Altcoins Talks - Cryptocurrency Forum
Archive => Sorting Box => Topic started by: Cordillerabit on November 29, 2017, 01:17:24 PM
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Hello there guys here's some FAQ about questions regarding Bitcoin. Hopefully this will help those who are newbie like me ;)
What Exactly is Bitcoin?
Bitcoin is a network that enables its users to pay using digital money. The idea behind Bitcoin is that it is like online cash. There is no central authority or middleman, like a government, that decides when to print money or where to send it. Bitcoin is a decentralized, peer-to-peer payment network: one Internet user pays another, using digital cash.
Is Bitcoin secure?
No technology can be 100% secure. However, Bitcoin’s most common vulnerability lies in user error. Users may accidentally delete, lose, or be robbed of their Bitcoin wallet files, just like they may lose physical wallets containing actual cash. Bitcoin offers many security practices to help users protect against loss of their money. The Bitcoin protocol and cryptography itself has an excellent track record. The Bitcoin network is probably the biggest project in the world using distributed computing.
Who or what controls the Bitcoin network?
Nobody owns the Bitcoin network. Every Bitcoin user is free to choose what software and what version they use. As a result, no developer can force the Bitcoin protocol to change. Thus, Bitcoin is controlled by all of its users across the world. However, all of Bitcoin’s users have to use software that follows certain rules – otherwise, Bitcoin’s users would be incompatible with one another. Because of this, Bitcoin and its users have to have a complete agreement about the protocols that everyone agrees to follow.
How does Bitcoin work?
For most Bitcoin users, Bitcoin is really just a mobile app or computer program. It offers a virtual Bitcoin “wallet,” from which a user can send or receive Bitcoins. Behind the scenes, the Bitcoin network records every transaction in a public ledger called the "block chain." This enables a user’s computer to verify that a certain transaction is valid.
Digital signatures also protect the validity of each transaction. Each sending address has a digital signature attached. This allows each user to have full control over sending Bitcoins from their own addresses. People with special software can earn Bitcoins by solving math problems. This is often called “mining.” The goals are to get more people using Bitcoin and to get more Bitcoin into circulation.
Who is the person that created Bitcoin?
Bitcoin grew out of a concept first described in 1998 by Wei Dai, called "cryptocurrency." As Dai described on the cypherpunks mailing list, the concept involved a new form of money. Traditional money was printed and distributed by central authoirities, like governments. Dai’s new form of money would use cryptography to create and exchange digital money instead.
Bitcoin was the first attempt at cryptocurrency. In 2009, Satoshi Nakamoto published the first Bitcoin specification and proof of concept in a cryptography mailing list. The next year, Satoshi quietly left the project. Since then, Bitcoin’s developer community has grown substantially.
Satoshi's anonymity led some individuals to question his influence on Bitcoin, accusing him of controlling the network. Many of these concerns were caused by misunderstandings of Bitcoin’s open-source nature. In fact, Bitcoin’s protocol and software are published freely for any developer to review – or even to change, to make his own version of Bitcoin. Satoshi did make some changes to Bitcoin which other developers adapted. However, like today’s developers, that was the limit of his influence. He did not control Bitcoin.
Do people really use Bitcoin?
Yes. An increasing number of people and businesses are using Bitcoin. These range from major online retailers like Microsoft and Overstock.com; to online services like WordPress and Reddit; airlines like AirBaltic and Air Lituanica; major sports franchices like the Sacramento Kings NBA franchise and the San Jose Earthquakes national soccer franchise; and physical stores across the United States.
At the end of August 2013, more than US $1.5 billion of Bitcoins were in circulation. Millions of dollars’ worth of Bitcoins were exchanged daily.
Why do people trust Bitcoin?
Bitcoin has few secrets. Its entire source code is fully open to the world at all times. Any developer may easily verify that Bitcoin is operating as it says it is. One Bitcoin user can pay another in real-time. No third-party action or approval is required. Cryptographic algorithms, like those that protect mobile online banking applications, protect all Bitcoin transactions. Because Bitcoin users have to agree to work together to exchange currency, no one individual or organization can control Bitcoin.
Can I make money with Bitcoin?
Bitcoin is not a get-rich-quick system. Like with any emerging technology, Bitcoin offers business opportunities that entail risks. There is no guarantee that Bitcoin will continue to grow; that activities will be profitable; or how risky investments will be. Activities like mining or running new businesses present the potential for profit, but also the potential for risk.
Is Bitcoin fully virtual?
Like a credit card or a Smartphone payment app, Bitcoin is virtual. Using their Smartphones, people can use Bitcoin to pay for things just like they use paper money. There are physical forms of Bitcoins, like the Casascius coins. However, a person can pay with Bitcoin without ever touching anything but a Smartphone.
Bitcoin stores its balances in a large distributed network and protects them from fraud. Bitcoin keeps records of transactions as if they were cash transactions. Bitcoins cannot vanish just because they are virtual. Bitcoins exist in a person’s “wallet” in the same way that money exists in a person’s bank account. The money, in physical form, may not be in the bank. Yet that does not mean it does not exist.
Is Bitcoin anonymous?
No. Bitcoin is designed to allow users to send and receive digital money with as much privacy as most other forms of money. However, Bitcoin is not completely anonymous, and can never be as private as paying with cash. To protect its users, Bitcoin keeps extensive public records of all payments. Bitcoin does have some policies in place to protect users’ privacy.
What about Bitcoin and taxes?
Bitcoin, in and of itself, is not a fiat currency with legal tender status in any world jurisdiction. However, often, Bitcoin users will accrue tax liability just as they would if earning any other type of money. Various forms of legislation are in progress in a variety of jurisdictions regarding the taxation of Bitcoin. Possibilities include income, sales, payroll, capital gains, or some other form of tax liability on Bitcoin earnings.
How are Bitcoins created?
New Bitcoins are created by miners. These are people who Bitcoin rewards for creating more Bitcoins. Miners use specialized hardware to process Bitcoin transactions securely. In exchange, they collect new Bitcoins.
Bitcoin mining is very competitive. This results from the fact that new Bitcoins are created at a fixed rate, in accordance with the Bitcoin protocol. Because only so many new Bitcoins can be created, the addition of new miners makes it more difficult to make a profit. Each year, the number of new Bitcoins created is halved. This decreasing, constant rate will continue until 21 million Bitcoins exist in circulation, at which point the creation of new Bitcoins will cease.
Why do Bitcoins have value?
Bitcoins have value for the same reason that paper money does. Bitcoin allows people to pay for things without having to trust in third parties (like governments) or having to rely on physical items like coins or dollars. Bitcoin is backed by mathematics. This allows people to trust in Bitcoin. Like with any form of money, if people trust Bitcoin and use it, it will hold its value. The more people and vendors that use Bitcoin, the more people will be willing to accept them as payment, like with any form of currency.
What determines Bitcoin’s price?
Bitcoins do not have fixed prices. Supply and demand determine a Bitcoin’s price. When more people want to use Bitcoins, the price increases. When the demand for Bitcoins falls, the price decreases. Because Bitcoin is a relatively small market, the price of Bitcoins can be driven up and down by fairly small amounts of money. This makes the value of a Bitcoin fairly volatile.
Is Bitcoin a bubble?
Although Bitcoin may feature fast rises in prices, this does not constitute a bubble. A bubble is an artificial over-valuation of an asset that causes a sudden downward correction to the asset’s true value. Bitcoin’s prices vary because its users make individual choices which drive the price up or down – not because the value of Bitcoins is over-valued.
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Nice explanation you are solve my sum confusion
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Nice explanation you are solve my sum confusion
thanks for positive response ;)
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Thanks for sharing
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A very detailed explanation of everything related to bitcoin. Thank you for sharing our knowledge. What you convey will certainly be useful also for beginners who are joining here.
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Nice explanation.
And yes, there are true popular ask and question.
If allowed, I request FAQ topic about blockchain.
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This is what we are looking for and almost all of our question about bitcoin are answered very well, so i very thankful to one who share this important information.