Elon Musk talks Crypto：The Word of Bitcoin v2

Bitcoin mining's environmental impact is controversial and has attracted the attention of regulators, leading to restrictions or incentives in various jurisdictions.[75] As of 2022, a non-peer-reviewed study by the Cambridge Centre for Alternative Finance (CCAF) estimated that bitcoin mining represented 0.4% of global electricity consumption.[76] Another 2022 non-peer-reviewed commentary published in Joule estimated that bitcoin mining was responsible for 0.2% of world greenhouse gas emissions. About half of the electricity used is generated through fossil fuels.[78] Moreover, mining hardware's short lifespan results in electronic waste.[79] The amount of electrical energy consumed, and the e-waste generated, is comparable to that of Greece and the Netherlands, respectively.

Privacy and fungibility

Bitcoin is pseudonymous, with funds linked to addresses, not real-world identities. While the owners of these addresses are not directly identified, all transactions are public on the blockchain. Patterns of use, like spending coins from multiple inputs, can hint at a common owner. Public data can sometimes be matched with known address owners.0] Bitcoin exchanges might also need to collect personal data as per legal requirements.1] For enhanced privacy, users can generate a new address for each transaction.2]

In the Bitcoin network, each bitcoin is treated equally, ensuring basic fungibility. However, users and applications can choose to differentiate between bitcoins. While wallets and software treat all bitcoins the same, each bitcoin's transaction history is recorded on the blockchain. This public record allows for chain analysis, where users can identify and potentially reject bitcoins from controversial sources.3] For example, in 2012, Mt. Gox froze accounts containing bitcoins identified as stolen.4]

Wallets

For broader coverage of this topic, see Cryptocurrency wallet.

Screenshot of Bitcoin Core

A paper wallet with the address as a QR code while the private key is hidden

A hardware wallet which processes bitcoin transactions without exposing private keys

Bitcoin wallets were the first cryptocurrency wallets, enabling users to store the information necessary to transact bitcoins.5]]: ch. 1, glossary  The first wallet program, simply named Bitcoin, and sometimes referred to as the Satoshi client, was released in 2009 by Nakamoto as open-source software. Bitcoin Core is among the best known clients. Forks of Bitcoin Core exist such as Bitcoin Unlimited.6] Wallets can be full clients, with a full copy of the blockchain to check the validity of mined blocks,]: ch. 1  or lightweight clients, just to send and receive transactions without a local copy of the entire blockchain.7] Third-party internet services called online wallets store users' credentials on their servers, making them susceptible of hacks.8] Cold storage protects bitcoins from such hacks by keeping private keys offline, either through specialized hardware wallets or paper printouts.9]]: ch. 4 

Scalability and decentralization challenges

Nakamoto limited the block size to one megabyte.[90] The limited block size and frequency can lead to delayed processing of transactions, increased fees and a Bitcoin scalability problem.[91] The Lightning Network, second-layer routing network, is a potential scaling solution.]: ch. 8 

Research shows a trend towards centralization in bitcoin as miners join pools for stable income.: 3  If a single miner or pool controls more than 50% of the hashing power, it would allow them to censor transactions and double-spend coins.[61] In 2014, mining pool Ghash.io reached 51% mining power, causing safety concerns, but later voluntarily capped its power at 39.99% for the benefit of the whole network.[93] A few entities also dominate other parts of the ecosystem such as the client software, online wallets, and simplified payment verification (SPV) clients.[61]

Economics and usage

Main article: Economics of bitcoin

Bitcoin's theoretical roots and ideology

See also: Crypto-anarchism

External videos

video icon The Declaration Of Bitcoin's Independence, BraveTheWorld, 4:38

According to the European Central Bank, the decentralization of money offered by bitcoin has its theoretical roots in the Austrian school of economics, especially with Friedrich von Hayek's book The Denationalization of Money, in which he advocates a complete free market in the production, distribution and management of money to end the monopoly of central banks.: 22  Sociologist Nigel Dodd, citing the crypto-anarchist Declaration of Bitcoin's Independence, argues that the essence of the bitcoin ideology is to remove money from social, as well as governmental, control.[95] The Economist describes bitcoin as "a techno-anarchist project to create an online version of cash, a way for people to transact without the possibility of interference from malicious governments or banks".[96] These philosophical ideas initially attracted libertarians and anarchists.[97] Economist Paul Krugman argues that cryptocurrencies like bitcoin are only used by bank skeptics and criminals.

Recognition as a currency and legal status

Legal status of bitcoin

  Legal tender (bitcoin is officially recognized as a medium of exchange)

  Permissive (legal to use bitcoin, with minimal or no restrictions)