Bitcoin For Beginners FAQ When was Bitcoin created? Who invented Bitcoin?
In 2009, the first Bitcoin was mined by someone nicknamed Satoshi Nakamoto
. There are still disputes over who Satoshi is.
Ever since then, the open source project has been accumulating many users and enthusiasts who have contributed their time and efforts to developing and distributing the bitcoin around the world.
How is Bitcoin created? What is Bitcoin mining?
Bitcoin comes into the world through a process called mining. It’s an analogy to gold mining, but instead of actual mining, new Bitcoins are created using computer power. In the past it would have been worthwhile to mine Bitcoin.
Today such huge computer power is required that bitcoin mining is not usually profitable. Currently, there are total of 16.5 million Bitcoins, and the mining process will continue until reaching the maximum limit of 21 million Bitcoins.
How to buy and sell Bitcoin?
The simple and easy way to get Bitcoin is by buying online or at bitcoin ATMs that are located around the world. Click here
to buy Bitcoin with a credit card with our partner exchange.
How can you store Bitcoin and other cryptocurrencies?
Just as regular coins are stored in your wallet, Bitcoins are also stored in a dedicated digital wallet
. Each wallet has its own public digital address, to which coins can be sent.
The address is a string of numbers and English letters about 30 characters long. There is no cost to create a new wallet, or a limit on the amount of wallets you can have. There are several types of wallets, which differ mainly in their security level.
How is Bitcoin being transferred? How long does it take to send Bitcoin?
A Bitcoin transaction is a digitally signed order and hence securely encrypted. The transaction is signed by the outgoing wallet and gets broadcast to the internet, and then gets listed on the block explorer.
This explorer is a log that keeps track of all Bitcoin transactions. The log is divided into blocks, each block contains of a number of log commands, and once the block is closed, the actual transaction takes place. It takes an average of about 10 minutes to close a block and confirm a Bitcoin transaction. Most exchanges require at least 2-3 confirmations in order to ensure a bitcoin transaction.
How much does it cost to send Bitcoin?
The only cost of a Bitcoin transaction from one place to another (doesn’t matter the physical distance) is the miner’s fee, which is added to each order and paid to the miner for his work to close the block.
Relative to the means of money transfers, the cost of transferring Bitcoin is significantly cheaper. The fee is not fixed and most of the wallets automatically calculate the fee required. The higher the fee, the faster the transfer will be (i.e., your transfer will be handled by the miner, who prefers to take the higher fee transactions) As of writing this, Bitcoin’s transaction cost (fee) is around 1 USD.
Is it possible to buy or send less than one Bitcoin?
Bitcoin has 8 numbers after the decimal. The smallest amount is 0.00000001 Bitcoin and this unit of measurement is called one Satoshi. It is better not to send such a small amount because the transaction fee will be higher than the amount sent.
Bitcoin use: Who accepts Bitcoin? What can I buy with Bitcoin?
Today more and more business places and online stores are adopting Bitcoin as a valid payment method. Bitcoin’s daily use as money is still not as common as the traditional bank account, but with the help of companies such as Xapo and Bitpay, credit cards can be linked directly to Bitcoin wallets and are respected anywhere as a standard credit card.
What affects the price of Bitcoin?
As stated, Bitcoin is traded on an open free market. Its value is affected by supply and demand as in any normal market. According to past events, a direct connection can be discerned between instability and crisis around the world and the Bitcoin.
For example, political events such as the Brexit (the UK voted to leave the European Union), the last US elections where president Trump was elected, cancellation of the largest Rupee bills in India – all of which have recently led to an increase in the Bitcoin’s value.
Of course, an event such as recognition of Bitcoin as a legitimate way of payment (like in Japan) also increased Bitcoin’s value, whereas hacking of crypto exchanges, Bitcoin regulation, the postponement of the Bitcoin’s ETF caused panic and a rapid decline in value. So – we decided to publish an article with an appropriate answer to the ultimate question – should I buy Bitcoin?
What is the Guinness record for the most expensive pizza?
During the summer of 2010, when many had doubted the concept of Bitcoin, one of the early adopters named Laszlo Henitz tried very hard and succeeded in ordering pizza and paid for it with Bitcoin.
In those days, Bitcoin was worth nothing (cents) and to order two family pizzas worth $ 30, Laszlo paid 10,000 Bitcoins! What was later considered as the first ever purchase in Bitcoin, became also the world’s most expensive pizza. 10,000 Bitcoins worth today is worth more than 25 million USD.
Original article: https://cryptopotato.com/bitcoin-for-beginners/
It's said that Bitcoin allows someone to be their own bank. This means that when it comes to money Bitcoin users are only beholden to themselves: no third party can dictate to a Bitcoin user how they may spend their money. However this principle of self-determination also means that when it comes to security Bitcoin users have only themselves to rely upon.
There are a wide variety of ways to use Bitcoin, which means that securing Bitcoin is not a one-size-fits-all proposition. Generally though, there are two recommended configurations for using Bitcoins: hot and cold wallets. Hot wallets optimize for ease of spending and movement, cold wallets go the other way and optimize for difficulty of movement to prevent theft.
Hot wallets are where Bitcoin commerce happens, coins can flow in and out with the minimum of resistance needed to prevent theft. There are many use cases where a hot wallet is appropriate: receiving payments from third parties, making small daily purchases at points of sale, regular or bulk fund transfers to generic endpoints, and converting to fiat to send an outside currency.
For receiving payments, it's recommended that the highest levels of validation be used. Even receiving funds from a trusted person may be suspect, the chain of trust is only as solid as its weakest link, if the trusted person re-sends coins from an untrusted third party, then the trusted person's funds cannot be trusted.
A strong user flow for this use-case is to use a strongly validating wallet as a proxy. Any funds that are known to have been validated by a strongly validating wallet are safe, even when transferred to a weakly validating wallet: the worst case scenario being that they do not transfer to the weakly validating wallet successfully.
Recommended strongly validating wallet:
For sending payments on the go or casual payments online, a mobile wallet is seen as a fairly secure option. Although it's unwise to store large amounts on a mobile wallet due to the risk of device loss or theft, a small amount of money on an iPhone or Android is seen as practical as long as those platforms' default security mechanisms have not been bypassed and well-vetted software is used.
Recommended well-vetted mobile wallets:
For transferring larger amounts of funds or making payments from small to large, it's useful to have a wallet that tempers extreme security with ease-of-use. The most effective way to achieve this utility is through the use of MultiSig
, a feature of Bitcoin that allows multiple independent signatories to cryptographically sign off on outgoing fund transfers. This method is seen as highly secure: an attacker attempting to purloin funds must simultaneously compromise multiple independent devices in order to perform an unauthorized spend.
Other security methods are possible that separate and isolate potential attackers, such as crafting transactions on an offline or single purpose computer, but the inconvenience of those methods may lead to their disuse, whereas a multiple signature flow can be simple and closely follows the general security industry best practice of requiring multiple factors for authentication. Using a desktop wallet for regular spending is recommended, due to the standard desktop security model that places reduced trust in the platform vendor.
Recommended MultiSig wallets
A Bitcoin user may stand apart from fiat and never touch it, but in practical reality no man is an island and the necessity or desire to interact with a fiat accepting merchant or a less enlightened individual may arise. To ease this process, custodial wallets and debit cards have been developed as compact convenient fiat exchanges. A user simply stores some Bitcoin with a service; when a fiat spend is requested the service automatically performs a market trade and completes the spend. Although generally speaking custodial wallets are not recommended, in the case of spending fiat they are a practical best solution.
Recommended Fiat Spending Solutions
Many users of Bitcoin have absolutely no need to access the majority of their funds on a day to day basis. To take advantage of this fact, these users can dramatically improve the security of their funds by placing them in a difficult to access cold storage wallet. Many solutions have been created for this use case, but generally speaking there are two broadly useful ways to accomplish cold storage: hardware wallets and HD backup seeds.
From a security perspective all software wallets are extremely problematic: they share a platform with other programs, any one of which may be malicious and abscond with user funds. Platform security features, dedicated computers, or software defensive programming can mitigate the problem but from a logical security perspective the surface area open to attack is much wider than absolutely necessary. A hardware wallet device addresses this problem by being designed specifically to be logically separate and single purpose, minimizing risk of unauthorized fund transfer.
Recommended hardware wallets:
Every wallet stores a set of data called private keys
, these keys are simply secret random numbers that are used to sign all fund transfers. If wallet files are deleted, and no backup is made, this can mean a loss of funds for the wallet owner: since he can no longer sign a transfer, he can no longer spend his funds.
To avoid this scenario, all that is needed is a backup of the private keys. Not only is this important for securing funds, it can be used as a method to secure funds in a cold way. By deliberately and securely erasing a hot wallet and keeping the backup out of the reach of any network or computer, the funds are logically separated it from the possibility of remote theft.
The best way to accomplish this is a durable and simple system called a Hierarchical Deterministic Seed, or HD
seed, a system formalized in Pieter Wuille's Bitcoin Improvement Proposal BIP 32
. Essentially, this backup scheme specifies a single random number that is used as a starting seed to deterministically generate a lot of other random numbers, or private keys, to be used by a wallet instead of many individual isolated random numbers that must be collectively backed up.
The big advantage to this system is the extreme ease of backup and restoration: a seed can be encoded as a simple set of twelve words, which are easily written down. Users should keep at least three copies of their seed in separate, secure places, inclusive with a software or hardware wallet using the seed. Various mechanisms exist to improve the durability of stored seeds: laminated paper, safe deposit boxes, safes, etc. Writing down the seed is preferable to printing, as printers and the chain of printing may leak a copy along the way.
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