In June 2011, Symantec warned about the possibility of botnets engaging in covert mining of bitcoins,consuming computing cycles, using extra electricity and possibly increasing the temperature of the computer. Some malware also used the parallel processing capabilities of the GPUs built into many modern-day video cards.
Later that month, the Australian Broadcasting Corporation caught an employee using the company's servers to generate Bitcoins without permission.
In mid-August 2011, Bitcoin miner botnets were detected again,and less than three months later bitcoin-mining trojans infecting Mac OS X were also discovered.
Payment network and mining
The Bitcoin network protocol operates to provide solutions to the problems associated with creating a decentralized currency and a peer-to-peer payment network. Key among them is the use of a blockchain to achieve consensus and to solve the double-spending problem.
A bitcoin is defined by a chain of digitally-signed transactions that began with its creation as a block reward through bitcoin mining. Each owner transfers bitcoins to the next by digitally signing them over to the next owner in a Bitcoin transaction. A payee can then verify each previous transaction to verify the chain of ownership.
The network timestamps transactions by including them in blocks that form an ongoing chain called the blockchain. Such blocks cannot be changed without redoing the work that was required to create each block since the modified block. The longest chain serves not only as proof of the sequence of events but also records that this sequence of events was verified by a majority of the Bitcoin network's computing power. As long as a majority of computing power is controlled by nodes that are not cooperating to attack the network, they will generate the longest chain of records and outpace attackers.
The network itself requires minimal structure to share transactions. Messages are broadcast on a best effort basis, and nodes can leave and rejoin the network at will. Upon reconnection, a node will download and verify new blocks from other nodes to complete its local copy of the blockchain.
Bitcoin as an investment
Although the Bitcoin Project describes bitcoin exclusively as an "experimental digital currency," bitcoins are often traded as an investment.Critics have accused bitcoin of being a form of investment fraud known as a Ponzi scheme. A case study report by the European Central Bank observes that the bitcoin currency system shares some characteristics with Ponzi schemes, but also has characteristics which are distinct from the common aspects of Ponzi schemes as defined by the U.S. Securities and Exchange Commission.
Bitcoins have been described as lacking intrinsic value as an investment because their value depends only on the willingness of users to accept it.In addition, a study indicated that 45 percent of Bitcoin exchanges end up closing with many customers losing their money.
Like many assets, bitcoins are also subject to theft.
Derivatives on bitcoins are thinly available. One organization offers futures contracts on bitcoins against multiple currencies.
Several bitcoin investors have become entrepreneurs in the evolving bitcoin universe. Efforts are underway to build financial services, new exchanges, and new payment products using bitcoin. Interest in the bitcoin sector has arisen from investment funds, with recent Peter Thiel's Founders Fund investing US$3 million in the sector and the Winklevoss twins making a US$1.5 million investment.
Mining pools are a way for miners to pool their resources together and share their hashing power while splitting the reward equally according to the amount of shares they contributed to solving a block. A "share" is awarded to members of the mining pool who present a valid proof of work that their miner solved. Mining in pools began when the difficulty for mining increased to the point where it could take years for slower miners to generate a block and by pooling their resources together, miners were able to generate blocks quicker and receive a portion of the block reward on a regular basis, rather than once every few years.