Every single day, i get questions about Bitcoin, how it works, how to do this and that, so I decided to write the answers to the most common question in one place, so they are easier to find.
If you stumble upon this mini-book, I’d suggest you treat it like a book.There is a table of contents below, use it to go to the part that interests you.
Unless, of course, you are new to the amazing world of cryptocurrencies and want to know more, then go read it all, I tried to explain as simple as I could.
Bitcoin, how it started?
The first mention of a product called Bitcoin was in August 2008 when two programmers using the names Satoshi Nakamoto and Martti Malmi registered a new domain called Bitcoin.org. In October of the same year, Nakamoto released a white paper called, “Bitcoin: A Peer-to-Peer Electronic Cash System.”
In the previous months, Nakamoto and a group of volunteer researchers had proposed different versions of the concept in forums and email threads. In 2008 it all came together.
This document sets forth the principles of Bitcoin, an electronic payment system that would eliminate the need for a central authority while ensuring secure, verifiable transactions.
Basically, the document described a new form of a currency that enabled reliable payments on the Internet – that is, they require a minimal amount that does not require trust between either party.
In other words, the system allowed two users who did not know or trusted each other to exchange money in the same way they could send money back and forth. The system also allowed users to confirm messages, transactions and data using a tool called public key encryption, eliminating the need to disclose their identities to transaction partners or third parties.
Pseudonymity was a byproduct in this case, but not a primary attribute.
In January 2009, the first Bitcoin currency transaction took place between two computers owned by Nakamoto , respectively Hal Finney, a developer and early cryptocurrency enthusiast.
Who is Satoshi Nakamoto?
To this day nobody knows who Satoshi Nakamoto really is. A man named Dorian Nakamoto was incorrectly named by a Newsweek reporter as the creator of Bitcoin in 2014.
It is speculated that it could be the same Hal Finney, developer of Parabo Corporation, as he received the first coins. Furthermore, many believe that Hal Finney would only work in the original team, but that it would not be the original founder. Some say that it should be Hal Finney as he would have had a neighbor named Satoshi Nakamoto.
He has also have been diagnosed with progressive lateral sclerosis, which should explain the inactivity.
There are also users with the suggestion that it should be Nick Szabo, and the name Adam Back was also mentioned. Adam Back is said to be responsible for making Bitcoin, because of a video by Barely Sociable drawing several parallels between Adam Back and Satoshi Nakamoto.
Craig Steven Wright is an Australian computer scientist and entrepreneur. In May 2016, Wright admitted to various media agencies that he was the true identity of Satoshi Nakamoto,the creator of Bitcoin. Wright claimed that he was forced to reveal his secret identity in order to avoid speculation and protect people close to him.
However, most Bitcoin specialists don’t believe he is Satoshi, because, according to them, he hasn’t produced a reliable proof to demonstrate without a doubt he is who is pretending to be.
Satoshi Nakamoto collaborated in the development of Bitcoin until 2010. Since then there has been no trace of him. Many have claimed to be Satoshi and many more will follow in the future. .
There are even websites that keep an eye on Satoshi’s alleged wallets, which is not surprising because Satoshi Nakamoto still has a lot Bitcoins in his digital wallets. There have been no moves in these wallets for a very long time, until recently (May 2020) Bitcoins were moved from one of the alleged wallets of Satoshi. It is not certain whether these Bitcoins actually belonged to Satoshi, but it is certain that they were mined in 2009.
The smallest possible amount that a Bitcoin can be divided into is named after the inventor of BTC, namely Satoshi. A Satoshi is 0.00000001 or 1/100 millionth of a Bitcoin.
Will we ever find out who Satoshi really is? Only time will tell, he or they have been hiding for at least 12 years.
However, due to the decentralized nature of Bitcoin, it is ultimately not considered important to know who Satoshi Nakamoto or the original creator of Bitcoin actually is.
What is Bitcoin used for
Satoshi Nakamoto originally created Bitcoin as an alternative, decentralized payment method. Unlike international bank transfers, Bitcoin was cheap to use and could be received almost immediately after sending.
An added benefit for merchants (less for users) was that it was irreversible, eliminating the threat of expensive chargebacks. In return, consumers benefit from a wider selection of merchants, both national and international, without having to worry about exchange fees. In addition, the details of their transactions are encrypted, which protects their personal information.
However, the improvement of domestic payment methods and the rapid development of alternative (non-cryptocurrency) forms of international transfers have diminished Bitcoin’s advantage in this area, especially given rising fees and frequent network bottlenecks.
In addition, increasing surveillance and regulations to prevent money laundering and illegal transactions have limited the use of the cryptocurrency for privacy reasons. In some parts of the world, Bitcoin is still an efficient and cheaper way to send money across borders and several startups are taking advantage of this feature. Last year, Coinbase added cross-border money transfers and custody services for major customers in Asia and Europe.
A recent partnership between crypto exchange Bitmex and Uruguay-based banking services provider Bantotal now enables instant Bitcoin payments at 60 banks in America.
However, the cost and speed benefits of Bitcoin are being eroded as traditional channels improve and network costs continue to rise and availability remains an issue in many countries.
While quite a few large and small retailers accept the cryptocurrency as a form of payment, reports suggest that the demand for this feature is not high. And many people feel more comfortable holding some of their assets in securely stored Bitcoin wallets, where a central authority cannot block access.
Since the start of the coronavirus began in March last year, we have witnessed a surge in demand for Bitcoin as users searched for alternative self-preservation solutions. The pandemic also appears to be accelerating the widespread adoption of blockchain technology as more and more companies, payment companies and e-commerce markets are turning to digital currencies and especially stablecoins.
Recently, Bitcoin appears to have assumed the role of investment asset as traders, institutional investors and small savers have become aware of the potential benefits of the price hike. According to some sources will become Bitcoin increasingly used for money laundering. But blockchain analytics startups and crypto tracing companies are introducing new tools to help exchanges
meet anti-money laundering standards.
Regardless, Bitcoin is not, as is commonly believed, a good tool for money laundering, extortion or terrorist financing, because it is both traceable and transparent.
How can I safely store my Bitcoin?
Before holding a Bitcoin, you must store it somewhere. Just like in the physical world, you keep your Bitcoin in a wallet. As with a bank account number, your wallet comes with a wallet address that is displayed in a ledger search and shared with others so you can make transactions. This address, which is a shorter, more useful version of your public key, consists of between 26 and 35 random alphanumeric characters, something like
Keep in mind that every letter and number in that address is important. Before sending a Bitcoin to your wallet, double check the full address character by character.
The safest way to share a bitcoin address (or any crypto address, for that matter) is by copy-pasting it.
Bitcoin private keys
Your wallet address also has one or more private keys associated with them, which, as the name suggests, should not be shared with anyone. Keys are used to verify that you are the owner of the aforementioned public key and to approve or disprove transactions. Some wallets create a safe seed phrase, which is a string of words that you can use to unlock your wallet if you lose your keys. Print this sentence and keep it in a safe place. The unfortunate truth is that your bitcoin wallet is similar to your physical wallet. If you lose the private keys to your wallet, you will likely lose the money in it forever.
Your wallet generates a master file that stores your public and private keys. This file should be backed up in case the original file is lost or damaged. Otherwise, you risk losing access to your money. You can store your private keys on your computer, mobile device, on a physical storage gadget, or even on a piece of paper.
Keeping your private keys safe and secure by backing up both online and offline is crucial.
Remember: your wallet is not on a single device. The wallet itself resides on the Bitcoin blockchain, just as your banking app doesn’t actually ‘hold’ the money in your checking account.
Bitcoin hardware wallet
While wallet apps work well and are relatively secure, the safest option is a hardware wallet that you keep offline, in a safe place. Most popular hardware wallets use special layers of security to ensure that your keys are not stolen and your Bitcoin is safe. But again, if you lose the hardware wallet, unless you have reliable backups of the keys, your bitcoins will be gone.
The least secure option is an online wallet i.e. storing your Bitcoin in an exchange. This is because the keys are in the hands of a third party. For many, the online exchange wallets are the easiest to set up and use, offering an all-too-familiar choice: convenience versus security.
Different purposes, different wallets
Many serious Bitcoin investors use a hybrid approach: they keep a core, long-term amount of Bitcoin offline in a so-called “cold storage”, while having a spending balance on a mobile account, for day to day use.
Depending on your Bitcoin strategy and willingness to get technical, there are different types of Bitcoin wallets available. Bitcoin.org has a helper that shows you which wallet to choose.
Cloud wallets exist online and the keys are usually stored on a remote server managed by a third party. Wallets in the cloud usually have a more user-friendly interface, but again you entrust your private keys to a third party, making your money more susceptible to theft.
Some examples of this type of wallet are Coinbase, Blockchain and Lumi Wallet. Most cryptocurrencies, including Bitcoin, have their own native wallets. Some offer additional security features such as offline storage (Crypto.com and Coinbase).
Not your keys, not your money
With your private keys stored on a server, you must trust the host’s security measures and also trust that the host does not disappear with your money or closes and/or denies you access to your wallet.
Software wallets can be installed directly on your computer, so you can keep your keys at hand. Most have a relatively simple setup and are free. The downside is that you are responsible for keeping your keys secure. Software wallets also require greater security measures. If your computer is hacked or stolen, the thief can get a copy of your wallet and your Bitcoin.
Although there is the original Bitcoin Core protocol wallet (which stores a ledger of all transactions since 2009 and takes up a lot of space), most wallets in use today are ‘light’ wallets or SPV (Simplified Payment Verification) wallets, which do not download the full ledger but sync with it.
Fake wallets and websites
Some malicious programmers clone various crypto websites and offer free downloads, which could lead to a hack and possibly a loss of your funds. Mobile wallets are available as apps for your smartphone, especially useful if you want to pay for something in Bitcoin at a store or buy, sell or ship on the go. All online wallets and most of the desktop wallets mentioned above have mobile versions, while others – like Abra, Edge, and Bread – are made with mobile in mind. Remember, many online wallets keep your keys on the phone itself, which can make you lose your Bitcoin if you lose your phone. Always keep a backup of your keys on another device and print your seed phrase.
Hardware Bitcoin wallets are really the most secure
Hardware wallets are small devices that only connect to the Internet to conduct Bitcoin transactions. They are more secure because they are generally offline and therefore not hackable. However, they can be stolen or lost along with the Bitcoins associated with the stored private keys, so it is recommended that you back up your keys.
Some large investors keep their hardware wallets in safe locations, such as bank vaults. Ledger and Trezor are notable examples.
Paper Bitcoin wallets
Paper wallets are perhaps the simplest of all wallets. Paper wallets are pieces of paper that contain the private and public keys of a Bitcoin address. Ideal for the long-term storage of Bitcoin (away from fire and water of course) or for giving Bitcoin as a gift, these wallets are more secure because they are not connected to a network. However, they are the easiest to lose.
With services such as https://www.bitaddress.org/ you can easily create a new address and print a wallet on your printer. When you’re ready to top up your paper wallet, just send some Bitcoin to that address and keep it safe. Whichever option you choose, make sure to back up everything and only tell your loved ones where your backups are stored.
Where can I buy Bitcoin?
Bitcoin can be bought on crypto exchanges such as Binance and Coinbase, through Bitcoin ATM’s or directly from other people through various marketplaces like LocalBitcoins.
You can buy Bitcoin in a variety of ways, from cash to credit and debit cards to bank transfers or even with other cryptocurrencies, depending on who you buy them and where you live.
The first step is to set up a wallet to store your bitcoin – you’ll need one either way, whether you’re buying Bitcoin online or with cash. It must be said, never invest more than you can afford to lose – cryptocurrencies are volatile and their prices can fall as well as rise sharply. If you want to buy Bitcoin online, you can open an account with any cryptocurrency exchange (exchanges) where you buy and sell Bitcoin.
There are currently hundreds of different exchanges operating with varying degrees of liquidity and security, and new exchanges keep popping up, while others eventually shut down due to hacking. The most reliable crypto exchange is and will remain Binance . With more than 15 million daily users, it makes not only the largest exchange in trading volume but also the most secure! Binance also has a built-in crypto wallet.
As with wallets, it is advisable to do some research before deciding on which exchange to buy and trade Bitcoin or other crypto. As mentioned, the largest Bitcoin exchange in the world at the moment in terms of US $ volume is Binance. Other high volume exchanges include Coinbase and Crypto.com . Becausr of know-your-client (KYC) and anti-money laundering (AML) regulations, many exchanges now require a verified identity to set up an account. This usually includes a photo of your official ID and sometimes proof of address as well. Most exchanges accept payments via bank transfers, credit cards, and some are willing to work with PayPal wire transfers. They typically charge a fee for every transaction, including the cost of using the Bitcoin network. However, the costs are usually quite low on an exchange.
A Bitcoin transaction takes from a few minutes to a few hours to process, depending on the traffic in the network and the costs associated with that transaction. Once the exchange has received the payment, it will purchase the corresponding amount of Bitcoin on your behalf and deposit it in an auto-generated wallet on the exchange. You will then need to move the money to your off-exchange wallet if you plan to keep it for the long term or to pay with it.
Do you want to actively trade with your Bitcoin? Then you can leave it on the exchange and use it anytime.
Bitcoin vending machines
If you prefer to buy Bitcoin with cash, platforms such as LocalBitcoins help you find people near you who want to exchange Bitcoin for cash. Bitcoin ATMs instead are machines that send Bitcoin to your wallet in exchange for cash. They work in the same way as any ATMs:
You enter the amount, hold your wallet QR code on a screen, and the corresponding amount of Bitcoin will be beamed to your account. Coinatmradar can help you find bitcoin ATM’s near you.
How can I sell Bitcoin?
Nowadays almost all available methods for buying Bitcoin offer also the ability to sell Bitcoin.
The exception is with Bitcoin ATMs – some allow you to exchange Bitcoin for cash, but not all.
https://coinatmradar.com will guide you to Bitcoin ATM’s in your area.
You can both sell and buy Bitcoin at all exchanges. What type of exchange you choose to sell your Bitcoin depends on what kind of holder you are: retail investor, institutional holder or trader? Some platforms such as Coinbase Pro and Gemini are more geared towards large orders from institutional investors and traders.
Retail customers can sell Bitcoin on crypto exchanges such as Binance . Each exchange has a different interface and some offer related services such as secure storage. Some require verified identification for all transactions, while others are more relaxed when it comes to small amounts.
You can exchange your Bitcoin for other crypto-assets instead of cash if you wish. Some exchanges, such as Uniswap, focus on this service, allowing you to switch between Bitcoin, Ether, Litecoin, XRP, Dash, and several others.
Another alternative is face to face exchange. You can register as a seller on platforms such as https://localbitcoins.com/ interested parties will contact you if they accept your offer.
Transactions are usually made via deposits or wire transfers into your bank account, after which you are expected to transfer the agreed amount of Bitcoin to the address provided. Or you can sell directly to friends and family once they set up a Bitcoin wallet. Just send the Bitcoin, collect the money or the mobile payment and have a festive drink together.
Nevertheless, we should mention that it is generally not a good idea to meet with strangers to personally exchange Bitcoin for cash, due to various risks involved.
The most common and probably safest way will always be via crypto exchanges such as Binance .
How Bitcoin transactions work
There are three main variables in any bitcoin transaction:
An input is the address from which the money is sent and an output is the address that receives the money. Because a wallet can contain multiple entry addresses, you can send money from one or more entries to one or more exits.
There is also a data storage part with every transaction, a kind of note, which allows you to record data invariably on the blockchain. But the uniqueness of bitcoin transactions is that if you initiate a transaction that is worth less than the total amount in your input, you will not get your change back to your original output, but through a new third address in your administration. This means that your wallet usually contains multiple addresses and you can take money from these addresses to make future transactions.
You’ve learned how to buy and store your bitcoins, so you already know what public and private keys are for and why you need them to make a transaction. To do that, you put your private key, the number of bitcoins you want to send and the output address in the bitcoin software on your computer or smartphone.
Then the program generates a signature made from your private key to announce this transaction to the network for validation. The network must confirm that you own the bitcoin being transferred and that you have not spent it by checking all previous transactions that are public in the general ledger. Once the bitcoin program has verified that your private key does indeed match the provided public key (without knowing your private key), your transaction will be confirmed.
This transaction is now contained in a “block” that will be attached to the previous block to be added to the blockchain. Each transaction in the blockchain is associated with a unique ID called a transaction hash (txid) that looks like a 64-character string of random letters and numbers.
You can track a particular transaction by typing this txid in the search bar of the blockchain explorer. Transactions cannot be rolled back or cannot be tampered with, as this would require all subsequent blocks to be redone. This process is not immediate. Since the bitcoin blockchain is quite large, it takes a lot of time to process a single transaction among the many on the blockchain.
The amount of time it takes to confirm a transaction varies, ranging from a few minutes to a few hours, depending on the traffic on the blockchain and the size of your transaction. Larger transactions with higher costs are generally validated by miners faster than smaller ones. That said, once confirmed, it will be fixed forever.
Transactions are irreversible!
As we said, bitcoin transactions are irreversible. Any transaction you make can’t be reversed. Therefore, always make sure that you send the correct amount to a different bitcoin address.
You should also be careful that you only send bitcoin to a bitcoin wallet. For example, are you sending bitcoin to an ethereum wallet? Then all sent bitcoins will be lost, this can also no longer be reversed.
Always check the bitcoin address. A bitcoin address can consist of many different numbers and letters, even if you only make a one character mistake in the address, the bitcoins will also be lost.
How does Bitcoin mining work?
When you hear about Bitcoin mining, you would think that coins are being dug out of the ground. But Bitcoin is not physical, so why do we call it mining?
As with gold mining, Bitcoins exist in the protocol’s design just as the gold exists underground, but they have not yet been brought to light, just as the gold has not yet been excavated.
The Bitcoin protocol states that a maximum of 21 million Bitcoins will ever exist. What miners do is exposing them a few at a time. Once miners are done mining all of these coins, no more coins will be rolled out unless the Bitcoin protocol changes to allow for a larger supply. Miners are paid in transaction fees for creating blocks of validated transactions and including them in the blockchain.
Blockhain nodes in Bitcoin’s network
To understand how Bitcoin mining works, we are also going to talk about nodes. A node is a powerful computer on which the Bitcoin software runs and fully validates transactions and blocks. Since the Bitcoin network is decentralized, these nodes are jointly responsible for confirming ongoing transactions. Anyone can run a node – just download the free Bitcoin software.
The drawback is that it consumes energy and storage space – the network takes up hundreds of gigabytes of data at the time of writing. Nodes distribute Bitcoin transactions over the network. One node sends information to a few known nodes, which relay the information to nodes they know. In this way, the current transaction reaches the entire network quite quickly.
Some nodes are mining nodes, so they fall under the category of ‘miners’. These divide open transactions into blocks and add them to the blockchain.
How miners actually work?
They work at solving a complex math puzzle that is part of the Bitcoin program and including the answer in the block. The puzzle to solve is to find a number that, when combined with the data in the block and goes through a hash function (which converts input data of any size into output data of a fixed length, yields a result that is within a given range. For trivia enthusiasts, this number is called a “nonce,” which is an abbreviation for “once used number.” In the blockchain, the nonce is an integer between 0 and 4,294,967,296.
How do they find this number?
By random guessing. The hash function makes it impossible to predict what the output will be. So miners guess the number and apply the hash function to the combination of that guessed number and the data in it block. The resulting hash starts with a certain number of zeros. There is no way of knowing which number will work, because two consecutive integers give wildly varying results. In addition, there may be several nonces that produce the desired result. yield, or not. In that case, the miners will keep trying, but with a different block configuration.
The difficulty of the calculation (the required number of zeros at the beginning of the hash string) is adjusted regularly so that on average it takes about 10 minutes to complete a block. processing. Why 10 minutes? That’s the amount of time the Bitcoin developers think it takes for a steady and diminishing stream of new coins until the maximum number of 21 million bitcoins is reached (expected sometime in 2140).
The first miner to get a resulting hash in the desired range will announce his win to the rest of the network. All other miners immediately stop working on that block and try to find out the mystery number for the next one. As a reward for his work, the victorious miner receives a brand new bit of Bitcoin.
At the time of writing, the reward is 6.25 Bitcoins per block, which is worth about $ 208,000 today. However, it is nowhere near as soft as it sounds. There are many mining nodes competing for that reward, and the more computing power you have and the more betting calculations you can perform, the luckier you are. The more miners there are in this field, the more difficult it becomes. The level of difficulty therefore also responds to this. Are there more miners and is the outcome therefore also guessed faster? That’s right, the difficulty level goes up automatically.
Bitcoin mining costs
Also, the costs of being a mining node are significant, not only because of the powerful hardware required, but also because of the large amounts of electricity used by these processors.
And the number of Bitcoins awarded as a reward for solving the puzzle will also decrease. It’s now 6.25, but it will halve every four years (the next is expected in 2024). Bitcoin’s value against the cost of electricity and hardware could rise in the coming years to partially offset this reduction, but it is not certain.
Shall I mine Bitcoin?
For most people in the world mining is unprofitable. The electricity costs are simply way too high and the mining also makes an incredible amount of noise. You also need to be able to cool the mining rigs, which also costs money.
Many Bitcoin mining farms are located in Greenland or in other cold countries where the power is cheap, the temperature is good (for mining) and where miners have all the space.
So the answer to the question “Should I mine Bitcoin” is no. Unless you are in possession of many solar panels that you can pass on to the Bitcoin miner in one way or another so that you don’t have to pay anything for electricity. To buy solar panels just for mining is a also a big No, as costs for buying and maintaining solar panels can exceed by far the revenue from mining.
What companies are accepting Bitcoin?
After an initial flurry of interest among merchants in accepting Bitcoin in their retail or online stores, interest has largely declined as rising Bitcoin transaction fees and volatile price movements made it less attractive as a means of payment.
However, that doesn’t mean that there are no outlets to spend your Bitcoin, far from it. A 2019 survey conducted by insurance company HSB found that more than a third of small and medium businesses in the United States accept cryptocurrency, and 59% of them buy digital currency for their own use.
One of the advantages of doing business with cryptocurrency is the ease of cross-border transactions and anonymity, although it should be noted that Bitcoin is not anonymous but pseudonymous. By accepting Bitcoin, traders gain access to a wider market and don’t have to worry as much about chargebacks as Bitcoin transactions are irreversible. In 2019, AT&T became the first major US cellular provider to accept cryptocurrency payments through BitPay.
If you want to use Bitcoin to buy gifts, the most obvious solution are gift vouchers or vouchers . The recipient can then spend the gift card at one of the many retailers. You can also pay for flights and hotels with Bitcoin.
Software companies such as Microsoft accept Bitcoin
Microsoft accepts Bitcoin payments for the purchase of movies, games and various app-based services in its app stores. The leading game streaming platform Twitch also accepts payments in Bitcoin and Bitcoin Cash for its subscriptions.
Various legal and accounting firms also accept payments for their services in cryptocurrency. Of course, you can always donate to one of the Bitcoin-accepting charities or crowdfunding sites, such as BitHope, BitGive or Fidelity Charitable.
For a list of offline stores in your area that accept Bitcoin, we recommend a https://coinmap.org/ .
Curious about how you can accept Bitcoin as a payment method in your store? Then read on!
How can I accept Bitcoin in my store?
One problem holding Bitcoin from wider adoption is still the lack of most major companies not accepting the digital currency as payment.
This is a chicken and egg problem. If more companies had the option to accept Bitcoin, it could encourage consumers to buy and spend it, and vice versa. With this in mind, we have listed a number of options for accepting Bitcoin in an online webshop and physical store.
Payments in person
The easiest way to accept Bitcoin payments is in person, simply by sending to your custmers with the amount of Bitcoin (BTC) and your wallet’s address. This is comparable to paying in cash. This can easily be done via smartphone apps, such as Crypto.com app, which is available for both Apple and Android. There are also options available in the Windows Phone App Store for users of that operating system.
Another alternative is https://coinbox.org/ , which is specially designed for merchants who want a simple option to receive payments. In these scenarios, the merchant enters the price of an item or service into the phone, which then presents a QR code with the amount to be paid and the address to which the money will be sent. The customer scans the QR code with their Bitcoin wallet app and the payment is sent.
All of these simple systems are ideal for small businesses testing Bitcoin acceptance or those doing chores for small amounts. Larger businesses are likely to look for a special solution that matches their existing POS systems.
Merchant bitcoin point-of-sale (POS) solutions
There are also a growing number of commerce-specific options that aim to enhance the process of streamline the taking of Bitcoin payments. The following services provide various POS solutions for merchants, both online and offline.
Merchants can be paid in bitcoin or fiat currency – or a combination of both – and the mobile app, Coinify POS, works with both Android and iOS devices.
For online merchants, Coinify offers various integration tools such as payment buttons, shopping cart plugins or hosted billing.
CoinKite is a new startup offering a Bitcoin payment terminal that looks exactly like the over-the-counter chip-and-PIN terminals we are used to in stores today. This handset reads a Bitcoin-based debit card, also offered by CoinKite. The handsets can also serve as Bitcoin and Litecoin ATMs, offering the ability to print QR codes that customers can scan with their smartphone apps.
Coinbase is another payment processor that provides a point of sale app (Android) for brick-and-mortar retailers. While it currently only supports US bank accounts as a funding source, it offers extensive e-commerce support. Not only does it provide an HTML code segment to easily insert payment buttons into your website, it also provides plugins for WordPress, WooCommerce, Megento and ZenCart.
BitPay is an international payment processor for businesses and charities. It is integrated into the SoftTouch POS system for physical stores. However, BitPay has an API that can be implemented in any other POS system with some coding work. BitPay has different rates that merchants can subscribe to, allowing for features such as using the service on a custom domain (for online stores), exporting transactions to QuickBooks, etc.
Anyway the most important thing is of course to make it clear that you accept Bitcoin as a means of payment whether you have an online or a physical store, if you accept Bitcoin you just have to disclose it. You can get a ‘Bitcoin accepted here‘ symbol at https://en.bitcoin.it/wiki/Promotional_graphics place it on your website or print it out and stick it on the window of your shop.
What is Lightning Network?
The so-called Lightning Network is a second layer of technology applied to Bitcoin that uses micropayment channels to increase the blockchain’s ability to execute transactions more efficiently. Transactions executed on the Lightning Network are faster, cheaper and more easily confirmed than transactions executed directly on the Bitcoin blockchain (in other words on-chain). By moving these transactions away from the main blockchain and making them off-chain, the Lightning Network is designed to unburden the Bitcoin blockchain and lower the associated transaction costs.
How does the Bitcoin Lightning Network work?
The Lightning Network was first proposed by Joseph Poon and Thaddeus Dryja in 2015 and has been in development ever since. The problem the Lightning Network had to solve is Bitcoin’s slow transaction time and throughput, which remains at around seven transactions per second (tps).
If it is to reach its potential to become a major option for everyday transactions, Bitcoin will need to reach tens of thousands or hundreds of thousands of transactions per second, similar to credit cards or electronic payment networks. Due to the nature of its decentralized technology that requires consensus from all nodes within its network, Bitcoin in its current state is overloaded with these kinds of problems.
For example, approving and storing transactions becomes expensive and time consuming as they multiply in numbers on Bitcoin’s network. An increase in transaction numbers also requires a very big improvement in the processing power of the computers required to perform transactions with Bitcoin. Additionally, the energy required to compute this information is enormous, making maintaining Bitcoin for everyday transactions prohibitively expensive.
The Lightning Network suggested solving the scalability problem by creating a second layer on Bitcoin’s main blockchain. The second layer consists of multiple payment channels between parties of Bitcoin users. A lightning network channel is a transaction mechanism between two parties. Through these channels, the parties can make and / or receive payments to each other. These transactions are processed differently compared to standard transactions that take place on the Bitcoin blockchain. They are only updated on the main chain when two parties open and close a channel.
Between those two actions, the parties can endlessly move money between each other without informing the main blockchain about their activities. This approach greatly accelerates the speed of a transaction as not all transactions need to be approved by all nodes within a blockchain. Individual payment channels between different parties together form a network of lightning nodes that can route transactions among themselves. The resulting interconnections between different payment channels is the Lightning Network.
Are there any costs associated with using the Lightning Network?
Yes, there are transaction costs associated with using the Lightning Network. These are a combination of a route cost for routing payment information between lightning nodes and Bitcoin transaction fees to open and close channels.
What are some issues with the Lightning Network?
The most obvious problem with the Lightning Network, which is intended to be decentralized, is that it can lead to a replication of the hub-and-sub model that is typically found in current financial systems. In the current model, banks and financial institutions are the main intermediaries through which all transactions take place.
By having more open connections with others, lightning nodes for prominent companies can become similar nodes or centralized nodes in the network. A failure at such a hub can easily cause a significant portion (or the entire) of the network to crash.
Another important problem is the need to increase fees to make the maintenance of the network economically viable.This applies not only to the nodes that maintain the lightning network itself, but also to the domino costs of potentially higher Bitcoin fees that are translated to the network.
One final question remains:
What happens to your Bitcoins when you die?
As cryptocurrency investments become more popular, long-term investors are increasingly concerned about the uncomfortable question: what will happen to my Bitcoin (BTC) if I die?
As explained in the whitepaper, Bitcoin is a purely peer-to-peer version of electronic money, allowing online payments to be sent directly from one party to another without the intervention of a financial institution.
As a distributed network, Bitcoin does not have a central authority to manage user funds, so only the owners can manage their assets.
As a result, millions of dollars worth of cryptocurrency are lost every year due to the death of its owners.
But this doesn’t mean that cryptocurrencies like Bitcoin cannot be bequeathed and will inevitably be buried forever with the deceased owner.
In fact, there are a number of ways investors can bequeath their crypto to the next generation, but each method requires some decision-making and planning as well as some general knowledge of how crypto works.
Sharing Bitcoin keys with trusted relatives
Sharing keys with trusted relatives is probably one of the simplest methods of passing your crypto. Some of the most prominent people in the crypto industry have publicly claimed to use this method to ensure their cryptocurrency is passed on.
Hal Finney, an early Bitcoin proponent and recipient of BTC creator Satoshi Nakamoto’s first Bitcoin transaction, wanted to give his crypto holdings to his kids by simply providing his keys. About a year before his death in 2014, Finney wrote:
Those discussions about inheriting your bitcoins are of more than academic importance. My bitcoins are stored in our safe and my son and daughter are tech savvy. I think they are safe enough. I feel comfortable with my legacy.
This crypto experience is simple, but may not be suitable for everyone in the crypto community. This way of forsaking Bitcoin can also be considered risky as shared keys come with the responsibility of keeping the crypto safe, if you choose this method, make sure your heirs are aware of the plan and do some practice on how to access the crypto.
Some exchanges can unlock access to crypto with a death certificate
Although the Bitcoin network itself is not interested in things like inheritance, some crypto services provide relatives of a deceased client access to their cryptocurrency The major US-based cryptocurrency exchange Coinbase, for example, allows access to the assets of a relative after providing a number of documents, including a death certificate and a will.
Coinbase users can also name a beneficiary on their Coinbase account. However, the procedure is not supported directly through Coinbase, rather it uses the services of an attorney.
A spokesperson for Binance, the world’s largest crypto exchange, told Cointelegraph that the company has a similar policy to provide access to cryptocurrency beneficiaries, but did not elaborate on the process.
The beneficiary should contact customer support directly, where one of our agents can guide them through the process
said the representative.
Is a crypto inheritance service worth it?
There are also some projects that aim to ensure the inheritance of digital currencies. For example, companies like Safe Haven, Casa and TrustVerse are working on their own solutions that allow people to bequeath their crypto assets using blockchain technology and cryptography.
They are offering a service that stores your key (or any other information) encrypted, so the relatives can access it later.
So, there’s that, a long-read guide about Bitcoin and how it works, if it was helpful to you in any way, share it with your friends.
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