded all
expectations, which were based on the fate of its predecessors. After all, the
first computer or internet currencies were already developed in the 1980s and
failed early on.