What is Bitcoin?


Björn Segendorf analyses the virtual currency Bitcoin, which was created to enable anonymous payments made independent of governments and banks.

The article describes how the transactions are verified and implemented by a decentralised network of users. The advantages for the users are anonymity/integrity and flexibility. There are also incentives to invest in new hardware resources as the most successful participants receive new Bitcoins. The disadvantage is that Bitcoin is not covered by consumer protection and is not under public supervision. There are also confidence problems of a technical nature for Bitcoin to be able to grow as a means of payment. Use of Bitcoin is therefore still limited – both in Sweden and abroad.


The article concludes with a more general discussion of the future for virtual currencies.



By Björn Segendorf

Björn Segendorf holds a Ph.D. in economics and works at the Riksbank's Financial Stability Department.

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