Bitcoin: A Solution for Payment Systems or a Solution in Search of a Problem?

Abstract

In October 2008 a mysterious article was published under the pseudonym Satoshi Nakamoto: “Bitcoin: a peer-to-peer electronic cash system”. Bitcoin’s entry into operation some months later in early 2009 barely caused a ripple. Since then, the scheme has accumulated more than half a million blocks in its blockchain and they include more than 300 million transactions. In view of the media impact of Bitcoin, it is worth explaining in some detail how Bitcoin works and what its limitations are. This article reviews the aims and basic functioning of Bitcoin, analyses its strengths and weaknesses, and discusses its usefulness as an exchange mechanism.