The Ultimate Bitcoin Frequently Asked Questions List for 2020

  1. What is Bitcoin? What does 'Bitcoin' mean?

  2. Bitcoin is the world's first decentralized cryptocurrency. Cryptocurrency is a medium of exchange backed by cryptography. A decentralized cryptocurrency keeps track of all transactions by all addresses on a peer-to-peer shared record. The main innovation of Bitcoin is the Blockchain, which breaks up the record of transactions into blocks, each one crypographically connected to the previous. Bitcoin is traded on bitni.com.

  3. How does Bitcoin work?

  4. Blockchain based cryptocurrencies like Bitcoin work by grouping transactions together in data blocks, then linking the blocks cryptographically. The chain of blocks is stored across a decentralized network of nodes, and distributed as peer-to-peer shared files. Quantities of Bitcoin are stored at addresses, cryptographic sequences paired with a private key used to spend the amount at the address. The user's wallet keeps track of all their Bitcoin addresses and adds up the balance. All of these were innovations introduced by Bitcoin.

  5. Who invented Bitcoin? How was Bitcoin created? Who is behind Bitcoin?

  6. The correct answer is 'unknown'. There is no evidence of who really created Bitcoin. 'Satoshi Nakamoto' is just an alias. The real inventor(s) disappeared without a trace. (One very important testament to Bitcoin's anonymity: After over a decade, the identity of the Bitcoin creator(s) cannot be found out from their transactions.) Some have claimed to be the inventor, but they are almost certainly impostors. It's possible Bitcoin does not originate from a single mind, but an underground team of cryptography and programming ninjas.

  7. What is Bitcoin used for?

  8. Bitcoin is used for anything money is used for - buying, selling, donations. But Bitcoin can also be used for even more things than fiat currency: A means of accepting donations or facilitating commerce that cannot be shut down by governments or the banking system. Also storing up wealth that cannot be confiscated.

  9. Why does Bitcoin have value?

  10. Bitcoin has more value than Fiat Currency because it's more useful: It's anonymous, decentralized, irreversible, cannot be devalued, cannot be confiscated, can be sent over the internet to anywhere in the world in minutes. Things that are very useful and scarce tend to be valuable. One reason Bitcoin has value because it fulfills all of the requirements of money: Store of Value, Medium of Exchange, Unit of Account.

  11. How many Bitcoin coins are there? What is the Bitcoin maximum supply?

  12. The maximum supply of Bitcoins is limited to 21 million. The reason is halving - the reward for mining is reduced by half every 4 years. 210,000 transaction blocks are processed every 4 year halving cycle. The first block reward to miners was 50 coins per block, after halving they were 25, then 4 years after that 12.5, and the series keeps reducing by half. All the block rewards that will ever be add up to 100, so 210K times that is 21 million.

  13. What is a Bitcoin transaction? How do Bitcoin transactions work?

  14. A Bitcoin transaction is a transfer of value from one address to another. The transaction spends the outputs of previous transactions as it's input. The entire value of an output is spent, so any remainder may be sent back to the sending address - this is called the "change". A transaction is created by a user on their Bitcoin client software, then broadcast out to all the other nodes and becomes part of the Blockchain.

  15. Are Bitcoin transactions anonymous? Can Bitcoin be traced?

  16. The blockchain is a public record of all transactions by all addresses. However, an address is just a number - it doesn't reveal anything about the identity of the one using it, like a street address can. As long as this number is never linked to an identity, the Bitcoin user is safe. There is no way to "trace" a bitcoin address to the person using it - unless they leave clues connecting their bitcoin address to their physical identity. bitni.com has maximum anonymity - we don't ask for personal details.

  17. What is Bitcoin mining? How is Bitcoin mined? How does Bitcoin mining work?

  18. Bitcoin mining is the computational process of adding new blocks to the blockchain. New transactions are grouped together in a block. New blocks must cryptographically connect to previous blocks with a proof-of-work hash function. Mining hardware is designed to the hashing function as quickly as possible. Miners are paid a small transaction fee for including new transactions in blocks. Mining also creates new Bitcoins, which go to the miners.

  19. Can Bitcoin be taxed? Are Bitcoin gains taxable? Are Bitcoin transactions taxable?

  20. Bitcoin was not designed to be taxed. If no one reports their Bitcoin gains, there is no way an authoritarian regime can know who gained what. However, centralized exchanges with accounts and IDs do report their user's Bitcoin balance to tax authorities. If you want privacy from authoritarian regimes, you need an accountless exchange that doesn't ask for your ID - bitni.com is the best exchange in this regard.

  21. How does a Bitcoin ATM work? Are Bitcoin ATMs safe? Are Bitcoin ATMs anonymous?

  22. Bitcoin ATMs allow a customer to buy Bitcoin by inserting physical cash, like a vending machine, or send Bitcoin to receive physical cash. (The former are called "1 way" ATMs and the latter are called "2 way".) If the Bitcoin ATM is from a trusted manufacturer and operator, it should be safe to use. Different Bitcoin ATMs have differing AML/KYC requirements.

  23. Can Bitcoin scale?

  24. Bitcoin has scaled to handle millions of transactions per month. Bitcoin is software, and it can evolve to scale - the code can be modified with better algorithms and the network then upgrades to the more advanced version. Several modifications to the Bitcoin code like SegWit (Segregated Witness) and Lightning Network are helping to solve scaling issues.

  25. Can Bitcoin be stolen?

  26. Anyone who knows the private key can move the coins from an address. If the private key is not known, it's not possible to spend the coins at an address. Bitcoin stored in the wallets of a centralized exchange can be stolen - it happens all the time. At a Non-custodial exchange like bitni.com, you are in charge of your wallet at all times.

  27. Can Bitcoin be hacked?

  28. If the Bitcoin network could be hacked, it would have already happened. The blockchain is decentralized across thousands of independent nodes - the more nodes on the network, the higher the security. If any one node is compromised, it will not compromise the others. However, centralized Bitcoin exchanges are hacked all the time! That's why you need a non-custodial exchange like bitni.com.

  29. Where is Bitcoin stored? Where to store Bitcoin?

  30. The data of all Bitcoin transactions is stored in a public ledger (blockchain) distributed as peer-to-peer shared files. Each node has a complete copy of all transactions ever made - the blockchain. So the blockchain is stored in the cloud - not on a centralized server, but on thousands of independent nodes. Each user's Bitcoin balance is also kept track of in their wallet.

  31. What is a Bitcoin wallet? How do Bitcoin wallets work?

  32. A Bitcoin wallet stores all of the user's Bitcoin addresses. The sum value of all of the addresses in a wallet is automatically added up - this is the total balance of a wallet. Centralized exchanges store the user's wallet, which is risky. Non-custodial exchanges like bitni.com do NOT store user's wallets, which is much safer.

  33. Who uses Bitcoin? Where is Bitcoin used?

  34. Millions of people everywhere in the world use Bitcoin for all the same things as any other money is used for - buying, selling, and donations - and the number of users is growing rapidly. Anyone needing to transfer wealth internationally, especially outside the grasp of authoritarian regimes, for ridiculously low cost, will find Bitcoin useful if they are not already using it. Bitcoin is also used as an investment and a hedge against inflation.

  35. Who accepts Bitcoin? Where is Bitcoin accepted?

  36. Many merchants, especially online, accept cryptocurrencies as payment. Charities like Wikipedia accept donations in crypto. Web Hosts and Domain registrars often accept crypto. Large brick and mortar stores are starting to accept crypto payment. Some local restaurants are also coming on board. bitni.com accepts Bitcoin to convert to other currencies, of course.

  37. Why is Bitcoin the future?

  38. The reason why a cryptocurrency is the future can be summed up in 3 words: Because it's better. Bitcoin is a huge improvement over fiat currency. It is also an improvement over precious metals - they can't be wired over the internet. If central banks continue destroying the value of fiat currencies, cryptocurrencies will become even more important to the future of money.

  39. Can Bitcoin crash? Will Bitcoin crash?

  40. If Bitcoin were going to crash to zero, it would have probably done it already. There have been wild price swings - because it's new and there's a lot of speculation, like the internet when it first came out. But there are wild price swings with other commodities like oil. Bitcoin's low after it's all-time high in the tens of thousands of dollars is is a few thousand dollars. For Bitcoin to crash to $0, demand would need to be zero or supply would need to be infinite - a highly unlikely scenerio.

  41. Is Bitcoin a good investment?

  42. Bitcoin has gone from pennies to thousands and thousands of dollars in less than a decade, utterly blowning away the stock market, even gold and other precious metals, and far outperformed pretty much any other investment. For those that were buying Bitcoin when it was only a few dollars or even pennies, it has been one of the best investments of the century.

  43. Where to buy Bitcoin? How to get Bitcoin?

  44. Exchanges are where Bitcoin is bought and sold, however there are several types: Centralized Exchanges store the user's coins like a bank and require ID. Decentralized Exchanges (DEX) facilitate peer-to-peer buying and selling between users - and these can be done locally in-person or online. Non-Custodial exchanges like bitni.com are a quick and easy way of swapping cryptocurrencies without signing up.

  45. Can I buy Bitcoin without ID? Is there a way to get Bitcoin without SSN?

  46. Many Centralized exchanges have rigorous requirements for identification, such as uploading a scan of passport or other government documents. Decentralized exchanges usually have less stringent requirements for identification, especially if the transaction is in-person. Non-custodial exchange bitni.com does not require identification for crypto-to-crypto swaps. If you want Bitcoin without SSN, you've come to the right place.

  47. Can I get Bitcoin without KYC? Is it possible to buy Bitcoin without verification?

  48. KYC stands for Know Your Customer. Many regimes have become increasingly authoritarian towards cryptocurrency and seek to crack down on anonymous trading, by requiring the customer to upload documents proving their identity. Many exchanges have caved in to the pressure and now have KYC policies. Centralized exchanges almost always have KYC, some Decentralized exchanges do as well. bitni.com does not require KYC for crypto-to-crypto swaps.

  49. Should I buy Bitcoin or Gold? Gold vs Bitcoin?

  50. Gold has been used as money for millenia. Bitcoin has been used as money for a decade. Gold has a proven track record as a relatively stable store of value. It has gone up and down over the years, but no severe crashes or jumps. Bitcoin on the other hand is unstable, can swing wildly in a day. Gold has been physically confiscated by governments in the past. Bitcoin is mathematically impossible to confiscate by anyone who does not know the private key.

  51. Is Bitcoin publicly traded?

  52. Most Bitcoin trading is done by buying and selling coins directly by individual investors. However, there are cryptocurrency funds listed on stock markets. A Cryptocurrency Exchange Traded Fund (ETF) holds assets in single cryptocurrencies or a basket of them. It may be more convenient to buy into one basket fund instead of manually managing dozens of different cryptos and their respective wallets. In the case of Bitcoin, it is probable some Cryptocurrency ETFs are holding it.

  53. Can Bitcoin reach 10000? Can Bitcoin reach 100K? Can Bitcoin reach 1M?

  54. Tens of thousands, hundreds of thousands, or even millions for a Bitcoin may seem speculative, but Bitcoin's high is already in the tens of thousands. Bitcoin started out at practically nothing and rose in a parabolic curve to it's high thousands of times higher than the starting price. $100k is only about five times higher than the all time high. If the long term trend continues, Bitcoin could reach new highs orders of magnitude greater.

  55. How long is a Bitcoin transaction time?

  56. A new block on the Bitcoin blockchain is added every 10 minutes. The number of transactions in each block is limited to several thousand. Transactions paying higher fees are given priority over those paying lower fees, which must sometimes wait to be included in future blocks instead of the current one. A Bitcoin transaction time can be as short as the generation of one block in 10 minutes. However, 6 levels of blocks is needed for irreversibility, thus the safe transaction time is 60 minutes.

  57. How many confirmations for a Bitcoin transaction?

  58. A Bitcoin transaction can be tentatively completed in as little as 1 confirmation in 10 minutes. However, the latest blocks in the blockchain are changeable until more blocks are added after them. For irreversibility, 6 levels of blocks and thus 6 confirmations are needed. The latest block in the process of being added to the blockchain is changeable. Not till several more blocks have been added after it is that part of the blockchain considered immutable.

  59. How much is an Bitcoin transaction fee? How much does a Bitcoin transaction cost?

  60. A Bitcoin transaction fee is the cost of having transaction data included in blocks added to the blockchain permanent record, which fluctuates under market supply and demand. The highest fees are equivalent in Satoshis to scores of dollars, the lowest are pennies. Lots of factors affect Bitcoin transaction fees, such as the cost of electricity, the hardware capacity and competition between miners, the number of simultaneous transactions competing to be included in a block.

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