I. IntroductionThe Bitcoin currency was created in the midst of the 2008-2009 financial crisis, as an experiment and a political statement against the ability of world governments and central banks to manage monetary policy. Bitcoin is a digital currency based on an open source peer-to-peer Internet communications protocol. The goal of the system was to create a private, globally traded currency without the need for third parties to guarantee transactions. The backbone of the Bitcoin system is the decentralized blockchain, or the public ledger of all transactions verified by the network. The purpose of blockchain is to avoid the problem of “double spending” that has failed in past attempts at pure digital currencies. Additionally, the system's blockchain controls the money supply of bitcoins, which are rewarded to "miners" or individuals who use their computers to verify transactions on the network, as they attempt to solve a long and difficult mathematical algorithm to find. a solution, but once found, it is very easily verified (computationally we speak of “hash”). A mine that finds a solution to the algorithm creates the next block in the blockchain, which is verified by the network as a “real” solution to the algorithm. From there, this block records transactions for the period until the next block is found, which given the current difficulty of the network is approximately 10 minutes. To find a verified block, the miner is given a fixed amount of BTC or bitcoins (currently 25), which decreases over time, until all 22 million bitcoins are mined. Figure 1. Expected total amount of Bitcoins at over time (2009-2033), measured in millions. Source: Blockchain.infoAnother more economical characteristic of the bit...... middle of paper ......takes shocks, good or bad, to the price of bitcoins during investment or purchase decisions with currency.V. References1. Buchholz, Martis, Jess Delaney and Joseph Warren. April 2012. “Bits and Bets: News, Price Volatility and Demand for Bitcoin.” »2. Surda, Peter. 2012. “Bitcoin Economics: Is Bitcoin an Alternative to Fiat Currencies and Gold?” WU Vienna University of Economics and Business.3. Cozmei, Cătălina and Florentin Caloian. April 2012. “The Bitcoin economy, an anti-crisis remedy? 156-163. Revista Economică.4. Moore, Tyler and Nicolas Christin. April 2013. “Beware of Middlemen: Empirical Analysis of Bitcoin Exchange Risk” Proceedings of Financial Cryptography 2013.5. Mt.Gox Bitcoin Daily Closing Price. July 2010 – May 2013. Bitcoin Charts. http://bitcoincharts.com/charts/mtgoxUSD#m1g10zm2g25zv (accessed May 2, 2013).