11 Frequently Asked Questions about Bitcoins

FAQ Bitcoin
FAQ Bitcoin
  1. What are Bitcoins?

Bitcoin is a consensus network that enables a new payment system and a fully digital currency. It is the first distributed point-to-point payment network operated by its users without a central authority or intermediary. From the user’s point of view, Bitcoin is pretty much the same as Internet money. Bitcoin can also be considered as the most important existing accounting system with three entries.

To Know More Check Out our Article at: What is Blockchain, The Ingenious Technology?

  1. Who created Bitcoin?

Bitcoin is the first implementation of a concept called “cryptocurrency” that Wei Dai described on the Cypherpunks mailing list in 1998, proposing the idea of a new form of money that uses cryptography to control creation and transactions rather than a central agency. The first specification of Bitcoin and Proof of Concept was published in 2009 on a cryptography mailing list by Satoshi Nakamoto. Satoshi left the project in late 2010 without revealing much about himself. Since then, the community has grown exponentially with many developers working in Bitcoin.

Satoshi’s anonymity often raises unjustified concerns, many of which are linked to a misunderstanding of the open source nature of Bitcoin. The Bitcoin protocol and software are published publicly, and any developer in the world can review the code or create their own modified Bitcoin software. Like the current developers, Satoshi’s influence was limited to the changes that led others to take them over and therefore did not control Bitcoin. Therefore, the identity of the inventor of Bitcoin is probably as relevant today as the identity of the person who invented the paper.

  1. Who owns the most no. of Bitcoins?

These are the people with the biggest known stakes in Bitcoin:

  1. The Winklevoss Twins.
  2. Barry Silbert (cryptocurrency maven)
  3. Tim Draper (billionaire venture capitalist)
  4. Charlie Shrem (Bitcoin early adopter)
  5. Tony Gallippi (cryptocurrency executive)
  6. Satoshi Nakamoto (Bitcoin mastermind)
  7. Uncle Sam.

4. How are new bitcoins created?

New bitcoins are made by a competitive and decentralized process called “mining”. This process involves that individuals are rewarded by the network for their services. Bitcoin miners are processing transactions and securing the network using specialized hardware and are collecting new bitcoins in exchange.

  1. How many Bitcoins are mined in a day?

While of the latest block reward having on 9th of July 2016 each block now makes 12.5 new bitcoins. On average a block should be mined every 10 minutes but, because of the continuous growth of hashing power (at least until now) each block takes close to 9 min on average to be mined.

  1. How long does it take to mine a block?

If you are going up in a group at the current difficulty level, you will probably extract about 0.00001406 BTC per week. That is, if the difficulty does not increase, it takes about 71123 weeks (about 1367 years) to extract 1 BTC. Of course, the difficulty will certainly increase during this time.

  1. How does Bitcoin work?

From the user’s perspective, Bitcoin is nothing more than a mobile application or computer program that provides a personal Bitcoin wallet and allows users to send and receive bitcoins with them. This is how Bitcoin works for most users.

Behind the scenes, the Bitcoin network shares a public book called “Blockchain”. This book contains every processed transaction so that a user’s computer can verify the validity of each transaction. The authenticity of each transaction is protected by digital signatures that correspond to delivery addresses so that all users can have full control over sending Bitcoins from their own Bitcoin addresses. In addition, anyone with specialized hardware computing power can complete transactions and receive a Bitcoin reward for this service. This is often referred to as mining. More information about Bitcoin can be found on the corresponding page and in the original document.

  1. Why do people trust Bitcoin?

Much of the trust in Bitcoin comes from the fact that it does not require trust at all. Bitcoin is the completely open source and decentralized. This means that anyone can access the entire source code at any time. Any developer in the world can scrutinize how Bitcoin works. All existing transactions and bitcoins can be viewed transparently by anyone in real time. All payments can be made independently of third parties and the entire system is protected by highly peer-controlled cryptographic algorithms used for online banking. No organization or person can control Bitcoin and the network remains secure, even if all its users cannot trust it.

  1. Can I make money with Bitcoin?

You should never expect to be rich in bitcoin or new technologies. It is always important to be wary of oneself that is too good to be true or disregard the basic economic rules.

Bitcoin is an area of innovation in growth and there are business opportunities that also involve risks. There is no guarantee that Bitcoin will continue to grow, although it has grown very rapidly so far. Investing in time and resources in everything that has to do with Bitcoin requires an entrepreneurial initiative. There are many ways to earn money with Bitcoin, such as mining, speculation, or new business management. All these methods are competitive and there is no guarantee of profit. It is up to each individual to properly assess the costs and risks of such a project.

  1. What happens when bitcoins are lost?

When a user loses their wallet, this has the effect of taking money out of circulation. Lost bitcoins remain in the blockchain like all other bitcoins. Lost Bitcoins, however, remain forever inactive, as it is impossible for anyone to find the private keys that will allow them to spend them again. Because of the law of supply and demand, when fewer bitcoins are available, those who stay will have greater demand and increase their value to compensate for it.

  1. What about Bitcoin and taxes?

Bitcoin is not a trusted currency with the status of a legal tender in a jurisdiction, but the tax debt accumulates frequently, regardless of the medium used. In many different jurisdictions, there are a variety of laws that can generate income, sales, wages, capital gains or other forms of tax liabilities with Bitcoin.

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