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Bitcoin FAQ |
| Q1. What is Bitcoin? |
In non-technical language, Bitcoin is a digital currency in which transactions can be performed without the need for a credit card or central bank. It's designed to enable users to send money over the Internet in a very simple and efficient way. Bitcoin as a payment system was invented by Satoshi Nakamoto in 2009. The system is peer-to-peer, in which people can transact directly without needing an intermediary. Transactions are verified by network nodes and recorded in a public distributed ledger called the blockchain. The system works without a central repository or single administrator, which is categorized as a decentralized virtual currency. Only 21 million bitcoins will be issued, which make it speculative. For a more detailed explaination, go to Bitcoin Wiki. |
| Q2. Who runs Bitcoin? What is the company behind Bitcoin? |
| In short, no one runs Bitcoin. Bitcoin is run collectively by the users who uses the Bitcoin Client, and any changes to the Bitcoin system have to be approved by the majority of users before they are implemented. |
| Q3. How are new bitcoins created? |
New bitcoins are generated by the network through the process of "mining". In a process that is similar to a continuous raffle draw, mining nodes on the network are awarded bitcoins each time they find the solution to a certain mathematical problem (and thereby create a new block). Creating a block is a proof of work with a difficulty that varies with the overall strength of the network. The reward for solving a block is automatically adjusted so that, ideally, every four years of operation of the Bitcoin network, half the amount of bitcoins created in the prior 4 years are created. A maximum of 10,499,889.80231183 bitcoins were created in the first 4 (approx.) years from January 2009 to November 2012. Every four years thereafter this amount halves, so it should be 5,250,000 over years 4-8, 2,625,000 over years 8-12, and so on. Thus the total number of bitcoins in existence can never exceed 20,999,839.77085749 and counting. Blocks are mined every 10 minutes, on average and for the first four years (210,000 blocks) each block included 50 new bitcoins. As the amount of processing power directed at mining changes, the difficulty of creating new bitcoins changes. This difficulty factor is calculated every 2016 blocks and is based upon the time taken to generate the previous 2016 blocks. See Mining. |
| Q4. Is there a limit to the amount of Bitcoins generated? |
| The number of Bitcoins in existence will never exceed 21 million. The last block that will generate coins will be block #6,929,999 which should be generated at or near the year 2140. The total number of coins in circulation will then remain static at 20,999,999.9769 BTC. |
| Q5. How much does a Bitcoin cost? What's the units of Bitcoin? |
The current market price for a Bitcoin is always changing due to the supply and demand for it. Bitcoins are traded at Bitcoin Exchanges. A historical Bitcoin price chart can be found here. The bitcoin (abbr. BTC) is the unit that was used in the original Bitcoin wallet software. There is nothing particularly special about this unit, but it is by far the most common unit due to tradition. The smallest value that the Bitcoin network supports sending is the satoshi, one hundred-millionth (0.000 000 01) of a bitcoin. In other words, the network does not support sending fractions of a satoshi. The unit was named in honor of Bitcoin's creator. Another common unit is the bit, one millionth (0.000 001) of a bitcoin. For an overview of all proposed units of Bitcoin, see Units. BitEvery.com uses bit as the unit for our "Tip with bits" and "Share your bits" services, because of our nature of micropayment. 1 Bitcoin = 1,000,000 bits. |
| Q6. What is a Bitcoin address? |
A Bitcoin address is a unique identifier which allows you to receive Bitcoins. With PayPal you send funds to an email address, and similarly with Bitcoin you send funds to a Bitcoin address. For example, this is one of our Bitcoin addresses: 1JArS6jzE3AJ9sZ3aFij1BmTcpFGgN86hA Please verify that you have copied the destination address exactly before sending Bitcoins to it. Bitcoin transactions are not reversible! |
| Q7. What is a private key? |
A private key is a secret code which allows the user to prove his ownership of his Bitcoins. Every Bitcoin address has a matching private key, which is saved in the wallet file of the person who owns the balance. The private key is mathematically related to the Bitcoin address, and is designed so that the Bitcoin address can be calculated from the private key, but importantly, the same cannot be done in reverse. Please keep your private keys safe, and make periodic backups to prevent the loss of Bitcoins. Anyone with your private keys can spend your Bitcoins! |
| Q8. What are the fees involved? |
The transaction is usually free if the sum transacted is greater than 0.01 BTC. A token sum is imposed to provide some incentive to the miners to include the transaction in the blockchain.. At the moment, many transactions are typically processed in a way where no fee is expected at all, but for transactions which draw coins from many Bitcoin addresses and therefore have a large data size, a small transaction fee is usually expected. Please see the bitcoin wiki for calculating minimum fees. |
| Q9. What does 'unconfirmed' mean? |
| It means that the transaction has not yet been included in the blockchain, and is still reversible. A transaction typically takes around 10 minutes to be confirmed. When that happens, it is said that one confirmation has occurred for the transaction. With each subsequent block that is found, the number of confirmations is increased by one. To protect against double spending, a transaction should not be considered as confirmed until a certain number of confirmations is seen. |
| Q10. What is this 'blockchain' you talk about? |
| The blockchain is a public ledger of all transactions in the Bitcoin network. Blockchain.info allows you to navigate the bitcoin blockchain. We also operate Bitcoin's largest and most secure wallet service. |
| Q11. Where could I learn more about Bitcoin? |
| For more information about bitcoin, please check: |
