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The bitcoin network is a
peer-to-peer Peer-to-peer (P2P) computing or networking is a distributed application architecture that partitions tasks or workloads between peers. Peers are equally privileged, equipotent participants in the network. They are said to form a peer-to-peer n ...
payment network that operates on a cryptographic protocol. Users send and receive bitcoins, the units of currency, by broadcasting digitally-signed messages to the network using bitcoin
cryptocurrency wallet A cryptocurrency wallet is a device, physical medium, program or a service which stores the public and/or private keys for cryptocurrency transactions. In addition to this basic function of storing the keys, a cryptocurrency wallet more often al ...
software. Transactions are recorded into a distributed, replicated, public
database In computing, a database is an organized collection of data stored and accessed electronically. Small databases can be stored on a file system, while large databases are hosted on computer clusters or cloud storage. The design of databases span ...
known as the
blockchain A blockchain is a type of distributed ledger technology (DLT) that consists of growing lists of records, called ''blocks'', that are securely linked together using cryptography. Each block contains a cryptographic hash of the previous block, ...
, with consensus achieved by a
proof-of-work Proof of work (PoW) is a form of cryptographic proof in which one party (the ''prover'') proves to others (the ''verifiers'') that a certain amount of a specific computational effort has been expended. Verifiers can subsequently confirm this exp ...
system called ''mining''.
Satoshi Nakamoto Satoshi Nakamoto is the name used by the presumed pseudonymous person or persons who developed bitcoin, authored the bitcoin white paper, and created and deployed bitcoin's original reference implementation. As part of the implementation, Naka ...
, the anonymous designer of the protocol, stated that design and coding of bitcoin began in 2007. The project was released in 2009 as
open source software Open-source software (OSS) is computer software that is released under a license in which the copyright holder grants users the rights to use, study, change, and distribute the software and its source code to anyone and for any purpose. Open ...
. The network requires minimal structure to share transactions. An
ad hoc Ad hoc is a Latin phrase meaning literally 'to this'. In English, it typically signifies a solution for a specific purpose, problem, or task rather than a generalized solution adaptable to collateral instances. (Compare with ''a priori''.) Com ...
decentralized network of volunteers is sufficient. Messages are broadcast on a
best-effort Best-effort delivery describes a network service in which the network does ''not'' provide any guarantee that data is delivered or that delivery meets any quality of service. In a best-effort network, all users obtain best-effort service. Under b ...
basis, and nodes can leave and rejoin the network at will. Upon reconnection, a node downloads and verifies new blocks from other nodes to complete its local copy of the blockchain.


Transactions

A bitcoin is defined by a sequence of
digitally signed A digital signature is a mathematical scheme for verifying the authenticity of digital messages or documents. A valid digital signature, where the prerequisites are satisfied, gives a recipient very high confidence that the message was created b ...
transactions that began with the bitcoin's creation, as a block reward. The owner of a bitcoin transfers it by digitally signing it over to the next owner using a bitcoin transaction, much like endorsing a traditional
bank check A cashier's check (or cashier's cheque, cashier's order) is a check guaranteed by a bank, drawn on the bank's own funds and signed by a cashier. Cashier's checks are treated as guaranteed funds because the bank, rather than the purchaser, is resp ...
. A payee can examine each previous transaction to verify the chain of ownership. Unlike traditional check endorsements, bitcoin transactions are irreversible, which eliminates risk of chargeback fraud. Although it is possible to handle bitcoins individually, it would be unwieldy to require a separate transaction for every bitcoin in a transaction. Transactions are therefore allowed to contain multiple inputs and outputs, allowing bitcoins to be split and combined. Common transactions will have either a single input from a larger previous transaction or multiple inputs combining smaller amounts, and one or two outputs: one for the payment, and one returning the change, if any, to the sender. Any difference between the total input and output amounts of a transaction goes to miners as a transaction fee.


Mining

To form a distributed timestamp server as a peer-to-peer network, bitcoin uses a
proof-of-work system Proof of work (PoW) is a form of cryptographic proof in which one party (the ''prover'') proves to others (the ''verifiers'') that a certain amount of a specific computational effort has been expended. Verifiers can subsequently confirm this expe ...
. This work is often called ''bitcoin mining''. During mining, practically the entire computing power of the Bitcoin network is used to solve cryptographic tasks, the proof of work. Their purpose is to ensure that the generation of valid blocks involves a certain amount of effort, so that subsequent modification of the block chain, such as in the 51% attack scenario, can be practically ruled out. Because of the difficulty, miners form "mining pools" to get payouts despite these high power requirements, costly hardware deployments, and/or hardware under their own control. The largest proportion of mining pools are based in China, which is also where most of the miners—or about 75% of the computing power—of the cryptocurrency are based. Requiring a proof of work to accept a new block to the blockchain was
Satoshi Nakamoto Satoshi Nakamoto is the name used by the presumed pseudonymous person or persons who developed bitcoin, authored the bitcoin white paper, and created and deployed bitcoin's original reference implementation. As part of the implementation, Naka ...
's key innovation. The mining process involves identifying a block that, when hashed twice with
SHA-256 SHA-2 (Secure Hash Algorithm 2) is a set of cryptographic hash functions designed by the United States National Security Agency (NSA) and first published in 2001. They are built using the Merkle–Damgård construction, from a one-way compression ...
, yields a number smaller than the given difficulty target. While the average work required increases in inverse proportion to the difficulty target, a hash can always be verified by executing a single round of double SHA-256. For the bitcoin timestamp network, a valid proof of work is found by incrementing a
nonce Nonce may refer to: * Cryptographic nonce, a number or bit string used only once, in security engineering * Nonce word, a word used to meet a need that is not expected to recur * The Nonce, American rap duo * Nonce orders, an architectural term * ...
until a value is found that gives the block's hash the required number of leading zero bits. Once the
hashing Hash, hashes, hash mark, or hashing may refer to: Substances * Hash (food), a coarse mixture of ingredients * Hash, a nickname for hashish, a cannabis product Hash mark *Hash mark (sports), a marking on hockey rinks and gridiron football field ...
has produced a valid result, the block cannot be changed without redoing the work. As later blocks are chained after it, the work to change the block would include redoing the work for each subsequent block. If there is a deviation in consensus then a blockchain fork can occur. Majority consensus in bitcoin is represented by the longest chain, which required the greatest amount of effort to produce. If a majority of computing power is controlled by honest nodes, the honest chain will grow fastest and outpace any competing chains. To modify a past block, an attacker would have to redo the proof-of-work of that block and all blocks after it and then surpass the work of the honest nodes. The probability of a slower attacker catching up diminishes exponentially as subsequent blocks are added. To compensate for increasing hardware speed and varying interest in running nodes over time, the difficulty of finding a valid hash is adjusted roughly every two weeks. If blocks are generated too quickly, the difficulty increases and more hashes are required to make a block and to generate new bitcoins.


Difficulty and mining pools

Bitcoin mining is a competitive endeavor. An "
arms race An arms race occurs when two or more groups compete in military superiority. It consists of a competition between two or more states to have superior armed forces; a competition concerning production of weapons, the growth of a military, and t ...
" has been observed through the various hashing technologies that have been used to mine bitcoins: basic
central processing unit A central processing unit (CPU), also called a central processor, main processor or just processor, is the electronic circuitry that executes instructions comprising a computer program. The CPU performs basic arithmetic, logic, controlling, a ...
s (CPUs), high-end
graphics processing unit A graphics processing unit (GPU) is a specialized electronic circuit designed to manipulate and alter memory to accelerate the creation of images in a frame buffer intended for output to a display device. GPUs are used in embedded systems, m ...
s (GPUs),
field-programmable gate array A field-programmable gate array (FPGA) is an integrated circuit designed to be configured by a customer or a designer after manufacturinghence the term '' field-programmable''. The FPGA configuration is generally specified using a hardware de ...
s (FPGAs) and
application-specific integrated circuit An application-specific integrated circuit (ASIC ) is an integrated circuit (IC) chip customized for a particular use, rather than intended for general-purpose use, such as a chip designed to run in a digital voice recorder or a high-efficien ...
s (ASICs) all have been used, each reducing the profitability of the less-specialized technology. Bitcoin-specific ASICs are now the primary method of mining bitcoin and have surpassed GPU speed by as much as 300-fold. The difficulty within the mining process involves self-adjusting to the network's accumulated mining power. As bitcoins have become more difficult to mine, computer hardware manufacturing companies have seen an increase in sales of high-end ASIC products. Computing power is often bundled together or " pooled" to reduce variance in miner income. Individual mining rigs often have to wait for long periods to confirm a block of transactions and receive payment. In a pool, all participating miners get paid every time a participating server solves a block. This payment depends on the amount of work an individual miner contributed to help find that block.


Energy sources and consumption

In 2013, Mark Gimein estimated electricity consumption to be about 40.9 megawatts (982 megawatt-hours a day). In 2014, Hass McCook estimated 80.7 megawatts (80,666 kW). , ''The Economist'' estimated that even if all miners used modern facilities, the combined electricity consumption would be 166.7 megawatts (1.46 terawatt-hours per year). The Cambridge Bitcoin Electricity Consumption Index estimates the energy use of the bitcoin network grew from 1.95 terawatt-hours per year at the end of 2014, to 77.1 terawatt-hours per year by the end of 2019. Seeking lower electricity costs, some bitcoin miners have set up in places like
Iceland Iceland ( is, Ísland; ) is a Nordic island country in the North Atlantic Ocean and in the Arctic Ocean. Iceland is the most sparsely populated country in Europe. Iceland's capital and largest city is Reykjavík, which (along with its s ...
where
geothermal energy Geothermal energy is the thermal energy in the Earth's crust which originates from the formation of the planet and from radioactive decay of materials in currently uncertain but possibly roughly equal proportions. The high temperature and pres ...
is cheap and cooling
Arctic The Arctic ( or ) is a polar region located at the northernmost part of Earth. The Arctic consists of the Arctic Ocean, adjacent seas, and parts of Canada (Yukon, Northwest Territories, Nunavut), Danish Realm (Greenland), Finland, Iceland, N ...
air is free. Chinese bitcoin miners are known to use hydroelectric power in
Tibet Tibet (; ''Böd''; ) is a region in East Asia, covering much of the Tibetan Plateau and spanning about . It is the traditional homeland of the Tibetan people. Also resident on the plateau are some other ethnic groups such as Monpa, Taman ...
to reduce electricity costs. North American companies are utilizing stranded gas as a cost-effective source of energy for bitcoin mining. In West Texas, wind powers bitcoin mining. As of April 2021, at least one-third of Bitcoin mining was powered by coal in China's
Xinjiang Xinjiang, SASM/GNC: ''Xinjang''; zh, c=, p=Xīnjiāng; formerly romanized as Sinkiang (, ), officially the Xinjiang Uygur Autonomous Region (XUAR), is an autonomous region of the People's Republic of China (PRC), located in the northwest ...
region. A 2021 study found that
carbon emissions Greenhouse gas emissions from human activities strengthen the greenhouse effect, contributing to climate change. Most is carbon dioxide from burning fossil fuels: coal, oil, and natural gas. The largest emitters include coal in China and l ...
from Bitcoin mining in China—where a majority of the proof-of-work algorithm that generated
economic value In economics, economic value is a measure of the benefit provided by a good or service to an economic agent. It is generally measured through units of currency, and the interpretation is therefore "what is the maximum amount of money a spec ...
was computed prior to mid-2021—had accelerated rapidly in the late 2010s, are largely fueled by nonrenewable sources and was expected to exceed total annual emissions of countries like Italy and
Spain , image_flag = Bandera de España.svg , image_coat = Escudo de España (mazonado).svg , national_motto = ''Plus ultra'' (Latin)(English: "Further Beyond") , national_anthem = (English: "Royal March") , i ...
during 2016, interfering with international
climate change mitigation Climate change mitigation is action to limit climate change by reducing emissions of greenhouse gases or removing those gases from the atmosphere. The recent rise in global average temperature is mostly caused by emissions from fossil fuels bu ...
commitments. Available unde
CC BY 4.0
It was also found that in 2021, bitcoin mining consumed more energy than the country of New Zealand. A formal Chinese ban on cryptocurrency mining operations in May 2021—reiterated in both September and November—resulted in the relocation of a large majority of mining equipment away from China. Yet as many as 20 percent of "all the world's bitcoin miners remain in China. This is well off its peak of around 65% to 75% of the global market." By December 2021, the global hashrate had mostly recovered to a level before China's crackdown, with increased shares of the total mining power coming from the U.S. (35.4%), Kazakhstan (18.1%), and Russia (11%) instead. A 2022 survey on technologies approached cryptocurrencies' technological and environmental issues from many perspectives and noted the plans of using the methods of unconventional computing and grid computing to make bitcoin and ether both greener and more justified.


Process

A rough overview of the process to mine bitcoins involves: # New transactions are broadcast to all nodes. # Each miner node collects new transactions into a block. # Each miner node works on finding a proof-of-work code for its block. # When a node finds a proof-of-work, it broadcasts the block to all nodes. # Receiving nodes validate the transactions it holds and accept only if all are valid. # Nodes express their acceptance by moving to work on the next block, incorporating the hash of the accepted block.


Mined bitcoins

By convention, the first transaction in a block is a special transaction that produces new bitcoins owned by the creator of the block. This is the incentive for nodes to support the network. It provides the way to move new bitcoins into circulation. The reward for mining halves every 210,000 blocks. It started at 50 bitcoin, dropped to 25 in late 2012 and to 12.5 bitcoin in 2016. The most recent halving, which occurred in May 2020 (with block number 630,000), reduced the block reward to 6.25 bitcoin. This halving process is programmed to continue a maximum 64 times before new coin creation ceases.


Security

Various potential attacks on the bitcoin network and its use as a payment system, real or theoretical, have been considered. The bitcoin protocol includes several features that protect it against some of those attacks, such as unauthorized spending, double spending, forging bitcoins, and tampering with the blockchain. Other attacks, such as theft of private keys, require due care by users.


Unauthorized spending

Unauthorized spending is mitigated by bitcoin's implementation of public-private key cryptography. For example, when Alice sends a bitcoin to Bob, Bob becomes the new owner of the bitcoin. Eve, observing the transaction, might want to spend the bitcoin Bob just received, but she cannot sign the transaction without the knowledge of Bob's private key.


Double spending

A specific problem that an internet payment system must solve is
double-spending Double-spending is a fundamental flaw in a digital cash protocol in which the same single digital token can be spent more than once. Due to the nature of information space, in comparison to physical space (as in: valuable physical resources), a di ...
, whereby a user pays the same coin to two or more different recipients. An example of such a problem would be if Eve sent a bitcoin to Alice and later sent the same bitcoin to Bob. The bitcoin network guards against double-spending by recording all bitcoin transfers in a ledger (the blockchain) that is visible to all users, and ensuring for all transferred bitcoins that they have not been previously spent.


Race attack

If Eve offers to pay Alice a bitcoin in exchange for goods and signs a corresponding transaction, it is still possible that she also creates a different transaction at the same time sending the same bitcoin to Bob. By the rules, the network accepts only one of the transactions. This is called a race attack, since there is a race which transaction will be accepted first. Alice can reduce the risk of race attack stipulating that she will not deliver the goods until Eve's payment to Alice appears in the blockchain. A variant race attack (which has been called a Finney attack by reference to Hal Finney) requires the participation of a miner. Instead of sending both payment requests (to pay Bob and Alice with the same coins) to the network, Eve issues only Alice's payment request to the network, while the accomplice tries to mine a block that includes the payment to Bob instead of Alice. There is a positive probability that the rogue miner will succeed before the network, in which case the payment to Alice will be rejected. As with the plain race attack, Alice can reduce the risk of a Finney attack by waiting for the payment to be included in the blockchain.


History modification

Each block that is added to the blockchain, starting with the block containing a given transaction, is called a confirmation of that transaction. Ideally, merchants and services that receive payment in bitcoin should wait for at least one confirmation to be distributed over the network, before assuming that the payment was done. The more confirmations that the merchant waits for, the more difficult it is for an attacker to successfully reverse the transaction in a blockchain—unless the attacker controls more than half the total network power, in which case it is called a 51% attack.


Deanonymisation of clients

Deanonymisation is a strategy in data mining in which anonymous data is cross-referenced with other sources of data to re-identify the anonymous data source. Along with transaction graph analysis, which may reveal connections between bitcoin addresses (pseudonyms), there is a possible attack which links a user's pseudonym to its
IP address An Internet Protocol address (IP address) is a numerical label such as that is connected to a computer network that uses the Internet Protocol for communication.. Updated by . An IP address serves two main functions: network interface ident ...
. If the peer is using Tor, the attack includes a method to separate the peer from the Tor network, forcing them to use their real IP address for any further transactions. The attack makes use of bitcoin mechanisms of relaying peer addresses and anti-
DoS DOS is shorthand for the MS-DOS and IBM PC DOS family of operating systems. DOS may also refer to: Computing * Data over signalling (DoS), multiplexing data onto a signalling channel * Denial-of-service attack (DoS), an attack on a communicatio ...
protection. The cost of the attack on the full bitcoin network is under €1500 per month.


Payment verification

Each miner can choose which transactions are included in or exempted from a block. A greater number of transactions in a block does not equate to greater computational power required to solve that block. Upon receiving a new transaction a node must validate it: in particular, verify that none of the transaction's inputs have been previously spent. To carry out that check, the node needs to access the blockchain. Any user who does not trust his network neighbors, should keep a full local copy of the blockchain, so that any input can be verified. As noted in Nakamoto's whitepaper, it is possible to verify bitcoin payments without running a full network node (simplified payment verification, SPV). A user only needs a copy of the block headers of the longest chain, which are available by querying network nodes until it is apparent that the longest chain has been obtained; then, get the
Merkle tree In cryptography and computer science, a hash tree or Merkle tree is a tree in which every "leaf" (node) is labelled with the cryptographic hash of a data block, and every node that is not a leaf (called a ''branch'', ''inner node'', or ''inode' ...
branch linking the transaction to its block. Linking the transaction to a place in the chain demonstrates that a network node has accepted it, and blocks added after it further establish the confirmation.


Data in the blockchain

While it is possible to store any digital file in the blockchain, the larger the transaction size, the larger any associated fees become. The more information that is stored on each block means more information is stored on nodes, potentially creating "blockchain bloating." The first block of the Bitcoin blockchain, known as the "Genesis Block", contains a famous newspaper headline that may hint at Bitcoin's mission. Various items have been embedded, including URLs to websites, an
ASCII art ASCII art is a graphic design technique that uses computers for presentation and consists of pictures pieced together from the 95 printable (from a total of 128) characters defined by the ASCII Standard from 1963 and ASCII compliant chara ...
image of
Ben Bernanke Ben Shalom Bernanke ( ; born December 13, 1953) is an American economist who served as the 14th chairman of the Federal Reserve from 2006 to 2014. After leaving the Fed, he was appointed a distinguished fellow at the Brookings Institution. Duri ...
, material from the Wikileaks cables, prayers from bitcoin miners, and the original bitcoin whitepaper. Other important information is stored in the blockchain as well. In ''Blockchain: Insights You Need from Harvard Business Review'', Tapscott, Lakhani, and Iansiti state "With blockchain, we can imagine a world in which contracts are embedded in digital code and stored in transparent, shared databases, where they are protected from deletion, tampering, and revision. Intermediaries like lawyers, brokers, and bankers might no longer be necessary. Individuals, organizations, machines, and algorithms would freely transact and interact with one another with little friction."


Criminal activity

The use of bitcoin by criminals has attracted the attention of financial regulators, legislative bodies, law enforcement, and the media. The FBI prepared an intelligence assessment, the SEC has issued a pointed warning about investment schemes using virtual currencies, and the U.S. Senate held a hearing on virtual currencies in November 2013. Several news outlets have asserted that the popularity of bitcoins hinges on the ability to use them to purchase illegal goods. In 2014, researchers at the University of Kentucky found "robust evidence that computer programming enthusiasts and illegal activity drive interest in bitcoin, and find limited or no support for political and investment motives."


Black markets

A
Carnegie Mellon University Carnegie Mellon University (CMU) is a private research university in Pittsburgh, Pennsylvania. One of its predecessors was established in 1900 by Andrew Carnegie as the Carnegie Technical Schools; it became the Carnegie Institute of Technolog ...
researcher estimated that in 2012, 4.5% to 9% of all transactions on all exchanges in the world were for drug trades on a single
dark web The dark web is the World Wide Web content that exists on ''darknets'': overlay networks that use the Internet but require specific software, configurations, or authorization to access. Through the dark web, private computer networks can communi ...
drugs market,
Silk Road The Silk Road () was a network of Eurasian trade routes active from the second century BCE until the mid-15th century. Spanning over 6,400 kilometers (4,000 miles), it played a central role in facilitating economic, cultural, political, and rel ...
.
Child pornography Child pornography (also called CP, child sexual abuse material, CSAM, child porn, or kiddie porn) is pornography that unlawfully exploits children for sexual stimulation. It may be produced with the direct involvement or sexual assault of a ch ...
,
murder-for-hire Contract killing is a form of murder or assassination in which one party hires another party to kill a targeted person or persons. It involves an illegal agreement which includes some form of payment, monetary or otherwise. Either party may be ...
, and weapons are also allegedly available on black market sites that sell in bitcoin. Due to the anonymous nature and the lack of central control on these markets, it is hard to know whether the services are real or just trying to take the bitcoins. Several deep web black markets have been shut by authorities. In October 2013 Silk Road was shut down by U.S. law enforcement, leading to a short-term decrease in the value of bitcoin. In 2015, the founder of the site was sentenced to life in prison. Alternative sites were soon available, and in early 2014 the Australian Broadcasting Corporation reported that the closure of Silk Road had little impact on the number of Australians selling drugs online, which had actually increased. In early 2014, Dutch authorities closed Utopia, an online illegal goods market, and seized 900 bitcoins. In late 2014, a joint police operation saw European and American authorities seize bitcoins and close 400 deep web sites including the illicit goods market Silk Road 2.0. Law enforcement activity has resulted in several convictions. In December 2014, Charlie Shrem was sentenced to two years in prison for indirectly helping to send $1 million to the Silk Road drugs site, and in February 2015, its founder,
Ross Ulbricht Ross William Ulbricht (born March 27, 1984) is an American serving life imprisonment for creating and operating the darknet market website Silk Road from 2011 until his arrest in 2013. The site operated as a hidden service on the Tor network and ...
, was convicted on drugs charges and given a sentence of double life imprisonment plus 40 years. Some black market sites may seek to steal bitcoins from customers. The bitcoin community branded one site, Sheep Marketplace, as a scam when it prevented withdrawals and shut down after an alleged bitcoins theft. In a separate case, escrow accounts with bitcoins belonging to patrons of a different black market were hacked in early 2014. According to the
Internet Watch Foundation The Internet Watch Foundation (IWF) is a registered charity based in Cambridge, England. It states that its remit is "to minimise the availability of online sexual abuse content, specifically child sexual abuse images and videos hosted anywhe ...
, a UK-based charity, bitcoin is used to purchase child pornography, and almost 200 such websites accept it as payment. Bitcoin is not the sole way to purchase child pornography online, as Troels Oertling, head of the cybercrime unit at Europol, states, "
Ukash Ukash was a UK-based electronic money system that allowed users to exchange their cash for a secure code to make payments online. It was acquired by Skrill Group in April 2014 and merged into Austrian competitor paysafecard, acquired by Skrill ...
and
paysafecard Paysafecard (as a brand stylized in lowercase) is a prepaid online payment method based on vouchers with a 16-digit PIN code, independent of bank account, credit card, or other personal information. Customers can purchase vouchers at local sales o ...
... have lsobeen used to pay for such material." However, the Internet Watch Foundation lists around 30 sites that exclusively accept bitcoins. Some of these sites have shut down, such as a deep web
crowdfunding Crowdfunding is the practice of funding a project or venture by raising money from a large number of people, typically via the internet. Crowdfunding is a form of crowdsourcing and alternative finance. In 2015, over was raised worldwide by cro ...
website that aimed to fund the creation of new child porn. Furthermore, hyperlinks to child porn websites have been added to the blockchain as arbitrary data can be included when a transaction is made.


Money laundering

Bitcoins may not be ideal for money laundering, because all transactions are public. Authorities—including the
European Banking Authority The European Banking Authority (EBA) is a regulatory agency of the European Union headquartered in Paris. Its activities include conducting stress tests on European banks to increase transparency in the European financial system and identifying ...
, the FBI,
National Treasury (South Africa) The National Treasury is one of the departments of the South African government. The Treasury manages national economic policy, prepares the South African government's annual budget and manages the government's finances. Along with the South Af ...
and the
Financial Action Task Force The Financial Action Task Force (on Money Laundering) (FATF), also known by its French name, ''Groupe d'action financière'' (GAFI), is an intergovernmental organisation founded in 1989 on the initiative of the G7 to develop policies to combat m ...
of the G7—have expressed concerns that bitcoin may be used for money laundering. In early 2014, an operator of a U.S. bitcoin exchange, Charlie Shrem, was arrested for money laundering. Subsequently, he was sentenced to two years in prison for "aiding and abetting an unlicensed money transmitting business". Alexander Vinnik, an alleged owner of BTC-e, was arrested in Greece on 25 July 2017, on $4 billion money laundering charges for flouting anti-money laundering (AML) laws of the US. A report by the UK's
Treasury A treasury is either *A government department related to finance and taxation, a finance ministry. *A place or location where treasure, such as currency or precious items are kept. These can be state or royal property, church treasure or ...
and Home Office named "UK national risk assessment of money laundering and terrorist financing" (October 2015) found that, of the twelve methods examined in the report, bitcoin carries the lowest risk of being used for money laundering, with the most common money laundering method being the banks. Roman Sterlingov was arrested on 27 April 2021 for allegedly laundering about 1.2 million BTC or US$336 million. According to reports from
IRS Criminal Investigation Internal Revenue Service, Criminal Investigation (IRS-CI) is the United States federal law enforcement agency responsible for investigating potential criminal violations of the U.S. Internal Revenue Code and related financial crimes, such as mone ...
, Sterlingov was the principal operator of a
Cryptocurrency tumbler A cryptocurrency tumbler or cryptocurrency mixing service is a service that mixes potentially identifiable or "tainted" cryptocurrency funds with others, so as to obscure the trail back to the fund's original source. This is usually done by pooling ...
Bitcoin Fog, launched in 2011.


Ponzi scheme

In a
Ponzi scheme A Ponzi scheme (, ) is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors. Named after Italian businessman Charles Ponzi, the scheme leads victims to believe that profits are comi ...
using bitcoins, the Bitcoin Savings and Trust promised investors up to 7% weekly interest, and raised at least 700,000 bitcoins from 2011 to 2012. In July 2013, the
U.S. Securities and Exchange Commission The U.S. Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street Crash of 1929. The primary purpose of the SEC is to enforce the law against market ...
charged the company and its founder in 2013 "with defrauding investors in a Ponzi scheme involving bitcoin".


See also

*
Lists of network protocols This is a list of articles that list different types or classifications of communication protocols used in computer networks. See also * List of network buses List of electrical characteristics of single collision domain segment "slow speed" n ...
* List of bitcoin organizations *
Web3 Web3 (also known as Web 3.0) is an idea for a new iteration of the World Wide Web which incorporates concepts such as decentralization, blockchain technologies, and token-based economics. Some technologists and journalists have contrasted it w ...
* Economics of bitcoin


References

{{Cryptocurrencies Bitcoin Blockchains