It is certain that almost all technology and internet activists, even ordinary people who are familiar with the internet, know or at least have heard of Bitcoin. Yes, bitcoin is a digital currency. That means that bitcoin only exists electronically without any physical form. To be more precise, bitcoin is type of cryptocurrency – which digital currency is very safe and very strong encryption.
In this article, I will try to answer 10 important questions about Bitcoin which are frequently asked and hopefully will give you a clearer understanding of what is Bitcoin, what it does, and how you can use it to buy products or services online.
1. What is bitcoin?
Bitcoin (capitalized) refers to the software (software) or network (namely: the Bitcoin network), while bitcoin (capitalized) refers to the digital currency itself (i.e.: two bitcoins).
Prices fluctuate depending on what people are willing to pay for it. At the beginning of its appearance, bitcoin was traded with a very small value until its value soared beyond reason a few years later, where bitcoin had reached $ 11,934 during its peak in 2017. And in the following month it experienced a very drastic decline and is now starting to rise again to $ 11,289 per one bitcoin. .
2. Who developed the idea of bitcoin?
The idea of Bitcoin was conceptualized by Satoshi Nakamoto, an anonymous figure. In May 2008, he shared a white paper [PDF] about Bitcoin, a peer-to-peer cryptocurrency.
Without disclosing who he is, Satoshi outlined how the currency would work: bitcoins would be “mined” by computer software otherwise known as “Bitcoin Mining”, bitcoins could be transferred directly between users and recorded in a ledger which could not be maintained without the need third party.
Then he disappeared.
Part of the allure of Bitcoin is the anonymity of Satoshi Nakamoto, which many see as a selfless act toward a new era of financial revolution. Online detectives have identified several candidates, including a Japanese person in the real world who has the same name. Some have even theorized that Satoshi Nakamoto was a pseudonym for the collective.
In May 2016, the Bitcoin community was shocked when Australian entrepreneur Craig Wright recognized himself as Satoshi Nakamoto. Some believe its claims, some don’t, but the whole Bitcoin community is not affected – the Bitcoin ecosystem is decentralized, and it cannot be controlled by anyone, including its creators.
3. What’s so special about bitcoin?
Bitcoin is a peer-to-peer currency and runs on a system that allows you to send and receive bitcoins without a third party.
Simply put, fiat currency relies on a third party, such as a bank or payment processor such as Visa, to verify transactions. This is how you and I can make sure the payment that is sent is indeed received.
However, bitcoin transactions are recorded in a public ledger called the bitcoin blockchain. This information is permanent and publicly viewable on Blockchain.info and cannot be edited or deleted.
This means that transaction records act as proof of transactions. Bitcoin is also programmed not to be duplicated, which means double spending is very unlikely.
4. What is the decentralized currency bitcoin?
Bitcoin is also a decentralized currency, as no government, individual or group has any authority over it. This allows bitcoins to be spent anywhere in the world as long as the recipient can accept bitcoins as payment.
Decentralized currency is a unique concept. Similar to the internet, it is free of geographic restrictions – this is why bitcoin is also nicknamed the ‘internet currency’.
Due to a lack of controls and regulations, many countries are generally wary of bitcoin – and other cryptocurrencies in general – but some progressive countries like Japan have started to recognize it as a currency.
5. What is bitcoin anonymous?
Bitcoin anonymity is a myth. Or rather, it is now much more difficult to make anonymous transactions with Bitcoin. Because as the ecosystem matures, many bitcoin service providers have started implementing KYC / AML regulations.
KYC / AML stands for know your customers or anti money laundering. This requires users to submit proof of identity and proof of residence.
It’s also quite easy to track bitcoins. Bitcoins are usually bought from bitcoin exchanges, received as payment, or donated. With transaction details publicly viewable online, it is possible to trace where bitcoins came from.
6. How do you use bitcoin?
Bitcoin can be used for spending, similar to money. Some people also keep it for investment purposes, while others prefer to use it as a method for making international money transfers.
Bitcoin exists electronically and is stored in a “bitcoin wallet”. There are many types of bitcoin wallets: desktop wallets, mobile wallets, online / web-based wallets, hardware wallets and even paper wallets.
To read more about bitcoin storage, check out this article by CoinDesk. You can have as many wallets and bitcoin addresses (where you receive money from other people) as you like.
7. How many people use bitcoin?
Estimates vary – it’s hard to know the exact number of people using Bitcoin. One way to measure the number of bitcoin users is to measure the number of bitcoin wallets.
According to CoinDesk’s 2016 State of Bitcoin and Blockchain report, bitcoin wallets doubled to 12.77 million in one year, from late 2014 to late 2015. Although many bitcoin users own more than one wallet (usually multiple bitcoin wallets), this is an indication that the number of bitcoin users around the world is increasing.
Another way to estimate bitcoin usage is by the number of bitcoin transactions, which are constantly increasing. While this could mean that the same person is simply doing more bitcoin transactions, it is fair to assume that there are new bitcoin users in the mix as well.
8. How do I get bitcoins?
There are three main ways to get bitcoins: mine them, buy them, or work for bitcoins.
Bitcoin mining used to be really profitable. However at this point in time it is no longer effective for the average individual. This is because one has to buy specialized Bitcoin mining equipment, acquire / rent a dedicated space for mining, and pay the associated costs (rent, electricity, and cooling).
You can buy bitcoins from many online exchanges. There are more options now than ever before – there are global bitcoin exchanges as well as country specific bitcoin exchanges. You can also buy them from.
Work for Bitcoin
Some people get paid in bitcoin, not in cash. Websites like XBTFreelancer and Coinality list jobs with bitcoin payments.
There are other, less effective ways to earn bitcoins. You can earn (very) small amounts of bitcoins from bitcoin faucets, which pay you to view advertisements. You can get it as a donation.
There are also bitcoin investments’ but if you don’t want to lose money, avoid companies that are listed in this Register Badbitcoin.
9. How do I send / receive / spend bitcoins?
Bitcoin wallets come with a bitcoin address, which represents a destination, similar to an email address. Bitcoin addresses are alphanumeric, between 27-34 characters long.
Many bitcoin service providers have user-friendly user interfaces that allow users to generate bitcoin addresses, send and receive bitcoins.
To send bitcoins, users only need to ensure a positive balance in their bitcoin wallet, enter the recipient’s bitcoin address, and press the send button. There is a small miner fee for processing transactions – a miner’s fee is given as a reward and incentive to Bitcoin miners for maintaining equipment.
Bitcoin transactions usually take less than an hour to arrive, but can take longer or shorter depending on the amount of fees and the bitcoin service provider.
You can spend bitcoin anywhere that accepts bitcoin as payment. You can also use a Visa / Mastercard linked bitcoin debit card issued by companies such as Wirex or Coinbase.
10. What are the disadvantages of bitcoin?
Depending on who you ask, you will get different answers. Coders and programmers may argue that bitcoin is already an outdated network, compared to some of the newer cryptocurrency networks available.
Here I will concentrate on the disadvantages of bitcoin for new users:
Must Have Knowledge of digital currencies
Bitcoin can be stolen in many ways. It is the responsibility of bitcoin owners to keep them safe, and this means implementing an additional layer of security such as 2-factor authentication. Storing them on a web wallet can be dangerous.
If you have a significant amount of bitcoins, it is recommended that you store them in a hardware wallet such as Trezor or Ledger.
Bitcoin service providers can be hard to believe
The biggest names in the Bitcoin community have failed. Who can forget Mt. Gox Incident in 2014. It was the largest bitcoin exchanger at the time and practically disappeared overnight along with nearly 745,000 bitcoins.
As recently as 2016, thieves stole nearly 120,000 bitcoins during the Bitfinex hack – and the experts still don’t know how they did it.
Lack of acceptance
Cold hard cash is still the widest and most widely used form of payment – bitcoin acceptance second to none. In contrast, bitcoin is only accepted at a few stores. However, bitcoin debit cards help solve this problem – with regard to payment processors, bitcoin cards help make spending bitcoin a little easier.
Lack of protection
In general, bitcoin is not considered legal in most countries in the world, including Indonesia. Therefore, victims of theft or fraud have almost no choice of asking for help or are unable to report to government or related parties. However, the legal landscape is always changing and one of the best places to update yourself on whether or not bitcoin is acceptable is Bitlegal.io.
While many countries around the world mainly warn the public against Bitcoin’s risky nature, some politicians or political parties have extreme views about bitcoin. Russian and French lawmakers are considering banning bitcoin.
Bitcoin is cool, but the underlying technology behind it – blockchain – is even cooler. As it turns out, having a method to record data in a way that can’t be tampered with or erased is a good thing. It is also a cost-effective method of storing information. Many companies including major banks have expressed interest in blockchain technology.
And that’s a complete explanation of what bitcoin is and some knowledge related to bitcoin. Hopefully this article will answer your questions about bitcoin and happy mining bitcoin. 🙂