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What is Bitcoin?
Bitcoin is a digital token that can be sent electronically from one user to
another, anywhere in the world.
Bitcoin is also the name of the payment network on which the Bitcoin digital
tokens move. Some people differentiate between Bitcoin capitalized, as the
token, and bitcoin lowercase, as the network. Unlike traditional payment
networks like Visa or American Express, no single company or person runs the
Bitcoin network. Instead, it is a decentralized network of computers around the
world that keep track of all Bitcoin transactions, similar to the decentralized
network of servers that makes the internet work.
Because there is no central authority running Bitcoin, no one has the authority
to force new users to reveal their identities. The network was designed this
way to create a currency and a financial network outside the control of any
government or single company.
The computers that join the network and track Bitcoin transactions are
motivated to do so by the new coins that are released to the network every 10
minutes and are given to one of the computers helping to track the transactions
and maintain the network.
Why are hackers using Bitcoin?
The digital currency Bitcoin has emerged as a favorite tool for hackers
demanding a ransom for a simple reason: You can start accepting Bitcoin
anywhere in the world without having to reveal your identity.
For criminals, this makes Bitcoin much more attractive than systems like
Western Union, which generally require customers to provide identification
before opening an account and receiving transferred money.
How do people use bitcoins?
It is an electronic or digital currency that works on a peer-to-peer basis.
This means that it is decentralised and has no central authority controlling
it. Like currency notes, it can be sent from one person to another, but without
a central bank or the government attempting to track it. The system depends on
cryptography to control the creation of the currency. While no one authority
controls the generation of the coins or tracks them, the system itself is
designed in such a way that the network maintains a foolproof system of the
record of every transaction as well as tracking issuance of the currency.
The beauty of this cryptocurrency is that if you receive a bitcoin from
another, you can be as sure of the payment as you would on receiving physical
currency notes, with the same anonymity ascribed to it. No one need know if
your neighbour spent 2 bitcoins this morning to buy gold, but the transaction
is recorded for posterity.
This anonymity is lacking in other forms of digital payment such as online
banking or e-wallets.
Who can you send bitcoins to?
You can send bitcoins digitally to anyone who has a bitcoin address anywhere in
the globe. One person could have multiple addresses for different purposes –
personal, business and the like.
Receivers can get to spend them within minutes of receiving the coins. Once
given away, like currency, there is no getting them back, unless the receiver
decides to give them to you. A bitcoin is not printed currency but is a non-
repudiable record of every transaction that it has been through. All this is
part of a huge ledger called the blockchain.
Where do you get bitcoins?
Bitcoins are available in bitcoin exchanges. You could also purchase bitcoins
from other users. A bitcoin exchange traded fund could be another source in the
near future. You can become a bitcoin miner by investing in software and
hardware. More the power of the hardware that helps with encryption technology,
higher the probability of your earning bitcoins.
Unocoin is a Bengaluru-based company that allows users to buy, sell, store or
use bitcoins. While bitcoin usage is certainly not mainstream, there are said
to be more than 500 merchants who accept bitcoins for payment in India.
How is a new bitcoin generated?
A bitcoin is generated when an entity, i.e. a person or a business, uses
software power to solve a mathematical puzzle that makes the blockchain more
secure. The difficulty level of solving the problem is high enough to ensure
that it takes time to do it.
Beware of tall promises
Even if you become a bitcoin miner, there is no guarantee that you would be
able to mine a certain number of bitcoins. Any scheme related to bitcoins
promising a fixed return is likely a tall promise best avoided.
Can you own 50 million bitcoins in, say, 2 years from now?
Unlike currency notes that can be printed by a central bank for an unlimited
value, there are only so many bitcoins that can be produced. The blockchain
system is designed such that at its maximum only 21 million bitcoins can be
produced and in circulation. The number cannot exceed this cap. As of February,
about 15.2 million bitcoins have been mined (or produced). That is about 75% of
the total cap already in circulation.
Current estimates are that the last bitcoin that will ever be mined will come
into existence in 2040.
What is the value of one bitcoin today?
One bitcoin is worth roughly about $1,200 now. An early investor in Snapchat
has been quoted on the Web as saying that by 2030, the value could be as high
as $500,000. One of the reasons that could prompt you to buy a bitcoin today is
not so much to use it for payment online but as an investment.
Urban legend has it that someone who was doing a thesis on cryptocurrency
bought 5,000 bitcoins for $27 in 2009. Do the math for the value today!
And unlike traditional currency that is inflationary in nature, the bitcoin is
a deflationary currency. In other words, if there are only so many bitcoins in
use, and the demand for those rises, the value of a bitcoin would, logically,
rise.
How does the payment system work?
When you send a bitcoin to a receiver, the transaction is included in the
blockchain and broadcast to the network. The blockchain ensures that the same
bitcoin is not spent twice by the same user. A computer network validates the
transaction using algorithms so that the transaction becomes unalterable. Once
validated, the transaction is added to others to create a block of data for the
ledger.
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IconSecuring your wallet
Like in real life, your wallet must be secured. Bitcoin makes it possible to
transfer value anywhere in a very easy way and it allows you to be in control
of your money. Such great features also come with great security concerns. At
the same time, Bitcoin can provide very high levels of security if used
correctly. Always remember that it is your responsibility to adopt good
practices in order to protect your money. Read more about securing your wallet.
IconBitcoin price is volatile
The price of a bitcoin can unpredictably increase or decrease over a short
period of time due to its young economy, novel nature, and sometimes illiquid
markets. Consequently, keeping your savings with Bitcoin is not recommended at
this point. Bitcoin should be seen like a high risk asset, and you should never
store money that you cannot afford to lose with Bitcoin. If you receive
payments with Bitcoin, many service providers can convert them to your local
currency.
IconBitcoin payments are irreversible
Any transaction issued with Bitcoin cannot be reversed, they can only be
refunded by the person receiving the funds. That means you should take care to
do business with people and organizations you know and trust, or who have an
established reputation. For their part, businesses need to keep control of the
payment requests they are displaying to their customers. Bitcoin can detect
typos and usually won't let you send money to an invalid address by mistake.
Additional services might exist in the future to provide more choice and
protection for the consumer.
IconBitcoin is not anonymous
Some effort is required to protect your privacy with Bitcoin. All Bitcoin
transactions are stored publicly and permanently on the network, which means
anyone can see the balance and transactions of any Bitcoin address. However,
the identity of the user behind an address remains unknown until information is
revealed during a purchase or in other circumstances. This is one reason why
Bitcoin addresses should only be used once. Always remember that it is your
responsibility to adopt good practices in order to protect your privacy. Read
more about protecting your privacy.
IconUnconfirmed transactions aren't secure
Transactions don't start out as irreversible. Instead, they get a confirmation
score that indicates how hard it is to reverse them (see table). Each
confirmation takes between a few seconds and 90 minutes, with 10 minutes being
the average. If the transaction pays too low a fee or is otherwise atypical,
getting the first confirmation can take much longer.
Confirmations Lightweight wallets Bitcoin Core
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What is bitcoin gold?
In short, bitcoin gold aims to achieve two goals:
First, bitcoin gold wants to change how mining works by making it so the most
powerful mining machines (called ASICs) can no longer be used.
Second, by attracting more people to this system over time, it hopes to free
the bitcoin network from the large companies that offer these products, and it
argues, command undue influence on the network.
Instead of scaling bitcoin to support more users, bitcoin gold tweaks bitcoin
in an effort to "make bitcoin decentralized again." This, proponents argue,
will make the network, designed to offer an egalitarian way to send payments
digitally around the globe, more accessible to users.
And while created via the same mechanism, bitcoin gold differs from bitcoin
cash in a few ways, most notably in its distribution.
Differences include:
The bitcoin gold cryptocurrency is set to be created in advance (prior to the
code being open-sourced to the public).
About 1 percent of the total cryptocurrency tokens mined before the blockchain
goes public will be used to pay the bitcoin gold development team.
Once this distribution is over, the team claims it will launch the
cryptocurrency so that users can redeem their coins.
Of course, while it aims to become the de-facto version of bitcoin, others
might consider bitcoin gold an "altcoin" – the term has long been used to
denote any cryptocurrency launched using bitcoin’s existing code, but that has
an alternative market or use case.
Do I have bitcoin gold?
All bitcoin owners will receive the cryptocurrency at a rate of 1 BTC to 1 BTG,
setting the stage for possible market activity.
But, that's not to say it's totally intuitive to retrieve.
One quirk is that it'll be easier to redeem the funds from wallets or exchanges
that recognize the cryptocurrency. The easiest way, then, to retrieve the
bitcoin gold is to move bitcoin to a wallet or exchange that supports bitcoin
gold, or to hold bitcoin in a wallet where you own your private keys (rather
than holding them with an exchange).
To date, 20 exchanges and wallets promise to support bitcoin gold once it
launches, according to the project's website.
Although one of the most popular U.S.-based exchanges, Coinbase stated on
October 20 that it does not support bitcoin gold due to skepticism about how
developers have made project information available to others.
"At this time, Coinbase cannot support bitcoin gold because its developers have
not made the code available to the public for review. This is a major security
risk,” the post reads.
This is perhaps something to keep an eye on as the project progresses. Although
the project will officially fork on Monday night, it's not yet open to anyone
and everyone, and there’s still plenty left on the developers' to-do list.
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What is Bitcoin?
Bitcoin is a digital token that can be sent electronically from one user to
another, anywhere in the world.
Bitcoin is also the name of the payment network on which the Bitcoin digital
tokens move. Some people differentiate between Bitcoin capitalized, as the
token, and bitcoin lowercase, as the network. Unlike traditional payment
networks like Visa or American Express, no single company or person runs the
Bitcoin network. Instead, it is a decentralized network of computers around the
world that keep track of all Bitcoin transactions, similar to the decentralized
network of servers that makes the internet work.
Because there is no central authority running Bitcoin, no one has the authority
to force new users to reveal their identities. The network was designed this
way to create a currency and a financial network outside the control of any
government or single company.
The computers that join the network and track Bitcoin transactions are
motivated to do so by the new coins that are released to the network every 10
minutes and are given to one of the computers helping to track the transactions
and maintain the network.
Why are hackers using Bitcoin?
The digital currency Bitcoin has emerged as a favorite tool for hackers
demanding a ransom for a simple reason: You can start accepting Bitcoin
anywhere in the world without having to reveal your identity.
For criminals, this makes Bitcoin much more attractive than systems like
Western Union, which generally require customers to provide identification
before opening an account and receiving transferred money.
How do people use bitcoins?
It is an electronic or digital currency that works on a peer-to-peer basis.
This means that it is decentralised and has no central authority controlling
it. Like currency notes, it can be sent from one person to another, but without
a central bank or the government attempting to track it. The system depends on
cryptography to control the creation of the currency. While no one authority
controls the generation of the coins or tracks them, the system itself is
designed in such a way that the network maintains a foolproof system of the
record of every transaction as well as tracking issuance of the currency.
The beauty of this cryptocurrency is that if you receive a bitcoin from
another, you can be as sure of the payment as you would on receiving physical
currency notes, with the same anonymity ascribed to it. No one need know if
your neighbour spent 2 bitcoins this morning to buy gold, but the transaction
is recorded for posterity.
This anonymity is lacking in other forms of digital payment such as online
banking or e-wallets.
Who can you send bitcoins to?
You can send bitcoins digitally to anyone who has a bitcoin address anywhere in
the globe. One person could have multiple addresses for different purposes –
personal, business and the like.
Receivers can get to spend them within minutes of receiving the coins. Once
given away, like currency, there is no getting them back, unless the receiver
decides to give them to you. A bitcoin is not printed currency but is a non-
repudiable record of every transaction that it has been through. All this is
part of a huge ledger called the blockchain.
Where do you get bitcoins?
Bitcoins are available in bitcoin exchanges. You could also purchase bitcoins
from other users. A bitcoin exchange traded fund could be another source in the
near future. You can become a bitcoin miner by investing in software and
hardware. More the power of the hardware that helps with encryption technology,
higher the probability of your earning bitcoins.
Unocoin is a Bengaluru-based company that allows users to buy, sell, store or
use bitcoins. While bitcoin usage is certainly not mainstream, there are said
to be more than 500 merchants who accept bitcoins for payment in India.
How is a new bitcoin generated?
A bitcoin is generated when an entity, i.e. a person or a business, uses
software power to solve a mathematical puzzle that makes the blockchain more
secure. The difficulty level of solving the problem is high enough to ensure
that it takes time to do it.
Beware of tall promises
Even if you become a bitcoin miner, there is no guarantee that you would be
able to mine a certain number of bitcoins. Any scheme related to bitcoins
promising a fixed return is likely a tall promise best avoided.
Can you own 50 million bitcoins in, say, 2 years from now?
Unlike currency notes that can be printed by a central bank for an unlimited
value, there are only so many bitcoins that can be produced. The blockchain
system is designed such that at its maximum only 21 million bitcoins can be
produced and in circulation. The number cannot exceed this cap. As of February,
about 15.2 million bitcoins have been mined (or produced). That is about 75% of
the total cap already in circulation.
Current estimates are that the last bitcoin that will ever be mined will come
into existence in 2040.
What is the value of one bitcoin today?
One bitcoin is worth roughly about $1,200 now. An early investor in Snapchat
has been quoted on the Web as saying that by 2030, the value could be as high
as $500,000. One of the reasons that could prompt you to buy a bitcoin today is
not so much to use it for payment online but as an investment.
Urban legend has it that someone who was doing a thesis on cryptocurrency
bought 5,000 bitcoins for $27 in 2009. Do the math for the value today!
And unlike traditional currency that is inflationary in nature, the bitcoin is
a deflationary currency. In other words, if there are only so many bitcoins in
use, and the demand for those rises, the value of a bitcoin would, logically,
rise.
How does the payment system work?
When you send a bitcoin to a receiver, the transaction is included in the
blockchain and broadcast to the network. The blockchain ensures that the same
bitcoin is not spent twice by the same user. A computer network validates the
transaction using algorithms so that the transaction becomes unalterable. Once
validated, the transaction is added to others to create a block of data for the
ledger.
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IconSecuring your wallet
Like in real life, your wallet must be secured. Bitcoin makes it possible to
transfer value anywhere in a very easy way and it allows you to be in control
of your money. Such great features also come with great security concerns. At
the same time, Bitcoin can provide very high levels of security if used
correctly. Always remember that it is your responsibility to adopt good
practices in order to protect your money. Read more about securing your wallet.
IconBitcoin price is volatile
The price of a bitcoin can unpredictably increase or decrease over a short
period of time due to its young economy, novel nature, and sometimes illiquid
markets. Consequently, keeping your savings with Bitcoin is not recommended at
this point. Bitcoin should be seen like a high risk asset, and you should never
store money that you cannot afford to lose with Bitcoin. If you receive
payments with Bitcoin, many service providers can convert them to your local
currency.
IconBitcoin payments are irreversible
Any transaction issued with Bitcoin cannot be reversed, they can only be
refunded by the person receiving the funds. That means you should take care to
do business with people and organizations you know and trust, or who have an
established reputation. For their part, businesses need to keep control of the
payment requests they are displaying to their customers. Bitcoin can detect
typos and usually won't let you send money to an invalid address by mistake.
Additional services might exist in the future to provide more choice and
protection for the consumer.
IconBitcoin is not anonymous
Some effort is required to protect your privacy with Bitcoin. All Bitcoin
transactions are stored publicly and permanently on the network, which means
anyone can see the balance and transactions of any Bitcoin address. However,
the identity of the user behind an address remains unknown until information is
revealed during a purchase or in other circumstances. This is one reason why
Bitcoin addresses should only be used once. Always remember that it is your
responsibility to adopt good practices in order to protect your privacy. Read
more about protecting your privacy.
IconUnconfirmed transactions aren't secure
Transactions don't start out as irreversible. Instead, they get a confirmation
score that indicates how hard it is to reverse them (see table). Each
confirmation takes between a few seconds and 90 minutes, with 10 minutes being
the average. If the transaction pays too low a fee or is otherwise atypical,
getting the first confirmation can take much longer.
Confirmations Lightweight wallets Bitcoin Core
0 Only safe if you trust the person paying you
1 Somewhat reliable Mostly reliable
3 Mostly reliable Highly reliable
6 Minimum recommendation for high-value bitcoin transfers
30 Recommendation during emergencies to allow human intervention
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What is bitcoin gold?
In short, bitcoin gold aims to achieve two goals:
First, bitcoin gold wants to change how mining works by making it so the most
powerful mining machines (called ASICs) can no longer be used.
Second, by attracting more people to this system over time, it hopes to free
the bitcoin network from the large companies that offer these products, and it
argues, command undue influence on the network.
Instead of scaling bitcoin to support more users, bitcoin gold tweaks bitcoin
in an effort to "make bitcoin decentralized again." This, proponents argue,
will make the network, designed to offer an egalitarian way to send payments
digitally around the globe, more accessible to users.
And while created via the same mechanism, bitcoin gold differs from bitcoin
cash in a few ways, most notably in its distribution.
Differences include:
The bitcoin gold cryptocurrency is set to be created in advance (prior to the
code being open-sourced to the public).
About 1 percent of the total cryptocurrency tokens mined before the blockchain
goes public will be used to pay the bitcoin gold development team.
Once this distribution is over, the team claims it will launch the
cryptocurrency so that users can redeem their coins.
Of course, while it aims to become the de-facto version of bitcoin, others
might consider bitcoin gold an "altcoin" – the term has long been used to
denote any cryptocurrency launched using bitcoin’s existing code, but that has
an alternative market or use case.
Do I have bitcoin gold?
All bitcoin owners will receive the cryptocurrency at a rate of 1 BTC to 1 BTG,
setting the stage for possible market activity.
But, that's not to say it's totally intuitive to retrieve.
One quirk is that it'll be easier to redeem the funds from wallets or exchanges
that recognize the cryptocurrency. The easiest way, then, to retrieve the
bitcoin gold is to move bitcoin to a wallet or exchange that supports bitcoin
gold, or to hold bitcoin in a wallet where you own your private keys (rather
than holding them with an exchange).
To date, 20 exchanges and wallets promise to support bitcoin gold once it
launches, according to the project's website.
Although one of the most popular U.S.-based exchanges, Coinbase stated on
October 20 that it does not support bitcoin gold due to skepticism about how
developers have made project information available to others.
"At this time, Coinbase cannot support bitcoin gold because its developers have
not made the code available to the public for review. This is a major security
risk,” the post reads.
This is perhaps something to keep an eye on as the project progresses. Although
the project will officially fork on Monday night, it's not yet open to anyone
and everyone, and there’s still plenty left on the developers' to-do list.
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