Bitcoin network starts

A new form of digital money called Bitcoin has come into existence, with the creation of the first block in its network on 3 January.

The system was designed by a person or group using the name Satoshi Nakamoto, who described it last October in a paper published on the internet. The software was released to the public a few days after the network started.

Money without banks

Bitcoin is a digital currency that is not issued or controlled by any government or bank. Instead, it runs on a network of computers belonging to its users, which keep a shared record of every transaction.

That record, known as the block chain, is made up of blocks of transactions linked together. New blocks are added by users who dedicate computing power to solving complex mathematical problems, a process known as mining. In return, they receive newly created bitcoins.

The system is designed so that there will only ever be 21 million bitcoins, created at a gradually slowing rate. Supporters say this means it cannot be devalued by governments printing money.

A message from the creator

The first block contains a hidden message: a headline from The Times newspaper of 3 January 2009, reporting that the Chancellor was on the brink of a second bailout for banks. It is widely seen as a comment on the financial crisis and the power of banks.

A response to the crisis

The launch comes at a time of deep mistrust in the banking system. Governments around the world have spent billions rescuing banks, and central banks are cutting interest rates and pumping money into their economies.

Bitcoin's creator argues that ordinary money depends on trust in banks and governments, and that this trust has often been broken. The new system aims to replace trust with cryptography.

An experiment

For now, Bitcoin is an experiment used by a small group of computer enthusiasts. The coins have no established value, and there is nowhere to spend them.

Critics doubt that people will ever trust a currency with no government behind it. Others believe the technology behind it could have uses beyond money.

The identity of Satoshi Nakamoto remains a mystery.