What is Bitcoin?
Bitcoin is a consensual network that allows a new payment system and a fully digital currency. It is the first network among decentralized payment peers driven by its users without a central authority or intermediaries. From a user's point of view, Bitcoin is like money for the Internet. Bitcoin may be the only existing triple accounting system.
Who created Bitcoin?
Bitcoin is the first implementation of a concept known as "cryptographic currency", which was first described in 1998 by Wei Dai on the e-mail list "cypherpunks", where he proposed the idea of a new type of money that would use the cryptography to control its creation and transactions, rather than a centralized authority. The first specification of the Bitcoin protocol and the proof of concept was published by Satoshi Nakamoto in 2009 on an email list. Satoshi left the project at the end of 2010 without revealing much about him. Since then, the community has grown exponentially and has numerous developers working on the Bitcoin protocol.
Satoshi's anonymity has sometimes raised unjustified suspicions, many of them caused by a lack of understanding about the open source on which Bitcoin is based. The Bitcoin protocol and its software are published openly and any programmer anywhere in the world can review it or create its own modified version of the software. Like the current programmers, Satoshi's influence has been limited to the fact that the changes he made were adopted by the others and, therefore, he did not control Bitcoin. Thus, knowing the identity of the inventor of Bitcoin is just as relevant as knowing who invented the paper.
Who controls the Bitcoin network?
In the same way that no one controls the technology behind electronic mail, Bitcoin does not have owners either. Bitcoin is controlled by all Bitcoin users in the world. Although programmers improve the software, they can not force a change in the Bitcoin protocol because all other users are free to choose the software and version they want. To keep them compatible with each other, all users need to use software that complies with the same rules. Bitcoin can only work correctly if there is consensus among all users. Therefore, all users and programmers have a great incentive to protect this consensus.
How does Bitcoin work?
From the user's perspective, Bitcoin is nothing more than a mobile or desktop application that provides a personal Bitcoin wallet and allows the user to send and receive bitcoins with it. This is how Bitcoin works for most users.
Behind the cameras, the Bitcoin network shares a public accounting called "block chain". This accounting contains each transaction processed, allowing verification of the validity of each transaction. The authenticity of each transaction is protected by digital signatures corresponding to the shipping addresses, allowing all users to have full control when sending Bitcoins from their Bitcoin addresses. In addition, anyone can process a transaction using the computing power of specialized hardware and get a reward in Bitcoins for this service. This is commonly called "mining" or mining. To learn more about Bitcoin, you can consult the dedicated page and the original document .
Is it really used by people?
Yes. There is a growing number of businesses and individuals using Bitcoin. This includes traditional businesses such as restaurants, houses, law firms and popular Internet services such as Namecheap, WordPress, Reddit and Flattr. Although Bitcoin is still a relatively new phenomenon, it is growing fast. At the end of August 2013, the value of all the bitcoins in circulation exceeded 1.5 trillion dollars and each day the equivalent of millions of dollars in bitcoins was exchanged.
What are the advantages of Bitcoin?
Freedom of Payments - With Bitcoin, you can send and receive any amount of money instantly to and from anywhere in the world, at any time. Without banks with schedules. Without Borders. Without imposed limits. Bitcoin users always have complete control over their money.
Very low rates - Bitcoin payments are currently processed with low or no fees. Users can include a fee in their transactions to receive priority in their processing, which results in faster confirmation of transactions by the network. In addition, merchant processors are in charge of advising merchants on transaction processes, converting bitcoins to the fiduciary currency and depositing funds directly into the merchant's bank account on a daily basis. As these services are based on Bitcoin, they are offered at much lower charges than those offered by PayPal or credit card networks.
Lower risks for merchants - Transactions with Bitcoin are secure, irreversible, and do not contain personal and private customer data. This protects merchants against losses caused by fraud or fraudulent return, and PCI compliance is not required. In addition, merchants can operate in new markets where credit cards are not available or fraud levels are too high. This leads to better commissions, more extensive markets and less administrative costs.
Security and control - Bitcoin users have complete control over their transactions; It is impossible for merchants to force unwanted or detected charges, as can happen with other payment methods. Bitcoin payments can be made without being associated with personal information. This offers a high level of protection against identity theft. Bitcoin users can also protect their money with backup and encryption.
Neutral and transparent - All information about the Bitcoin supply is available in the blockchain for anyone who wants to verify and use it. No individual or organization can control or manipulate the Bitcoin protocol because it is cryptographically secure. You can rely on Bitcoin for being completely neutral, transparent and reliable.
What are the disadvantages of Bitcoin?
Degree of acceptance - Many people do not yet know Bitcoin. Every day, more businesses accept Bitcoin to take advantage of its advantages, but the list is still small and needs to grow so that they can benefit from its network effect .
Volatility - The total value of bitcoins in circulation and the number of businesses using Bitcoin are very small compared to what it can be. Therefore, relatively small events, exchanges or business activities significantly affect the price. In theory, this volatility will decrease as the market and Bitcoin technology mature. Never before has a nascent coin been seen, so it is very difficult (and exciting) to imagine what will happen.
Ongoing development - Bitcoin software is still in beta phase with many incomplete features in development. New tools, features and services are being developed to make Bitcoin safer and more accessible to the masses. Many are not yet ready for the public. Most businesses with Bitcoin are new and offer no security. In general, Bitcoin is still in the process of maturing.
Why do people trust Bitcoin?
Much of the trust in Bitcoin comes from the fact that it does not require trust. Bitcoin is completely open source and decentralized. This means that anyone has access to the complete code at any time. Any developer in the world can verify how it works. All the transactions and bitcoins created during its existence can be clearly consulted in real time by any person. All payments can be made without depending on third parties and the entire system is protected by cryptographic algorithms reviewed by users, similar to what is used in electronic banking. No organization or individual can control Bitcoin and the network remains secure even if all its users can not be trusted.
Can I earn money with Bitcoin?
You should never expect to get rich with Bitcoin or any emerging technology. It is always important to be aware of anything that sounds too good to be true or that disobeys the basic rules of the economy.
Bitcoin is a growing universe of innovation and there are business opportunities that carry risks. There is no guarantee that Bitcoin will continue to grow, although until now it has developed very rapidly. Investing time and resources in anything related to Bitcoin requires entrepreneurial spirit. There are several ways to make money with Bitcoin such as mining, speculation or create new business. All these options are competitive and there is no guarantee of benefit. Each individual must make an assessment of risks and costs that involve any of these projects.
Is Bitcoin totally virtual and immaterial?
Bitcoin is as virtual as the credit cards and banking networks that people use every day. Bitcoin can be used to pay online and in physical stores like any other currency. Bitcoins can also be exchanged for a physical option such as Casascius coins , but paying with a mobile phone is usually easier . The balances of bitcoins are stored in an immense network and can not be altered fraudulently by anyone. In other words, Bitcoin users have exclusive control over their funds and bitcoins can not vanish just because they are virtual.
Is Bitcoin anonymous?
Bitcoin is designed to allow its users to send and receive payments with an acceptable level of privacy like any other currency. It is also true that Bitcoin is not anonymous and can not offer the same level of privacy as money. The use of Bitcoin leaves public records. There are several mechanisms to protect the privacy of users, plus those that are in development. Even so, a lot of work remains before these features are correctly used by most Bitcoin users.
There have been some concerns about private transactions with Bitcoin that could be used for illegal purposes. However, Bitcoin will undoubtedly be subject to regulations similar to those that exist within financial systems. Bitcoin can not be more anonymous than cash and will surely not prevent criminal investigations. In addition, Bitcoin is created to prevent a large number of financial crimes.
What happens when bitcoins are lost?
When a user loses his wallet, the effect is to remove the money from circulation. Lost bitcoins still remain in the blockchain just like other bitcoins. However, the lost bitcoins remain inactive forever because there is no way that anyone can find the private key (s) that allow them to be used. By the law of supply and demand, when there are fewer bitcoins available, these will have greater demand and therefore increase their value.
Can Bitcoin scale up to become a reference payment network?
The Bitcoin network can process many more transactions per second than it does today. Even so, it is not ready to jump to the level of large credit cards. Work is being done to raise the current limitations and the requirements of the future are well known. Since the creation, every aspect of the Bitcoin network has been in a continuous process of maturation, optimization and specialization, and should be expected to remain that way in the coming years. As traffic grows, more Bitcoin users will use lighter clients and the network nodes will offer a better service. For more information, visit the wiki page on Scalability .
Source Bitcoin.org