Cryptocurrency: The Future of Money? Bitcoin is just one of many cryptocurrencies (internet currency). It’s not the first but it’s the first that works and the one that’s caught everyone’s attention.
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 is essentially internet currency.
Who Runs Bitcoin? What is the Company Behind Bitcoin?
In short, no one runs Bitcoin. Bitcoin is run collectively by the users who use the Bitcoin Client, and any changes to the Bitcoin system have to be approved by the majority of users before they are implemented.
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. The following is an example of a real Bitcoin addresses: 1JArS6jzE3AJ9sZ3aFij1BmTcpFGgN86hA.
What is a Private Key?
A private key is a secret code which allows the user to prove the ownership of their 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.
IMPORTANT TO NOTE:
Private keys are to be kept safe, with periodic backups made to prevent the loss of Bitcoins. Anyone with your private keys can spend your Bitcoins!
What Fees Are 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.
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.
What is ‘Blockchain’?
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.
For more information regarding the blockchain, visit our barrister and bitcoin/blockchain lawyer Jeremy Barnett.
Who are the ‘Miners’?
Miners are individuals who run computer systems to repeatedly calculate hashes with the intention to create a successful block and earn coins from transaction fees and new coins created with the block itself. The term references an analogy of gold miners who dig gold out of the ground and thus ‘discover’ new gold that can be used to create new coins, with a similar kind of discovery occurring with a successful hash to create new Bitcoins
Is There a Limit to the Amount of Bitcoins Generated?
The number of Bitcoins in existence will never exceed 21 million. See here for how many Bitcoins are in circulation.
How much does a Bitcoin cost?
The current market price for a Bitcoin is always changing due to the supply and demand for it. Bitcoins are traded at Bitcoin Exchanges. See the following for a historical Bitcoin price chart.
What is a Bitcoin Client?
Bitcoin clients are the base level of technology for conducting Bitcoin transactions, and they store the keys needed to conduct a Bitcoin transaction. They come in multiple flavours, and are customised to fit different niches, the most popular of which include;
- The Bitcoin-QT Client is the original software written by Satoshi Nakamoto, the project’s founder. If you aren’t sure which program to pick, this is a good bet. It is suited for enthusiasts, merchants, miners, developers and people who want to help support the project.
- The MultiBit Client fast and easy to use, even for those with no technical knowledge. It is also able to import Blockchain.info’s wallet backups (Multibit version 5.17 and earlier), making it a versatile tool for all users.
- The Electrum Client focuses at speed, with low resource usage, and simplified Bitcoin usage. Startup times are instant because it operates in conjunction with high-performance servers that handle the most complicated parts of the Bitcoin system.
Bitcoin Assistance with St. Pauls Chambers
If you wish to receive legal assistance or advice regarding Bitcoin or any other internet currency, please don’t hesitate to get in touch with our team at St. Paul Chambers. We will then put you in contact with one of our fraud and financial crime barristers suited to the topic.
Alternatively, for more information on the latest developments in Bitcoin technology, follow the blog of our Bitcoin & blockchain lawyer Jeremy Barnett, which includes Bitcoin regulatory updates, information on the blockchain and an introduction to smart contracts, amongst other resources.