FAQ’s About Bitcoin
What is Bitcoin?
Bitcoin is the world’s first decenteralized digital peer-to-peer crypto currency, which was developed by a person or group of person by the pseudonym Satoshi Nakomoto. Bitcoin was introduced on 31 October 2008 to a cryptography mailing list, and released as open-source software on January3 2009.Bitcoin works through the internet and uses peer-to-peer technology. It is open-source and free for everyone to be part of. It has a payment system within its protocol which helps the transfer of value as fast as an email. Being unique and different from traditional fiat currencies.
What is a AltCoin?
An AltCoin is basically an Alternative Coin, which are all the other cryptocurrencies other than the Bitcoin. This term covers over the more than 100 other cryptocurrencies that currently exist in circulation, all competing to become the next Bitcoin. Just like with the Bitcoin, AltCoins are also decentralized, not regulated by any bank, but instead by the market
How are bitcoins created?
New bitcoins are created by decentralized process called “Mining”. Bitcoin miners are processing and validating transactions and securing the network using specialized hardware and softwares developed specifically for Bitcoin mining and in return are collecting new bitcoins in exchange. Its like,as a bank clerk performs verifying of transaction,collecting and depositing cash,etc and getting paid in return, similarly a miner performs the job of validating the transactions and securing the network and in return gettimg rewarded by new bitcoins generated by the bitcoin network.
How does Bitcoin work?
From a common lay-mans perspective, Bitcoin is nothing more than a mobile app or computer program that provides a personal Bitcoin digital wallet and allows a user to send and receive bitcoins with them. Just like sending mails or performing internet banking transactions.
From the perspective of miners, it is a bit technical and is explained in our article about mining.
Click here to read about mining.
How is Bitcoin price determined?
The price of a bitcoin is determined by simple market rule of demand and supply. When demand for bitcoins increases, the price increases, and when demand falls, the price falls. There is only a limited number of bitcoins in circulation and new bitcoins are created at a predictable and decreasing rate, which means that demand must follow this level of inflation to keep the price stable.
From where does bitcoin gets its value?
Bitcoins have value because they are useful as a form of money. Bitcoin has the characteristics of money (durability, portability, fungibility, scarcity, divisibility, and recognizability) based on the properties of mathematics rather than relying on physical properties (like gold and silver) or trust in central authorities (like fiat currencies). In short, Bitcoin is backed by mathematics. With these attributes, all that is required for a form of money to hold value is trust and adoption. In the case of Bitcoin, this can be measured by its growing base of users, merchants, and startups. As with all currency, bitcoin’s value comes only and directly from people willing to accept them as payment.
Who accepts Bitcoin as Payment?
Companies like Microsoft,Tesla,Dell,Wordpress.com, etc have started accepting payment in the form of bitcoin. Even some charitable organisations and charitable hospitals have started accepting bitcoins as donation.
Who controls the bitcoin network?
Nobody owns the Bitcoin network much like no one owns the technology behind email. Bitcoin is controlled by all Bitcoin users around the world. While developers are improving the software, they can’t force a change in the Bitcoin protocol because all users are free to choose what software and version they use. In order to stay compatible with each other, all users need to use software complying with the same rules. Bitcoin can only work correctly with a complete consensus among all users. Therefore, all users and developers have a strong incentive to protect this consensus.
Why should I buy bitcoin?
Going by what seems to be people’s favourite feature of Bitcoin – the dramatic increase in price and it’s future potential to keep increasing, as unlike all other currencies Bitcoin is a deflationary currency. As an asset class, it has been voted as top preference owing to its virtual and decentralised nature. It has been largely compared to gold and even sometimes called “Virtual Gold” . Bitcoin can be used exactly as money anywhere in the globe. Bitcoin gives you the freedom to control your finances. When you start exploring you will begin to believe that with the Bitcoin technology, the possibilities are endless.
What if Bitcoins are lost?
When a user loses his wallet, it has the effect of removing money out of circulation. Lost bitcoins still remain in the block chain just like any other bitcoins. However, lost bitcoins remain dormant forever because there is no way for anybody to find the private key(s) that would allow them to be spent again. Because of the law of supply and demand, when fewer bitcoins are available, the ones that are left will be in higher demand and increase in value to compensate.
Are bitcoins legal?
In General, Bitcoin has not been made illegal by legislation in most countries. There maybe restrictions and limits for the usage of it in some countries.
Regulators from various countries are taking steps to provide individuals and businesses with rules on how to use this new technology with the formal, regulated financial system.
For example, the Financial Crimes Enforcement Network (FinCEN), a bureau in the United States Treasury Department, issued non-binding guidance on how it characterizes certain activities involving virtual currencies.
Legality is different in different countries.
KryptoMoney.com will come up with a list of countries accepting and legalizing usage of bitcoins soon.
Till then, search over the internet to find legality of Bitcoins in your Country.
What about taxes on bitcoin?
At present Bitcoin is not a fiat currency with any legal tender status in any jurisdiction, but it may attract tax liabilities in some countries. Well this depend upon the rules and regulations of the particular country regarding taxation of Bitcoin and is different in different countries. There is a huge variety of rules and regulations in many different countries which could cause income, sales, payroll, capital gains, or some other form of tax liability to arise with Bitcoin.
KryptoMoney.com will come up with a list of countries and their taxation regarding Bitcoin. Till then search over the web to find your country’s rules and regulation about taxation of Bitcoin.