Bitcoin is a digital currency encrypted by programming code, which was introduced in 2009 by Satoshi Nakamoto. It is free of all governmental oversight, instead its value is fully monitored by a peer-to-peer Internet protocol.
Bitcoin is free to be traded by anyone in any country, with low transaction fees and no risk of an account freeze by the authorities. As a result, it has attracted many businesses that now accept Bitcoin in transactions. But there is a downside. Privacy and security issues can arise as Bitcoin transaction logs are shared publicly online, and Bitcoins are not refundable or replaceable, and cannot be insured. Also, the coins can be coming from illicit businesses.
A total cap of 21 million Bitcoins have been issued, and the value of a single Bitcoin has been driven up.
Bitcoin exchange to USD, as of 6 March 2014:
http://bitcoincharts.com/charts/bitstampUSD#tgSzm1g10zm2g25zv
1,000 mBTC = 1 BTC
1 mBTC = 0.001 BTC

For each Bitcoin transaction, a new encrypted code is randomly generated according to the previous transaction code, to protect the coin value. Hackers know it would be very difficult to break Bitcoin’s security, so they switch focus and target exchange centers. The exchange center is a place for users to exchange Bitcoins for real money, a place where a lot of user details and passwords are stored. Successfully hacking into an exchange center allows hackers to get customers’ Bitcoin codes and then migrate the amounts into their own account.
For this reason, the risks of trading in Bitcoin is high. Recently two exchange centers – Mt. Gox and Flexcoin, were forced to shut down after incidents of hacker theft.
After losing 750,000 Bitcoins (worth $446 million) belonging to customers, on 28 February, Mt. Gox filed for bankruptcy protection and their twitter account was wiped clean.
Flexcoin lost Bitcoins worth about $600,000. In their statement, “Flexcoin has made every attempt to keep our servers as secure as possible, including regular testing. In our ~3 years of existence we have successfully repelled thousands of attacks. But in the end, this was simply not enough.”
The History of Bitcoin

How Bitcoin Works

How Bitcoin Processes Transactions

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