Possible Questions regarding Bitcoin (BTC)

Discussion in 'Cryptocurrency' started by tony_t, Jun 23, 2017.




  1. tony_t

    tony_t New Member

    Hello Folks,

    After @EyeFakeID 's guide to bitcoin, someone might have any questions regarding bitcoint. So i am here to provide some answers of possible questions that i think might occur in anyones mind..


    What is Bitcoin ?
    Answer:

    Bitcoin is a cryptocurrency and a digital payment system invented by an unknown programmer, or a group of programmers, under the name Satoshi Nakamoto. It was released as open-source software in 2009.

    The system is peer to peer, and transactions take place between users directly, without an intermediary. These transactions are verified by network nodes and recorded in a public distributed ledger called a blockchain. Since the system works without a central repository or single administrator, bitcoin is called the first decentralized digital currency.

    Besides being created as a reward for mining, bitcoin can be exchanged for other currencies, products, and services in legal or black markets.

    As of February 2015, over 100,000 merchants and vendors accepted bitcoin as payment. According to research produced by Cambridge University in 2017, there are 2.9 to 5.8 million unique users using a cryptocurrency wallet, most of them using bitcoin.



    What is blockhain ?

    Answer: A blockchain is a public ledger of all Bitcoin transactions that have ever been executed. It is constantly growing as 'completed' blocks are added to it with a new set of recordings. The blocks are added to the blockchain in a linear, chronological order.


    What is BitCoin Wallet ?

    Answer: A Bitcoin wallet can be computer software, hardware, or a printed piece of paper, but they all essentially do the same thing: they allow you to spend and receive bitcoins.

    The core part of a Bitcoin wallet are its private keys. Each private key is a very large randomly generated number, and is used to create a corresponding Bitcoin address (a.k.a public key). Each matching private and public key constitutes a cryptographic key pair.

    Simply put, public keys are how you receive bitcoins, and private keys allow you to spend bitcoins. Public keys are derived from your private keys, and your wallet contains your collection of private keys.

    So basically, wallets allow you to store and manage your bitcoins.


    -->>>Keep in mind if your wallet is ever lost or stolen, your bitcoins are gone forever. So keep your wallet secret and safe.




    Why should I use Bitcoin? I already have a bank account/credit card/Paypal account/Payoneer account.
    Answer: Bitcoin has lots of advantages over existing payment methods:
    • There is no centralized middleman controlling the flow of money, so your funds can’t be frozen, held, or subjected to arbitrary spending limits.
    • You can send nearly instant payments anywhere in the world for a very small, optional fee; usually equivalent to a few cents.
    • Bitcoin transactions are irreversible. For merchants, this means no chargebacks and a much smaller risk of payment fraud.
    • All Bitcoin transactions are on public record, so it’s possible to prove a payment has been made or personal ownership of bitcoins.
    • Bitcoins cannot be counterfeited or debased — only a finite amount of bitcoins can ever be created.
    • Bitcoin can be an anonymous form of payment if certain precautions are taken.

    Is Bitcoin legal?

    Answer: This is dependent on jurisdiction, but to date, no government has passed any law that makes Bitcoin or cryptocurrency illegal.


    How are payments made?

    Answer: Just like in the offline world, a wallet holds the key to making payments. It’s actually easier and faster to make a payment with Bitcoin than any traditional credit card or PayPal transaction online. You get a web or app based wallet, key in the recipients address, enter payment amount and press send. The fees are much lower and you can send Bitcoin any time of day or night without 3rd party assistance. Easy-peasy.


    Do people have to pay taxes on Bitcoin?
    Answer: Tax law is dependent on your country and locality. Recently in the United States, the IRS has declared that Bitcoin is to be treated as property, not currency, for tax purpose. All income in the US is taxed, regardless of what form it takes. If you’re paid in bitcoins, you’re supposed to pay taxes on your earnings at the BTC/USD exchange rate when you receive payment. Same goes for any capital gains made when you trade bitcoins for items or sell them for cash. Of course, US taxes can’t be paid in bitcoins, they can only be paid in US dollars, you big silly!


    What is mining?
    Answer: Mining is how new bitcoins are minted, as well as how the Bitcoin public ledger (a.k.a. the blockchain) is secured. See explanation here ( http://eyefakeid.com/threads/how-bitcoins-are-created.8/ )


    Why is Bitcoin sometimes spelled with an uppercase ‘B’ and other times spelled with a lowercase ‘b’?

    Answer:
    “Bitcoin” typically refers to the protocol and associated software, while “bitcoin” refers to the unit of currency.
    For instance:
    Code:
    I read an article about how Bitcoin works.
    
    
    versus
    Code:
    I'll pay you 100 bitcoins for that red Cadillac.



    How can I know which Bitcoin services to trust?
    Anwer: you can’t. Some services that have had thousands of customers and operated in a trustworthy manner for years have ultimately either lost or fled with customers’ bitcoins (i.e. the MtGox debacle).

    you should rely on the experiences of others before making that first leap into depositing bitcoins with a service. Read reviews from others and research the service’s reputation by looking on sites such http://bittrust.org/ and searching for the service on the Bitcoin Subreddit ( https://www.reddit.com/r/Bitcoin/ ) and bitcointalk.org. Businesses that have been established longer or are run by known people in the Bitcoin community tend to be more trustworthy. It’s a good idea to distrust any service that does not list their business address or operates anonymously.

    What are Bitcoins backed by ?
    Answer:
    Bitcoins are not backed by any physical asset, bank, or government.

    Instead, they are backed by math, cryptography, and a public distributed network with a hash computing power of over 740,000 PetaFLOPS (currently). As of this writing, the Bitcoin network is over 256 times faster then the top 500 supercomputers, combined.

    But what does that mean? It means that many of the world’s citizens and companies have dedicated computers to constantly run and process Bitcoin transactions. And it adds up to a huge amount of computing power. Math and cryptography are used to prove individual ownership of bitcoins, while the computing power of the Bitcoin network is used to secure the the public ledger of all Bitcoin transactions against double spending.


    Won’t governments try to kill Bitcoin?
    Answer:
    Maybe. Bitcoin might be the idea that eventually brings an end to the global bank and government monopoly on money. Some governments might see that as a threat to their power. Others might embrace Bitcoin and its potential for economic growth.

    Bitcoin is decentralized, so it’s a tough target for an adversary to hit. What could governments do to attack Bitcoin?
    1. Excessively regulate or tax centralized Bitcoin based businesses (i.e. online Bitcoin exchanges).
    2. Completely outlaw the usage of Bitcoin and cryptocurrency.
    3. Turn off the internet.

    It can be argued that (1.) is already occurring in some jurisdictions: in China, banks are currently outlawed from processing Bitcoin related transactions. United Stateslaw requires expensive money transmitter licenses to operate payment and money exchange services, which has been determined to apply to related Bitcoin businesses.Yet Bitcoin continues to flourish.

    Prohibition (2.) would probably be met with fierce opposition in free-ish nations, even from citizens that don’t use Bitcoin on the basis of freedom. But nonetheless, illegalization is always a possibility, but the outcome of prohibition might have the reverse effect on Bitcoin’s popularity and usage.

    The likelihood of (3.) seems small. Most of the global economy relies on the internet. Yet in this case, decentralized internet access may be a viable solution.

    - I hope it helps a bit.
     
    Last edited: Jun 23, 2017
  2. Naruto6pathsbro

    Naruto6pathsbro New Member

    Perhaps some of these are the questions that had appeared in my mind when i had started with bitcoin service. One of the most common and to-be answered is this one also.

    What are Bitcoins backed by ?

    Bitcoins are not backed by any physical asset, bank, or government.

    Instead, they are backed by math, cryptography, and a public distributed network with a hash computing power of over 740,000 PetaFLOPS (currently). As of this writing, the Bitcoin network is over 256 times faster then the top 500 supercomputers, combined.

    But what does that mean? It means that many of the world’s citizens and companies have dedicated computers to constantly run and process Bitcoin transactions. And it adds up to a huge amount of computing power. Math and cryptography are used to prove individual ownership of bitcoins, while the computing power of the Bitcoin network is used to secure the the public ledger of all Bitcoin transactions against double spending.


    Won’t governments try to kill Bitcoin?

    Maybe. Bitcoin might be the idea that eventually brings an end to the global bank and government monopoly on money. Some governments might see that as a threat to their power. Others might embrace Bitcoin and its potential for economic growth.

    Bitcoin is decentralized, so it’s a tough target for an adversary to hit. What could governments do to attack Bitcoin?

    1. Excessively regulate or tax centralized Bitcoin based businesses (i.e. online Bitcoin exchanges).
    2. Completely outlaw the usage of Bitcoin and cryptocurrency.
    3. Turn off the internet.
    It can be argued that (1.) is already occurring in some jurisdictions: in China, banks are currently outlawed from processing Bitcoin related transactions. United States law requires expensive money transmitter licenses to operate payment and money exchange services, which has been determined to apply to related Bitcoin businesses. Yet Bitcoin continues to flourish.

    Prohibition (2.) would probably be met with fierce opposition in free-ish nations, even from citizens that don’t use Bitcoin on the basis of freedom. But nonetheless, illegalization is always a possibility, but the outcome of prohibition might have the reverse effect on Bitcoin’s popularity and usage.

    The likelihood of (3.) seems small. Most of the global economy relies on the internet. Yet in this case, decentralized internet access may be a viable solution.


    One must know that by whom the Bitcoin is backed up and about the risks.
     
  3. wob4j539689l2

    wob4j539689l2 New Member

    Each n every question is very useful. Understood some them and hope i'll understand rest very soon. As i am new to bitcoin it'll take me some time to understand its services. ( hehe ).

    One more question, what does BTC Stands for :confused:
     
  4. tony_t

    tony_t New Member

    Quite possiblity of such questions appearing in beginnners minds @San . You have covered it properly! thanks for adding up.
    .
    .
    .
    BTC is just a short form of expressing Bitcoin. I don't think there's any full form of it. Not sure if there is. I haven't came across to it yet.
    However, XBT is commonly used as Bitcoin Currency. Although there isn't any official currency code for bitcoin.

    -Thanks!
     
    Last edited: Jun 23, 2017
  5. Naruto6pathsbro

    Naruto6pathsbro New Member

    read up some more articles regarding common questions about bitcoin. here are two more. merger them in your topic. However, we have mentioned these things in our topic but not really explained.

    What is decentralised currency?

    Bitcoin is also a decentralised currency, as in no one government, individual or group holds authority over it. This makes bitcoin spendable anywhere in the world as long as the receiver accepts bitcoins as payment.

    Decentralised currencies are a unique concept. Similar to the internet, it is free from geographical boundaries – this is why bitcoin is also dubbed ‘the currency of the internet’.

    Due to lack of control and regulations, many countries are understandably wary of bitcoin – and other cryptocurrencies in general – but some progressive countries such as Japan have started to recognise it as currency.


    What does peer-to-peer connection mean?

    Peer to peer connection means that we do not require any sort of third party tool to send or receive transactions. Such as we use payoneer/paypal/skrill to send or recieve the money. But bitcoin allows us to send and receive the money directly from user to user. means that if your friend is sending you some BTC he will directly send it to you without using any medium.
     
  6. tony_t

    tony_t New Member

    usefull questions indeed. It also drew away my confusion as well.

    Topic updated!

    Thanks for your support Mrs: @San .


    EDIT: noticed that i can't make a post of more than 1k characters so summing up all the question ain't possible. Not a big deal. Just leaving these two questions below. People could check it here as well.
     
    Last edited: Jun 23, 2017
  7. Zaroon

    Zaroon New Member

    these questions are must to know for a Bitcoin user. Not for beginners only. Some of these questions helped me a bit. They way you have sort these questions is what i liked the most. Nice effort.
     
  8. tony_t

    tony_t New Member

    thanks. Don't forget to help newbies by sharing your possible questions and the questions that appeared in your mind when you started using BTC service. ;)
     
  9. Zaroon

    Zaroon New Member

    here are two usefull questions from my side.

    What is double spending ?
    A double spend is an attack where the given set of coins is spent in more than one transaction. There are a couple main ways to perform a double spend:
    • Send two conflicting transactions in rapid succession into the Bitcoin network. This is called a race attack
    • Pre-mine one transaction into a block and spend the same coins before releasing the block to invalidate that transaction. This is called a Finnety attack.
    • Own 51+% of the total computing power of the Bitcoin network to reverse any transaction you feel like, as well as have total control of which transactions appear in blocks. This is called 51+% attack
    To prevent damages from the first attack - wait for one confirmation to appear on a given transaction. To prevent damage from the second attack - wait for 6 confirmations to appear on a transaction, or less if the transaction is small (but still require at least 1). Damage from the third attack can cripple the entire Bitcoin network, so don't worry about it - your business most likely won't be the main target (it's unlikely to happen without really big money getting involved).


    What is Proof of Work ?
    A proof of work is a piece of data which is difficult (costly, time-consuming) to produce but easy for others to verify and which satisfies certain requirements. Producing a proof of work can be a random process with low probability so that a lot of trial and error is required on average before a valid proof of work is generated. Bitcoin uses the Hashchash proof of work system.

    One application of this idea is using Hashcash as a method to preventing email spam, requiring a proof of work on the email's contents (including the To address), on every email. Legitimate emails will be able to do the work to generate the proof easily (not much work is required for a single email), but mass spam emailers will have difficulty generating the required proofs (which would require huge computational resources).

    Hashcash
    Bitcoin uses the hashcash proof of work function as the mining core. All bitcoin miners whether CPU, GPU, FPGA or ASICs are expending their effort creating hashcash proofs-of-work which act as a vote in the blockchain evolution and validate the blockchain transaction log.

    Like many cryptographic algorithms hashcash uses a hash function as a building block, in the same way that HMAC, or RSA signatures are defined on a pluggable hash-function (commonly denoted by the naming convention of algorithm-hash: HMAC-SHA1, HMAC-MD5, HMAC-SHA256, RSA-SHA1, etc), hashcash can be instantiated with different functions, hashcash-SHA1 (original), hashcash-SHA256^2 (bitcoin), hashcash-Scrypt(iter=1) (litecoin).
     
  10. SheraTheBobm

    SheraTheBobm New Member

    All the questions are really really helpfull. I have mostly read the questions present here but some question were new for me, like bitcoins are backed by whom, they could be killed as well as decentralized system and double spending and some more questions that enhanced my knowledge about it. Keep sharing such a usefull stuff guys!
     
  11. wob4j539689l2

    wob4j539689l2 New Member

    and till now i was worried about its full form lol. thanks for letting me know that BTC is a short hand method of expressing bitcoin. and thanks for telling me about its currency. :)
     
  12. tony_t

    tony_t New Member

    Good information collected. Glad to see such explained answers. Thanks for your contribution.
     
    Zaroon likes this.

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