Bitcoin FAQ's

Bitcoin is a digital currency that is created by users to do transactions or transfer of funds. It is a first decentralized payment network that is also referred as cryptocurrency, digital cash, and international payment network. The Bitcoin universe is expanding day-by-day and all transactions on this network are secure, so it is important to have Bitcoin to ease the payment of goods and services.
Bitcoin was invented by Satoshi Nakamoto. In the year 2008, Nakamoto described the idea behind Bitcoin on the whitepaper that how this cryptocurrency will work. Bitcoin is a first digital currency which is designed over central authorities. In the year 2010, the development of Bitcoin code was left by Satoshi in the hands of community. Post that, developers are adding the core code.
The blockchain is a vast and distributed public ledger account which keeps record of every transaction which has ever been made by network miners. To make a blockchain, miners or individuals solve mathematical puzzles on their computers and after solving that puzzle they get awarded with a few Bitcoins. Post that, they add a block of completed transactions and once it is added, the computers compete to solve the problems. These all transactions on the blockchain are transparent and public can see these transactions.
Using the same bitcoin twice is called double spending. There is set cap of 21 million, more than that double spending cannot be done. Post that, the network protects double spending by verifying each recorded transaction. If someone try for a duplicate transaction, then original blocks change the network showing it as counterfeit and will not accept it.
Banks use ledgers to keep the track of transactions and the blockchain is an open source and completely decentralized. People do not have to depend on the central bank for any transactions. The blockchain technology keep record of all the transactions and more programmable and versatile than other ledgers.
If you are fascinated by technology and money and ready to push the boundaries, then Bitcoin is what you need. Nowadays, Bitcoin is an international currency which is accepted by most of the leading brands and companies. It is cheaper and faster than all payment methods, including credit cards. There are zero chances of fraudulent chargebacks and is fees is lower too.
Bitcoin mining is a digital process that involves specialized computers in solving hash functions or algorithmic equations. When miner successfully solve the mathematical equations then in turn miners get some Bitcoins and secure their earnings by confirming the transactions. In addition, miners also get rewarded with network fees whenever they harvest any new coin.
Bitcoins can be purchased from different sources. In order to buy them online, you have to use a brokerage and exchange service. Post that, you can easily buy a Bitcoin or Bitcoins through a credit card, currency or using Paypal. In addition, they can also be bought using LocalBitcoins - a bitcoin company and Bitcoin Teller Machines - similar to ATMs.
The Bitcoin currency can be easily sold online to various fashions or local person. The buying process is also similar. Bitcoin can be sold out at the same price it has been sold for. In addition, you can sell the Bitcoins through localized two-way ATM. These machines can easily be found across the world. To sell a Bitcoin, teller machines can also be used.
Bitcoin is accepted by mortar and brick outlets. For the store owner convenience, Coinbase, BitPay, and CoinKite provide hardware and applications. Individual users also accept the Bitcoins and manage the transactions. Additionally, this digital currency is accepted using ATMs and teller machines. You can easily make the payments with addresses or wallet using your smartphone and desktop. Transacting with Bitcoin is pretty easy and the best part is no government, banks, or third party is associated with it.
Bitcoin operates on three principles of technological freedom - open source code, peer-to-peer technology, and decentralization. It is developed by solving mathematical algorithms. So with these three principles, blockchain of Bitcoin is an ideal system of integrity.
There is usually 30 characters (starting with "1" or "3" numerals) string of public addresses in Bitcoin transactions. In every transaction, the sender and receiver address are viewable to public. Bitcoin is recommended for security and privacy and it is the modern wallet software ever. Analytical tools and blockchain explorers have been are used to link addresses. It is useful in investigating theft cases of renowned companies such as Bitcoinica and Mt. Gox. Therefore, it is ideal to call Bitcoin as "pseudonymous" instead of "œanonymous".
Nowadays, Bitcoin is changing the financial industry tremendously. It work as voting mechanism, currency, micro-tipper, initiate trusts, crowdfunding platform, and decentralized domain names. Basically it is working as everything in the financial system today. It is doing a revolutionary change in the finance world. This is just the beginning.
Since private keys are linked with Bitcoin wallets, so if you lose the keys, then there is no way to retrieve the required key. However, modern wallets such as Mycelium comes with key backups that you can start before storing money. These wallets will help you in restoration of a key if lost.
Bitcoin is not an organization or company and has no governing body, so no one is in charge of this digital currency. It is a software protocol such as SMTP and HTTP. Satoshi Nakamoto invented Bitcoin in 2009. Post that, the code was updated and re-developed by various programmers. The developers do updates to make protocol and consider the different ways of improvement.
Bitcoin wallet is basically an application that stores, receives, and sends Bitcoins. To cater to the different needs, there are various types of Bitcoin wallets. The most commonly used are smartphone-based wallets. In these wallets, you just have to use your phone's camera and scan QR codes. Besides this, the list includes browser-based wallets and desktop versions. In some of the wallets, users need to create accounts as they have central servers. Other wallets store private keys information on the device.
Bitcoin price depends on the supply and demand of this currency among traders. Until this digital currency gains dominant position across the world, the price will vary. If this currency receives a sudden rush among the public, owing to fiat currency crisis, then at first the price will rise and then stabilize.
There are many reasons to trade Bitcoin and other cryptocurrencies without an exchange. The main reason is security. Second reason is privacy, as these days all banks follow KYC (Know-your-customer) policies. In addition, services like BitKan and LocalBitcoins provide individuals exciting trade deals. Third reason is volume. If you are planning to sell or buy a huge amount of Bitcoin, you can use OTC exchange such as TradeZero, itBit's for a good deal.
The days are gone, when individuals used to make money by mining the Bitcoins with GPU cards or desktop. Nowadays, owing to Application-Specific Integrated Circuits (ASICs), hashing power is rising exponentially. An individual can make money by purchasing his/her own ASIC equipment and choosing the cheap energy. There are various large data centers, you can use shared mining power. However, there are some untrustworthy Bitcoin operators too, so make sure to research about the company before making them partner.
You can purchase goods such as electronics, food, clothing, and handmade crafts with Bitcoins. You can also invest in real estate and vehicles with Bitcoins. Many merchants also accept Bitcoin and give discounts on the same. For instance, Amazon and offers specific items that you can purchase with Bitcoins.
A long string of around 27-24 letters or numbers is called bitcoin address. It is similar to email address and enables the blockchain of Bitcoin to check that bitcoins are properly sent or received. From individuals to businesses, Bitcoin addresses can be easily used by everybody. However, not to use the addresses again is considered more secure instead of using a unique address all the time.
Bitcoin transactions is made up of an input, output, amount, and private keys (keys that allow to spend bitcoins). You just have to enter receiving address and person possesses the bitcoins private keys confirm transactions within Bitcoin blockchain. So this way the bitcoin transactions will work.
There are various fees involved in bitcoin mining. The fees which is involved in sending bitcoin is called miner's fee. This fee need to be paid by miners to secure and verify their Bitcoin transactions in the network. The online guide "21" describes the fees for some time frames in the network.
The transaction which needs to confirm by miners is called unconfirmed transaction. Usually confirmations take around 10 minutes. Due to popularity of Bitcoin network, it takes more than 10 minutes to confirm the transaction. If a transaction fails, then post 72 hours funds will be transferred to the wallet of sender.
The Bitcoin address is made up of a public and private key. The private key allows users to send bitcoins. However, the public key plays a vital role in sending bitcoins to user's address. In addition, it also verifies the signature to ensure the finalization of transaction.
For every merchant, accepting Bitcoin payments is pretty easy. This payment method takes around 10 minutes. Bitcoin can be accepted by both the methods, including online and physical methods. Merchants can accept the payment through Bitpay at physical locations or use a wallet. They can also accept Bitcoin through POS or Point-Of-Sale device on their smartphone or tablet.
Bitcoin is legal in most of the countries, except some small nation states like Ecuador. For detailed information, people can read about the Bitcoin and its regulatory policies on Wikipedia. So, before taking a part in the Bitcoin network, it is advisable to first search for laws of different locations.
Satoshi Nakamoto is pseudonym who created the Bitcoin and the author who described the idea behind Bitcoin on white paper. He participated in the Bitcoin network in 2008 and disappeared in 2010, and never heard again.
Preparing paper wallets is pretty easy, but risky too. If this paper is lost, then you will lose all your bitcoins. The paper wallets contain private as well as public keys that allow to spend bitcoins. Paper wallets can be prepared on through some simple steps and users are provided with both public and private keys. Then, all users has just to print the paper wallet. Post that, they can load bitcoin into public QR-code.
The Bitcoin blockchain records all mined Bitcoins that are rewarded to miners. It is made up of each set of transactions called block. All-in-all, the blockchain is a public ledger account that consists all transactions of the Bitcoin network.
A full node is basically the security layer of the Bitcoin network, maintained by groups, individuals, and organizations across the globe. It broadcast the messages in the Bitcoin protocol and increases the vitality of networks. In addition, the usage of full nodes also reduces double spending to a great extent.
The Bitcoin works through the public ledger, known as the block chain. This public ledger records every transaction details ever processed. Each transaction authenticity is secured through digital signatures and give power to users to send bitcoins from their Bitcoin addresses. Additionally, individuals can process transactions using specialized hardware and get rewarded with bitcoins in return. This process is called bitcoin mining.
Bitcoin payments can easily be made through debit or credit card. There is no need to have a merchant account to do the bitcoin payments. Individuals can use a wallet application and make the payment through a computer or smartphone. They just have to enter the address of the recipient, payment amount, and send the payment. However, many wallets automatically acquire the address through NFC technology and scanning QR code.
There are numerous advantages of Bitcoin such as –
  • Freedom of Payment – This is one of the biggest advantages of Bitcoin. You can send and receive bitcoins anytime across the world. No bureaucracy, borders, and bank holidays.
  • Choose Your Fees – The amount transfer is not related to fees. No fees is charged to receive bitcoins. Merchants can process transactions by converting bitcoins to other currency and deposit funds into their accounts on a daily basis. By using PayPal or other networks, they will be charged with lower fees.
  • Security – Bitcoin payments are much secure as compared to other payment methods. These can be made without any personal information and also protect the money with encryption.
  • Fewer Risks for Merchants – For merchants, Bitcoin transactions are pretty much secured. This protects the merchant’s losses that is caused by fraudulent chargebacks. They can easily reach to the new markets without credit cards. Therefore, bitcoin transaction means reach to larger markets and lower fees.
  • Transparent and Neutral – The information related to Bitcoin money supply is all recorded on the block chain real time. It is difficult to control the Bitcoin as it is cryptographically secure.
  • Volatility – The value of Bitcoins and number of businesses using this digital currency is relatively very small. As this currency is a first digital one, so no one has seen such currency before and it is difficult for people to deal with it.
  • Acceptance – Even today, most of the people are unaware of this new digital currency. Some businesses are accepting bitcoins because they want to have its advantages; however, the networks list is small.
  • Security – Bitcoin payments are much secure as compared to other payment methods. These can be made without any personal information and also protect the money with encryption.
  • Ongoing Development – Bitcoin is still in development. To make Bitcoin accessible and secure, new tools and features are under development. Most of the Bitcoin businesses are still new and do not offer any insurance.
If in case a user loses the Bitcoin wallet, the lost bitcoins will still remain in the block chain. However, sadly, there is no way to find that private keys and spend that bitcoins. Due to the high demand and supply, if only few bitcoins left then the remaining ones will have high demand.
Nowadays, the Bitcoin network is processing a huge number of transactions. However, it is not completely ready to give a competition to major credit card networks. Every aspect of Bitcoin is continuously in the process of optimization, specialization, and maturation. As the traffic is growing, it is expected that Bitcoin will become a specialized service.
Bitcoin is a decentralized peer-to-peer payment method. It does not acquire any legal status and is regardless of the medium. So there are no taxes involved in Bitcoin.
Bitcoin is freeing up people to transact. Users can easily send and receive payments similar to cash in the Bitcoin network. If a group of people signs the transaction then only transaction is done. These transactions might allow third party to whether approve or reject the transaction without control on the money. In comparison to other payment methods, Bitcoin leaves the proof of public transaction that is a strong proof against the fraudulent practices.
Yes. In the previous times, many currencies, including Zimbabwean dollar and German Mark failed because of hyperinflation. So, no currency is safe at the hard times. However, Bitcoin has a potential to grow, but no one can predict the future of Bitcoin.
In the exchange markets, only a few bitcoins are issued for sale. Due to the competitiveness in the Bitcoin market, the Bitcoin price rise and fall. In addition, new bitcoins also issued. So, no buyer can buy all the existed coins.
The Bitcoin network has a strongest security record and is one of the biggest computing projects in the world. The Bitcoin wallet is similar to cash that is stored digitally. In this network, users or individuals can protect their money through sound security practices or take help of service providers.
The protocol and cryptography used for Bitcoin is still working fine, even after so many years. This simply means the concept of Bitcoin is well planned. However, there is various security flaws found in the software implementations and fixed too. To provide a complete security, it is necessary to set security solutions and good practices, and reduce the theft risk. In the past few years, many security features have been developed, including offline wallets, hardware wallets and wallet encryption.
Yes. Nowadays, most of the systems work on the cryptography, such traditional banking systems. Today, quantum computers do not exist. If in case, quantum computing is a treat to Bitcoin, then it can be successfully secured by upgrading through post-quantum algorithms. Post the up gradation, it will be reviewed by all the Bitcoin developers and accepted by the Bitcoin users.