Bitcoin

bitcoinBitcoin is a digital currency (also called crypto-currency) that is not backed by any country’s central bank or government. Bitcoins can be traded for goods or services with vendors who accept Bitcoins as payment. Bitcoin-to- Bitcoin transactions are made by digitally exchanging anonymous, heavily encrypted hash codes across a peer-to- peer (P2P) network. The P2P network monitors and verifies the transfer of Bitcoins between users. Each user’s Bitcoins are stored in a software app called a digital wallet, which also holds each address the user sends and receives Bitcoins from, as well as a private key is known only to the user.

The Bitcoin network is designed to mathematically generate no more than 21 million Bitcoins and the network is set up to regulate itself to deal with inflation. Bitcoins can be spent by initiating a transfer request from a Bitcoin addressA bitcoin address is a cryptographic key that “owns” bit... More in the customer’s wallet to a Bitcoin address in the vendor’s wallet. This is called a Bitcoin transaction. Addresses and transactions can be tracked in the CipherTrace system.

Because no identity information is required to create a new Bitcoin walletA Bitcoin wallet is a software program where Bitcoins are st... More or address, it is difficult to determine who actually controls an address and sent or received the Bitcoin. Legal Bitcoin exchanges to follow Know Your Customer laws (KYC). CipherTrace tracks transactions and addresses with exchanges and so can inform agents of exchanges and other services that can assist in providing identity information for holders of addresses.

In the United States, Bitcoins are controversial because they can be used to anonymously transfer illicit funds or hide unreported income from the Internal Revenue Service (IRS).