General
What is Bitcoin?
Bitcoin is a decentralized digital currency based on a peer-to-peer network. It enables a new payment system and entirely digital money without the need for central authorities or intermediaries. Technically, Bitcoin is the first decentralized distributed payment network powered by its users. From a user perspective, Bitcoin functions like internet cash. It's also the most prominent example of triple-entry accounting.
Who created Bitcoin?
Bitcoin is the first implementation of "cryptocurrency," a concept described by Wei Dai in 1998. The idea involves a new form of money controlled by cryptography instead of a central authority. The first Bitcoin specification and proof of concept were published in 2009 by Satoshi Nakamoto, who left the project in late 2010 without revealing much about their identity. Development continues with contributions from many developers.
Satoshi’s anonymity has raised concerns, but these are unfounded given Bitcoin’s open-source nature. The protocol and software are transparent, allowing anyone to review the code or create modified versions. Changes are only adopted by consensus, meaning no single entity controls Bitcoin.
Who controls the Bitcoin network?
No one owns Bitcoin, just as no one owns email technology. The network is controlled and maintained by users worldwide. Developers improve the software but cannot force rule changes—users freely choose which software to run. For the system to work, all users must run compatible software adhering to the same rules. Bitcoin’s stability relies on full consensus among users.
How does Bitcoin work?
For average users, Bitcoin is an app (or wallet) that functions like a personal bank account, allowing payments and receipts. Behind the scenes, Bitcoin uses a public ledger called the blockchain, maintained by all network participants. Transactions are verified through cryptographic signatures, ensuring only the owner can spend their coins. Users can also earn Bitcoin by processing transactions through mining. Learn more at How Bitcoin Works.
Do people actually use Bitcoin?
Yes. An increasing number of businesses and individuals use Bitcoin, including restaurants, law firms, and online services like Namecheap and WordPress. Bitcoin’s total market value has grown significantly, with daily exchange volumes reaching millions of dollars.
How do I get Bitcoin?
- As payment for goods/services.
- Buy from exchanges.
- Purchase locally via peer-to-peer platforms.
- Earn through mining.
Most exchanges avoid credit cards/PayPal due to chargeback risks.
How easy is it to pay with Bitcoin?
Bitcoin payments are simpler than credit cards—no intermediaries are needed. Users enter the recipient’s address and amount in their wallet app. Many wallets support QR codes or NFC for quick transactions.
What are Bitcoin’s advantages?
- Payment freedom: Send/receive any amount globally, instantly.
- Low fees: Minimal processing fees compared to traditional methods.
- Reduced fraud risk: Transactions are irreversible and contain no sensitive data.
- Full control: Users manage their funds without third-party interference.
- Transparency: All transactions are public and verifiable.
What are Bitcoin’s disadvantages?
- Adoption: Still limited compared to traditional currencies.
- Volatility: Price fluctuations are common due to the nascent market.
- Ongoing development: The technology is still evolving.
Why do people trust Bitcoin?
Trust stems from Bitcoin’s decentralized, open-source nature. Anyone can audit the code, and transactions are secured by cryptography. No single entity controls Bitcoin, making it resilient even if some users act maliciously.
Can I earn money with Bitcoin?
While Bitcoin offers opportunities (mining, trading, entrepreneurship), there are no guarantees. It’s akin to investing in a startup—high risk, high reward. Always assess risks carefully.
Is Bitcoin purely virtual?
Bitcoin is as tangible as digital banking. It can be used online or physically (e.g., Casascius coins), though mobile payments are more common.
Is Bitcoin anonymous?
Bitcoin offers privacy similar to traditional payment methods but isn’t fully anonymous. All transactions are recorded publicly. Privacy tools are available, but misuse is possible. Bitcoin isn’t immune to regulation.
What if I lose my Bitcoin?
Lost coins are permanently out of circulation, potentially increasing the value of remaining coins due to reduced supply.
Can Bitcoin scale to compete with major payment networks?
Bitcoin can handle higher transaction volumes than currently used. Scaling solutions are underway, like lightweight clients and specialized services. Learn more at Scalability.
Legal Aspects
Is Bitcoin legal?
Bitcoin isn’t illegal in most countries, but some restrict foreign currencies (e.g., Argentina, Russia). Regulations vary—check local laws. For Slovenia, see Wikipedia.
Is Bitcoin used for illegal activities?
Like cash, Bitcoin can be misused, but its transparency often deters crime. Its design prevents counterfeiting and unauthorized charges.
Can Bitcoin be regulated?
Bitcoin’s protocol can’t be altered without user consensus. Governments may impose usage restrictions, but banning Bitcoin would stifle domestic innovation.
What about taxes?
Tax obligations vary by jurisdiction. Bitcoin may be subject to income, sales, or capital gains taxes. Consult local regulations.
Consumer protection?
Bitcoin enables self-managed transactions but also supports dispute resolution tools like multisig escrow. Users must safeguard their funds.
Economics
How are new Bitcoins created?
Bitcoins are generated through mining—a competitive process where miners earn rewards for securing the network. The protocol ensures a fixed supply cap of 21 million coins.
Why do Bitcoins have value?
Value derives from utility as money. Bitcoin’s scarcity and decentralization make it a unique asset. Acceptance grows as more users and businesses adopt it.
What determines Bitcoin’s price?
Supply and demand. Limited supply and growing adoption drive price volatility. Market sentiment, media coverage, and speculation also play roles.
👉 Learn more about Bitcoin trading
Could Bitcoin become worthless?
Yes, like any currency, Bitcoin could fail if trust erodes. However, its decentralized nature and growing adoption suggest resilience.
Is Bitcoin a bubble?
Rapid price increases don’t inherently indicate a bubble. Bitcoin’s value is tied to its utility and adoption, not artificial hype.
Is Bitcoin a Ponzi scheme?
No. Bitcoin has no central authority promising returns. It’s a voluntary market-driven system like gold or fiat currencies.
Isn’t Bitcoin unfair to late adopters?
Early adopters took risks investing in unproven technology. Rewards reflect this, similar to startup investing.
Will Bitcoin’s limited supply be a problem?
No. Each Bitcoin is divisible to eight decimal places (0.00000001 BTC), allowing microtransactions.
Could Bitcoin cause deflation?
Deflation fears are overstated. Bitcoin’s design aims for long-term stability, not continuous inflation or deflation.
Transactions
Why wait 10 minutes for confirmations?
Confirmations ensure transaction finality. Each block added exponentially reduces reversal risk. Six confirmations (~1 hour) are considered secure.
What are transaction fees?
Most transactions are free, but voluntary fees speed up processing. Fees prevent network spam.
What if my computer is off during a transaction?
Transactions are recorded on the blockchain. Your wallet updates once reconnected.
What is "syncing" with the network?
Full nodes download/verify the entire blockchain for security. Lightweight wallets avoid this but rely on others for data.
Mining
What is Bitcoin mining?
Mining involves solving cryptographic puzzles to validate transactions and secure the network. Miners earn fees and new Bitcoins.
How does mining work?
Miners compete to add blocks to the blockchain, requiring significant computational power. Difficulty adjusts to maintain a 10-minute block time.
Do I need special equipment?
Yes. Early mining used CPUs, but today requires ASICs (specialized hardware). Learn more at BitcoinMining.com.
Security
Is Bitcoin secure?
Bitcoin’s protocol and cryptography are battle-tested. User errors (e.g., lost wallets) are the main risks. Follow security best practices.
Has Bitcoin been hacked?
Protocol flaws are rare and quickly patched. Exchange breaches occur, but Bitcoin itself remains uncompromised.
Could quantum computing break Bitcoin?
Quantum computers could threaten cryptography, but Bitcoin could adapt with post-quantum algorithms if needed.
👉 Explore secure Bitcoin storage
Help
Where can I learn more?
Visit Resources and Community pages or check the FAQ on the Wiki.