Bitcoin Wiki - User contributions [en]

Help:FAQ

2011-05-22T20:36:10Z

Jabowery: /* How does the BitCoin network handle the CAP theorem? */

Here you will find answers to the most commonly asked questions.

== General ==
=== What are bitcoins? ===
Bitcoins are the unit of currency of the Bitcoin system. A commonly used shorthand for this is “BTC” to refer to a price or amount (eg: “100 BTC”)
A Bitcoin isn't actually a 'thing' you can point at. It is just a number associated with a [[Address|Bitcoin Address]]. See also an [[Introduction|easy intro]] to bitcoin.

=== How can I get Bitcoins? ===

There are four ways to get Bitcoins:

* Buy them on an exchange such as [https://www.mtgox.com/ Mt. Gox] or [http://www.bitcoin-otc.com/ #bitcoin-otc] on FreeNode.
* Accept Bitcoins as payment for goods or services.
* Find a local trader on [http://tradebitcoin.com tradebitcoin] (or somewhere else) and trade with him in cash
* Create a new [[block]] (currently yields 50 Bitcoins).
* Participate in a [[Pooled mining|mining pool]].

=== Can I buy Bitcoins with Paypal? ===

While it's possible to find an individual who wishes to sell Bitcoin to you via Paypal, (perhaps via [http://www.bitcoin-otc.com/ #bitcoin-otc] ) most major exchanges do not allow funding through Paypal. This is due to repeated cases where someone pays for Bitcoins with Paypal, receives their Bitcoins, and then fraudulently complains to Paypal that they never received their goods. Paypal too often sides with the fraudulent buyer in this case, and so exchangers no longer allow this method of funding.

Buying Bitcoins from individuals with this method is still possible, but requires mutual trust. In this case, Bitcoin seller beware.

=== How are new Bitcoins created? ===

[[File:total_bitcoins_over_time_graph.png|thumb|Number of bitcoins over time, assuming a perfect 10-minute interval.]]
New coins are generated by a network node each time it finds the solution to a certain mathematical problem (i.e. creates a new [[block]]), which is difficult to perform and can demonstrate a [[proof of work]]. The reward for solving a block is [[controlled inflation|automatically adjusted]] so that in the first 4 years of the Bitcoin network, 10,500,000 BTC will be created. The amount is halved each 4 years, so it will be 5,250,000 over years 4-8, 2,625,000 over years 8-12 and so on. Thus the total number of coins will approach 21,000,000 BTC over time.

In addition, built into the network is a system that attempts to allocate new coins in blocks about every 10 minutes, on average, somewhere on the network. As the number of people who attempt to generate these new coins changes, the difficulty of creating new coins changes. This happens in a manner that is agreed upon by the network as a whole, based upon the time taken to generate the previous 2016 blocks. The difficulty is therefore related to the average computing resources devoted to generate these new coins over the time it took to create these previous blocks. The likelihood of somebody "discovering" one of these blocks is based on the computer they are using compared to all of the computers also generating blocks on the network.

=== What's the current total number of Bitcoins in existence? ===

[http://blockexplorer.com/q/totalbc Current count]

The number of blocks times the coin value of a block is the number of coins in existence. The coin value of a block is 50 BTC for each of the first 210,000 blocks, 25 BTC for the next 210,000 blocks, then 12.5 BTC, 6.25 BTC and so on.

=== How divisible are Bitcoins? ===

Technically, a Bitcoin can be divided down to 8 decimals using existing data structures, so 0.00000001 BTC is the smallest amount currently possible. Discussions about and ideas for ways to provide for even smaller quantities of Bitcoins may be created in the future if the need for them ever arises.

=== How does the halving work when the number gets really small? ===

The reward will go from 0.00000001 BTC to 0. Then no more coins will likely be created.

The calculation is done as a right bitwise shift of a 64-bit signed integer, which means it is divided by 2 and rounded down. The integer is equal to the value in BTC * 100,000,000. This is how all Bitcoin balances/values are stored internally.

Keep in mind that using current rules this will take nearly 100 years before it becomes an issue and Bitcoins may change considerably before that happens.

=== How long will it take to generate all the coins? ===

The last block that will generate coins will be block #6,929,999. This should be generated around year 2140. Then the total number of coins in circulation will remain static at 20,999,999.9769 BTC.

Even if the allowed precision is expanded from the current 8 decimals, the total BTC in circulation will always be slightly below 21 million (assuming everything else stays the same). For example, with 16 decimals of precision, the end total would be 20999999.999999999496 BTC.

=== If no more coins are going to be generated, will more blocks be created? ===

Absolutely! Even before the creation of coins ends, the use of [[transaction fee|transaction fees]] will likely make creating new blocks more valuable from the fees than the new coins being created. When coin generation ends, what will sustain the ability to use bitcoins will be these fees entirely. There will be blocks generated after block #6,929,999, assuming that people are still using Bitcoins at that time.

=== But if no more coins are generated, what happens when Bitcoins are lost? Won't that be a problem? ===

Not at all. Because of the law of supply and demand, when fewer Bitcoins are available the ones that are left will be in higher demand, and therefore will have a higher value. So when Bitcoins are lost, the remaining Bitcoins will increase in value to compensate. As the value of Bitcoins increase, the number of Bitcoins required to purchase an item '''de'''creases. This is known as a [[Deflationary spiral|deflationary economic model]]. Eventually, if and when it gets to the point where the largest transaction is less that 1BTC, then it's a simple matter of shifting the decimal place to the right a few places, and the system continues.

=== If every transaction is broadcast via the network, does BitCoin scale? ===
The Bitcoin protocol allows lightweight clients that can use Bitcoin without downloading the entire transaction history. As traffic grows and this becomes more critical, implementations of the concept will be developed. Full network nodes will at some point become a more specialized service.

With some modifications to the software, full BitCoin nodes could easily keep up with both VISA and MasterCard combined, using only fairly modest hardware (a couple of racks of machines using todays hardware). It's worth noting that the MasterCard network is structured somewhat like BitCoin itself - as a peer to peer broadcast network.

Learn more about [[Scalability]].

=== How does the BitCoin network handle [http://en.wikipedia.org/wiki/CAP_theorem the CAP theorem]? ===

=== Why do I have to wait 10 minutes before I can spend money I received? ===

The reason you have to wait 10 minutes is that's the average time taken to find a block. It can be significantly more or less time than that depending on luck, 10 minutes is simply the average case.

Blocks (shown as "confirmations" in the GUI) are how the BitCoin achieves consensus on who owns what. Once a block is found everyone agrees that you now own those coins, so you can spend them again. Until then it's possible that some network nodes believe otherwise, if somebody is attempting to defraud the system by reversing a transaction. The more confirmations a transaction has, the less risk there is of a reversal. Only 6 blocks or 1 hour is enough to make reversal computationally impractical. This is dramatically better than credit cards which can see chargebacks occur up to three months after the original transaction!

Why ten minutes specifically? It is a tradeoff chosen by Satoshi between propagation time of new blocks in large networks and the amount of work wasted due to chain splits. If that made no sense to you, don't worry. Reading [http://www.bitcoin.org/bitcoin.pdf the technical paper] should make things clearer.

=== Do you have to wait 10 minutes in order to buy or sell things with BitCoin? ===

No, it's reasonable to sell things without waiting for a confirmation as long as the transaction is not of high value.

When people ask this question they are usually thinking about applications like supermarkets or snack machines, as discussed in [http://www.bitcoin.org/smf/index.php?topic=423.msg3819#msg3819 this thread from July 2010]. Zero confirmation transactions still show up in the GUI, but you cannot spend them. You can however reason about the risk involved in assuming you ''will'' be able to spend them in future. In general, selling things that are fairly cheap (like snacks, digital downloads etc) for zero confirmations will not pose a problem if you are running a well connected node.

=== Why does my Bitcoin address keep changing? ===

Whenever the address listed in "Your address" receives a transaction, Bitcoin replaces it with a new address. This is meant to encourage you to use a new address for every transaction, which enhances [[anonymity]]. All of your old addresses are still usable: you can see them in ''Settings -> Your Receiving Addresses''.

==Economy==
=== Where does the value of Bitcoin stem from? What backs up Bitcoin? ===
Bitcoins have value because they are accepted as payment by many. See the [[Trade|list of Bitcoin-accepting sites]].

When we say that a currency is backed up by gold, we mean that there's a promise in place that you can exchange the currency for gold. In a sense, you could say that Bitcoin is "backed up" by the price tags of merchants – a price tag is a promise to exchange goods for a specified amount of currency.

It's a common misconception that Bitcoins gain their value from the cost of electricity required to generate them. Cost doesn't equal value – hiring 1,000 men to shovel a big hole in the ground may be costly, but not valuable. Also, even though scarcity is a critical requirement for a useful currency, it alone doesn't make anything valuable. For example, your fingerprints are scarce, but that doesn't mean they have any exchange value.

=== What if someone bought up all the existing Bitcoins? ===
What if somebody bought up all the gold in the world? Well, by attempting to buy it all, the buyer would just drive the prices up until he runs out of money.

Not all Bitcoins are for sale. Just as with gold, no one can buy a Bitcoin that isn't available for sale.

=== Bitcoin's monetary policy causes a deflationary spiral ===
See the article [[Deflationary spiral]].

==Networking==
=== Do I need to configure my firewall to run bitcoin? ===

Bitcoin will connect to other nodes, usually on tcp port 8333. You will need to allow outgoing TCP connections to port 8333 if you want to allow your bitcoin client to connect to many nodes. Bitcoin will also try to connect to IRC (tcp port 6667) to meet other nodes to connect to.

If you want to restrict your firewall rules to a few ips and/or don't want to allow IRC connection, you can find stable nodes in the [[Fallback Nodes|fallback nodes list]]. If your provider blocks the common IRC ports, note that lfnet also listens on port 7777. Connecting to this alternate port currently requires either recompiling Bitcoin, or changing routing rules. For example, on Linux you can evade a port 6667 block by doing something like this:

echo 173.246.103.92 irc.lfnet.org >> /etc/hosts
iptables -t nat -A OUTPUT -p tcp --dest 173.246.103.92 --dport 6667 -j DNAT --to-destination :7777 -m comment --comment "bitcoind irc connection"

=== How does the peer finding mechanism work? ===
Bitcoin finds peers primarily by connecting to an IRC server (channel #bitcoin on irc.lfnet.org). If a connection to the IRC server cannot be established (like when connecting through TOR), an in-built node list will be used and the nodes will be queried for more node addresses.

==Mining==
===What is mining?===
Mining is the process of spending computation power to find valid blocks and thus create new Bitcoins.

===I've been mining for a long time and haven't created any new Bitcoins. What's wrong?===

In the early days of Bitcoin, it was easy for anyone to find new blocks using standard CPUs. As more and more people started mining, the [[difficulty]] of finding new blocks has greatly increased to the point where the average time for a CPU to find a single block can be many years. The only cost- or time-effective method of mining is using a high-end graphics card with special software (see also [[Why a GPU mines faster than a CPU]]). Since CPU mining is essentially useless, it may be removed from future versions of the Bitcoin software.

===Is mining used for some useful computation?===
The computations done when mining are internal to Bitcoin and not related to any other distributed computing projects. They serve the purpose of securing the Bitcoin network, which is useful.

===Is it not a waste of energy?===
Spending energy on creating a free monetary system is hardly a waste. Also, services necessary for the operation of currently widespread monetary systems, such as banks and credit card companies, also spend energy, arguably more than Bitcoin would.

===Why don't we use calculations that are also useful for some other purpose?===
To provide security for the Bitcoin network, the calculations involved need to have some very specific features. These features are incompatible with leveraging the computation for other purposes.

==Help==
===I'd like to learn more. Where can I get help?===

* Read the [[Introduction|introduction to bitcoin]]
* See the videos, podcasts, and blog posts from the [[Press]]
* Read and post on the [[Bitcoin:Community_portal#Bitcoin_Community_Forums|forums]]
* Chat on one of the [[Bitcoin:Community_portal#IRC_Chat|Bitcoin IRC]] channels
* Listen to [http://omegataupodcast.net/2011/03/59-bitcoin-a-digital-decentralized-currency/ this podcast], which goes into the details of how bitcoin works

==See Also==

* [[Man page]]
* [[Introduction]]

[[zh-cn:FAQ]]
[[fr:FAQ]]
{{fromold|bitcoins}}

[[Category:Technical]]
[[Category:Vocabulary]]

Help:FAQ

2011-05-22T20:35:16Z

Jabowery: /* How does the BitCoin network handle the CAP theorem? */

Here you will find answers to the most commonly asked questions.

== General ==
=== What are bitcoins? ===
Bitcoins are the unit of currency of the Bitcoin system. A commonly used shorthand for this is “BTC” to refer to a price or amount (eg: “100 BTC”)
A Bitcoin isn't actually a 'thing' you can point at. It is just a number associated with a [[Address|Bitcoin Address]]. See also an [[Introduction|easy intro]] to bitcoin.

=== How can I get Bitcoins? ===

There are four ways to get Bitcoins:

* Buy them on an exchange such as [https://www.mtgox.com/ Mt. Gox] or [http://www.bitcoin-otc.com/ #bitcoin-otc] on FreeNode.
* Accept Bitcoins as payment for goods or services.
* Find a local trader on [http://tradebitcoin.com tradebitcoin] (or somewhere else) and trade with him in cash
* Create a new [[block]] (currently yields 50 Bitcoins).
* Participate in a [[Pooled mining|mining pool]].

=== Can I buy Bitcoins with Paypal? ===

While it's possible to find an individual who wishes to sell Bitcoin to you via Paypal, (perhaps via [http://www.bitcoin-otc.com/ #bitcoin-otc] ) most major exchanges do not allow funding through Paypal. This is due to repeated cases where someone pays for Bitcoins with Paypal, receives their Bitcoins, and then fraudulently complains to Paypal that they never received their goods. Paypal too often sides with the fraudulent buyer in this case, and so exchangers no longer allow this method of funding.

Buying Bitcoins from individuals with this method is still possible, but requires mutual trust. In this case, Bitcoin seller beware.

=== How are new Bitcoins created? ===

[[File:total_bitcoins_over_time_graph.png|thumb|Number of bitcoins over time, assuming a perfect 10-minute interval.]]
New coins are generated by a network node each time it finds the solution to a certain mathematical problem (i.e. creates a new [[block]]), which is difficult to perform and can demonstrate a [[proof of work]]. The reward for solving a block is [[controlled inflation|automatically adjusted]] so that in the first 4 years of the Bitcoin network, 10,500,000 BTC will be created. The amount is halved each 4 years, so it will be 5,250,000 over years 4-8, 2,625,000 over years 8-12 and so on. Thus the total number of coins will approach 21,000,000 BTC over time.

In addition, built into the network is a system that attempts to allocate new coins in blocks about every 10 minutes, on average, somewhere on the network. As the number of people who attempt to generate these new coins changes, the difficulty of creating new coins changes. This happens in a manner that is agreed upon by the network as a whole, based upon the time taken to generate the previous 2016 blocks. The difficulty is therefore related to the average computing resources devoted to generate these new coins over the time it took to create these previous blocks. The likelihood of somebody "discovering" one of these blocks is based on the computer they are using compared to all of the computers also generating blocks on the network.

=== What's the current total number of Bitcoins in existence? ===

[http://blockexplorer.com/q/totalbc Current count]

The number of blocks times the coin value of a block is the number of coins in existence. The coin value of a block is 50 BTC for each of the first 210,000 blocks, 25 BTC for the next 210,000 blocks, then 12.5 BTC, 6.25 BTC and so on.

=== How divisible are Bitcoins? ===

Technically, a Bitcoin can be divided down to 8 decimals using existing data structures, so 0.00000001 BTC is the smallest amount currently possible. Discussions about and ideas for ways to provide for even smaller quantities of Bitcoins may be created in the future if the need for them ever arises.

=== How does the halving work when the number gets really small? ===

The reward will go from 0.00000001 BTC to 0. Then no more coins will likely be created.

The calculation is done as a right bitwise shift of a 64-bit signed integer, which means it is divided by 2 and rounded down. The integer is equal to the value in BTC * 100,000,000. This is how all Bitcoin balances/values are stored internally.

Keep in mind that using current rules this will take nearly 100 years before it becomes an issue and Bitcoins may change considerably before that happens.

=== How long will it take to generate all the coins? ===

The last block that will generate coins will be block #6,929,999. This should be generated around year 2140. Then the total number of coins in circulation will remain static at 20,999,999.9769 BTC.

Even if the allowed precision is expanded from the current 8 decimals, the total BTC in circulation will always be slightly below 21 million (assuming everything else stays the same). For example, with 16 decimals of precision, the end total would be 20999999.999999999496 BTC.

=== If no more coins are going to be generated, will more blocks be created? ===

Absolutely! Even before the creation of coins ends, the use of [[transaction fee|transaction fees]] will likely make creating new blocks more valuable from the fees than the new coins being created. When coin generation ends, what will sustain the ability to use bitcoins will be these fees entirely. There will be blocks generated after block #6,929,999, assuming that people are still using Bitcoins at that time.

=== But if no more coins are generated, what happens when Bitcoins are lost? Won't that be a problem? ===

Not at all. Because of the law of supply and demand, when fewer Bitcoins are available the ones that are left will be in higher demand, and therefore will have a higher value. So when Bitcoins are lost, the remaining Bitcoins will increase in value to compensate. As the value of Bitcoins increase, the number of Bitcoins required to purchase an item '''de'''creases. This is known as a [[Deflationary spiral|deflationary economic model]]. Eventually, if and when it gets to the point where the largest transaction is less that 1BTC, then it's a simple matter of shifting the decimal place to the right a few places, and the system continues.

=== If every transaction is broadcast via the network, does BitCoin scale? ===
The Bitcoin protocol allows lightweight clients that can use Bitcoin without downloading the entire transaction history. As traffic grows and this becomes more critical, implementations of the concept will be developed. Full network nodes will at some point become a more specialized service.

With some modifications to the software, full BitCoin nodes could easily keep up with both VISA and MasterCard combined, using only fairly modest hardware (a couple of racks of machines using todays hardware). It's worth noting that the MasterCard network is structured somewhat like BitCoin itself - as a peer to peer broadcast network.

Learn more about [[Scalability]].

=== How does the BitCoin network handle the CAP theorem? ===

=== Why do I have to wait 10 minutes before I can spend money I received? ===

The reason you have to wait 10 minutes is that's the average time taken to find a block. It can be significantly more or less time than that depending on luck, 10 minutes is simply the average case.

Blocks (shown as "confirmations" in the GUI) are how the BitCoin achieves consensus on who owns what. Once a block is found everyone agrees that you now own those coins, so you can spend them again. Until then it's possible that some network nodes believe otherwise, if somebody is attempting to defraud the system by reversing a transaction. The more confirmations a transaction has, the less risk there is of a reversal. Only 6 blocks or 1 hour is enough to make reversal computationally impractical. This is dramatically better than credit cards which can see chargebacks occur up to three months after the original transaction!

Why ten minutes specifically? It is a tradeoff chosen by Satoshi between propagation time of new blocks in large networks and the amount of work wasted due to chain splits. If that made no sense to you, don't worry. Reading [http://www.bitcoin.org/bitcoin.pdf the technical paper] should make things clearer.

=== Do you have to wait 10 minutes in order to buy or sell things with BitCoin? ===

No, it's reasonable to sell things without waiting for a confirmation as long as the transaction is not of high value.

When people ask this question they are usually thinking about applications like supermarkets or snack machines, as discussed in [http://www.bitcoin.org/smf/index.php?topic=423.msg3819#msg3819 this thread from July 2010]. Zero confirmation transactions still show up in the GUI, but you cannot spend them. You can however reason about the risk involved in assuming you ''will'' be able to spend them in future. In general, selling things that are fairly cheap (like snacks, digital downloads etc) for zero confirmations will not pose a problem if you are running a well connected node.

=== Why does my Bitcoin address keep changing? ===

Whenever the address listed in "Your address" receives a transaction, Bitcoin replaces it with a new address. This is meant to encourage you to use a new address for every transaction, which enhances [[anonymity]]. All of your old addresses are still usable: you can see them in ''Settings -> Your Receiving Addresses''.

==Economy==
=== Where does the value of Bitcoin stem from? What backs up Bitcoin? ===
Bitcoins have value because they are accepted as payment by many. See the [[Trade|list of Bitcoin-accepting sites]].

When we say that a currency is backed up by gold, we mean that there's a promise in place that you can exchange the currency for gold. In a sense, you could say that Bitcoin is "backed up" by the price tags of merchants – a price tag is a promise to exchange goods for a specified amount of currency.

It's a common misconception that Bitcoins gain their value from the cost of electricity required to generate them. Cost doesn't equal value – hiring 1,000 men to shovel a big hole in the ground may be costly, but not valuable. Also, even though scarcity is a critical requirement for a useful currency, it alone doesn't make anything valuable. For example, your fingerprints are scarce, but that doesn't mean they have any exchange value.

=== What if someone bought up all the existing Bitcoins? ===
What if somebody bought up all the gold in the world? Well, by attempting to buy it all, the buyer would just drive the prices up until he runs out of money.

Not all Bitcoins are for sale. Just as with gold, no one can buy a Bitcoin that isn't available for sale.

=== Bitcoin's monetary policy causes a deflationary spiral ===
See the article [[Deflationary spiral]].

==Networking==
=== Do I need to configure my firewall to run bitcoin? ===

Bitcoin will connect to other nodes, usually on tcp port 8333. You will need to allow outgoing TCP connections to port 8333 if you want to allow your bitcoin client to connect to many nodes. Bitcoin will also try to connect to IRC (tcp port 6667) to meet other nodes to connect to.

If you want to restrict your firewall rules to a few ips and/or don't want to allow IRC connection, you can find stable nodes in the [[Fallback Nodes|fallback nodes list]]. If your provider blocks the common IRC ports, note that lfnet also listens on port 7777. Connecting to this alternate port currently requires either recompiling Bitcoin, or changing routing rules. For example, on Linux you can evade a port 6667 block by doing something like this:

echo 173.246.103.92 irc.lfnet.org >> /etc/hosts
iptables -t nat -A OUTPUT -p tcp --dest 173.246.103.92 --dport 6667 -j DNAT --to-destination :7777 -m comment --comment "bitcoind irc connection"

=== How does the peer finding mechanism work? ===
Bitcoin finds peers primarily by connecting to an IRC server (channel #bitcoin on irc.lfnet.org). If a connection to the IRC server cannot be established (like when connecting through TOR), an in-built node list will be used and the nodes will be queried for more node addresses.

==Mining==
===What is mining?===
Mining is the process of spending computation power to find valid blocks and thus create new Bitcoins.

===I've been mining for a long time and haven't created any new Bitcoins. What's wrong?===

In the early days of Bitcoin, it was easy for anyone to find new blocks using standard CPUs. As more and more people started mining, the [[difficulty]] of finding new blocks has greatly increased to the point where the average time for a CPU to find a single block can be many years. The only cost- or time-effective method of mining is using a high-end graphics card with special software (see also [[Why a GPU mines faster than a CPU]]). Since CPU mining is essentially useless, it may be removed from future versions of the Bitcoin software.

===Is mining used for some useful computation?===
The computations done when mining are internal to Bitcoin and not related to any other distributed computing projects. They serve the purpose of securing the Bitcoin network, which is useful.

===Is it not a waste of energy?===
Spending energy on creating a free monetary system is hardly a waste. Also, services necessary for the operation of currently widespread monetary systems, such as banks and credit card companies, also spend energy, arguably more than Bitcoin would.

===Why don't we use calculations that are also useful for some other purpose?===
To provide security for the Bitcoin network, the calculations involved need to have some very specific features. These features are incompatible with leveraging the computation for other purposes.

==Help==
===I'd like to learn more. Where can I get help?===

* Read the [[Introduction|introduction to bitcoin]]
* See the videos, podcasts, and blog posts from the [[Press]]
* Read and post on the [[Bitcoin:Community_portal#Bitcoin_Community_Forums|forums]]
* Chat on one of the [[Bitcoin:Community_portal#IRC_Chat|Bitcoin IRC]] channels
* Listen to [http://omegataupodcast.net/2011/03/59-bitcoin-a-digital-decentralized-currency/ this podcast], which goes into the details of how bitcoin works

==See Also==

* [[Man page]]
* [[Introduction]]

[[zh-cn:FAQ]]
[[fr:FAQ]]
{{fromold|bitcoins}}

[[Category:Technical]]
[[Category:Vocabulary]]

Help:FAQ

2011-05-22T20:32:11Z

Jabowery: /* General */

Here you will find answers to the most commonly asked questions.

== General ==
=== What are bitcoins? ===
Bitcoins are the unit of currency of the Bitcoin system. A commonly used shorthand for this is “BTC” to refer to a price or amount (eg: “100 BTC”)
A Bitcoin isn't actually a 'thing' you can point at. It is just a number associated with a [[Address|Bitcoin Address]]. See also an [[Introduction|easy intro]] to bitcoin.

=== How can I get Bitcoins? ===

There are four ways to get Bitcoins:

* Buy them on an exchange such as [https://www.mtgox.com/ Mt. Gox] or [http://www.bitcoin-otc.com/ #bitcoin-otc] on FreeNode.
* Accept Bitcoins as payment for goods or services.
* Find a local trader on [http://tradebitcoin.com tradebitcoin] (or somewhere else) and trade with him in cash
* Create a new [[block]] (currently yields 50 Bitcoins).
* Participate in a [[Pooled mining|mining pool]].

=== Can I buy Bitcoins with Paypal? ===

While it's possible to find an individual who wishes to sell Bitcoin to you via Paypal, (perhaps via [http://www.bitcoin-otc.com/ #bitcoin-otc] ) most major exchanges do not allow funding through Paypal. This is due to repeated cases where someone pays for Bitcoins with Paypal, receives their Bitcoins, and then fraudulently complains to Paypal that they never received their goods. Paypal too often sides with the fraudulent buyer in this case, and so exchangers no longer allow this method of funding.

Buying Bitcoins from individuals with this method is still possible, but requires mutual trust. In this case, Bitcoin seller beware.

=== How are new Bitcoins created? ===

[[File:total_bitcoins_over_time_graph.png|thumb|Number of bitcoins over time, assuming a perfect 10-minute interval.]]
New coins are generated by a network node each time it finds the solution to a certain mathematical problem (i.e. creates a new [[block]]), which is difficult to perform and can demonstrate a [[proof of work]]. The reward for solving a block is [[controlled inflation|automatically adjusted]] so that in the first 4 years of the Bitcoin network, 10,500,000 BTC will be created. The amount is halved each 4 years, so it will be 5,250,000 over years 4-8, 2,625,000 over years 8-12 and so on. Thus the total number of coins will approach 21,000,000 BTC over time.

In addition, built into the network is a system that attempts to allocate new coins in blocks about every 10 minutes, on average, somewhere on the network. As the number of people who attempt to generate these new coins changes, the difficulty of creating new coins changes. This happens in a manner that is agreed upon by the network as a whole, based upon the time taken to generate the previous 2016 blocks. The difficulty is therefore related to the average computing resources devoted to generate these new coins over the time it took to create these previous blocks. The likelihood of somebody "discovering" one of these blocks is based on the computer they are using compared to all of the computers also generating blocks on the network.

=== What's the current total number of Bitcoins in existence? ===

[http://blockexplorer.com/q/totalbc Current count]

The number of blocks times the coin value of a block is the number of coins in existence. The coin value of a block is 50 BTC for each of the first 210,000 blocks, 25 BTC for the next 210,000 blocks, then 12.5 BTC, 6.25 BTC and so on.

=== How divisible are Bitcoins? ===

Technically, a Bitcoin can be divided down to 8 decimals using existing data structures, so 0.00000001 BTC is the smallest amount currently possible. Discussions about and ideas for ways to provide for even smaller quantities of Bitcoins may be created in the future if the need for them ever arises.

=== How does the halving work when the number gets really small? ===

The reward will go from 0.00000001 BTC to 0. Then no more coins will likely be created.

The calculation is done as a right bitwise shift of a 64-bit signed integer, which means it is divided by 2 and rounded down. The integer is equal to the value in BTC * 100,000,000. This is how all Bitcoin balances/values are stored internally.

Keep in mind that using current rules this will take nearly 100 years before it becomes an issue and Bitcoins may change considerably before that happens.

=== How long will it take to generate all the coins? ===

The last block that will generate coins will be block #6,929,999. This should be generated around year 2140. Then the total number of coins in circulation will remain static at 20,999,999.9769 BTC.

Even if the allowed precision is expanded from the current 8 decimals, the total BTC in circulation will always be slightly below 21 million (assuming everything else stays the same). For example, with 16 decimals of precision, the end total would be 20999999.999999999496 BTC.

=== If no more coins are going to be generated, will more blocks be created? ===

Absolutely! Even before the creation of coins ends, the use of [[transaction fee|transaction fees]] will likely make creating new blocks more valuable from the fees than the new coins being created. When coin generation ends, what will sustain the ability to use bitcoins will be these fees entirely. There will be blocks generated after block #6,929,999, assuming that people are still using Bitcoins at that time.

=== But if no more coins are generated, what happens when Bitcoins are lost? Won't that be a problem? ===

Not at all. Because of the law of supply and demand, when fewer Bitcoins are available the ones that are left will be in higher demand, and therefore will have a higher value. So when Bitcoins are lost, the remaining Bitcoins will increase in value to compensate. As the value of Bitcoins increase, the number of Bitcoins required to purchase an item '''de'''creases. This is known as a [[Deflationary spiral|deflationary economic model]]. Eventually, if and when it gets to the point where the largest transaction is less that 1BTC, then it's a simple matter of shifting the decimal place to the right a few places, and the system continues.

=== If every transaction is broadcast via the network, does BitCoin scale? ===
The Bitcoin protocol allows lightweight clients that can use Bitcoin without downloading the entire transaction history. As traffic grows and this becomes more critical, implementations of the concept will be developed. Full network nodes will at some point become a more specialized service.

With some modifications to the software, full BitCoin nodes could easily keep up with both VISA and MasterCard combined, using only fairly modest hardware (a couple of racks of machines using todays hardware). It's worth noting that the MasterCard network is structured somewhat like BitCoin itself - as a peer to peer broadcast network.

Learn more about [[Scalability]].

=== How does the BitCoin network recover from a network partition? ===

=== Why do I have to wait 10 minutes before I can spend money I received? ===

The reason you have to wait 10 minutes is that's the average time taken to find a block. It can be significantly more or less time than that depending on luck, 10 minutes is simply the average case.

Blocks (shown as "confirmations" in the GUI) are how the BitCoin achieves consensus on who owns what. Once a block is found everyone agrees that you now own those coins, so you can spend them again. Until then it's possible that some network nodes believe otherwise, if somebody is attempting to defraud the system by reversing a transaction. The more confirmations a transaction has, the less risk there is of a reversal. Only 6 blocks or 1 hour is enough to make reversal computationally impractical. This is dramatically better than credit cards which can see chargebacks occur up to three months after the original transaction!

Why ten minutes specifically? It is a tradeoff chosen by Satoshi between propagation time of new blocks in large networks and the amount of work wasted due to chain splits. If that made no sense to you, don't worry. Reading [http://www.bitcoin.org/bitcoin.pdf the technical paper] should make things clearer.

=== Do you have to wait 10 minutes in order to buy or sell things with BitCoin? ===

No, it's reasonable to sell things without waiting for a confirmation as long as the transaction is not of high value.

When people ask this question they are usually thinking about applications like supermarkets or snack machines, as discussed in [http://www.bitcoin.org/smf/index.php?topic=423.msg3819#msg3819 this thread from July 2010]. Zero confirmation transactions still show up in the GUI, but you cannot spend them. You can however reason about the risk involved in assuming you ''will'' be able to spend them in future. In general, selling things that are fairly cheap (like snacks, digital downloads etc) for zero confirmations will not pose a problem if you are running a well connected node.

=== Why does my Bitcoin address keep changing? ===

Whenever the address listed in "Your address" receives a transaction, Bitcoin replaces it with a new address. This is meant to encourage you to use a new address for every transaction, which enhances [[anonymity]]. All of your old addresses are still usable: you can see them in ''Settings -> Your Receiving Addresses''.

==Economy==
=== Where does the value of Bitcoin stem from? What backs up Bitcoin? ===
Bitcoins have value because they are accepted as payment by many. See the [[Trade|list of Bitcoin-accepting sites]].

When we say that a currency is backed up by gold, we mean that there's a promise in place that you can exchange the currency for gold. In a sense, you could say that Bitcoin is "backed up" by the price tags of merchants – a price tag is a promise to exchange goods for a specified amount of currency.

It's a common misconception that Bitcoins gain their value from the cost of electricity required to generate them. Cost doesn't equal value – hiring 1,000 men to shovel a big hole in the ground may be costly, but not valuable. Also, even though scarcity is a critical requirement for a useful currency, it alone doesn't make anything valuable. For example, your fingerprints are scarce, but that doesn't mean they have any exchange value.

=== What if someone bought up all the existing Bitcoins? ===
What if somebody bought up all the gold in the world? Well, by attempting to buy it all, the buyer would just drive the prices up until he runs out of money.

Not all Bitcoins are for sale. Just as with gold, no one can buy a Bitcoin that isn't available for sale.

=== Bitcoin's monetary policy causes a deflationary spiral ===
See the article [[Deflationary spiral]].

==Networking==
=== Do I need to configure my firewall to run bitcoin? ===

Bitcoin will connect to other nodes, usually on tcp port 8333. You will need to allow outgoing TCP connections to port 8333 if you want to allow your bitcoin client to connect to many nodes. Bitcoin will also try to connect to IRC (tcp port 6667) to meet other nodes to connect to.

If you want to restrict your firewall rules to a few ips and/or don't want to allow IRC connection, you can find stable nodes in the [[Fallback Nodes|fallback nodes list]]. If your provider blocks the common IRC ports, note that lfnet also listens on port 7777. Connecting to this alternate port currently requires either recompiling Bitcoin, or changing routing rules. For example, on Linux you can evade a port 6667 block by doing something like this:

echo 173.246.103.92 irc.lfnet.org >> /etc/hosts
iptables -t nat -A OUTPUT -p tcp --dest 173.246.103.92 --dport 6667 -j DNAT --to-destination :7777 -m comment --comment "bitcoind irc connection"

=== How does the peer finding mechanism work? ===
Bitcoin finds peers primarily by connecting to an IRC server (channel #bitcoin on irc.lfnet.org). If a connection to the IRC server cannot be established (like when connecting through TOR), an in-built node list will be used and the nodes will be queried for more node addresses.

==Mining==
===What is mining?===
Mining is the process of spending computation power to find valid blocks and thus create new Bitcoins.

===I've been mining for a long time and haven't created any new Bitcoins. What's wrong?===

In the early days of Bitcoin, it was easy for anyone to find new blocks using standard CPUs. As more and more people started mining, the [[difficulty]] of finding new blocks has greatly increased to the point where the average time for a CPU to find a single block can be many years. The only cost- or time-effective method of mining is using a high-end graphics card with special software (see also [[Why a GPU mines faster than a CPU]]). Since CPU mining is essentially useless, it may be removed from future versions of the Bitcoin software.

===Is mining used for some useful computation?===
The computations done when mining are internal to Bitcoin and not related to any other distributed computing projects. They serve the purpose of securing the Bitcoin network, which is useful.

===Is it not a waste of energy?===
Spending energy on creating a free monetary system is hardly a waste. Also, services necessary for the operation of currently widespread monetary systems, such as banks and credit card companies, also spend energy, arguably more than Bitcoin would.

===Why don't we use calculations that are also useful for some other purpose?===
To provide security for the Bitcoin network, the calculations involved need to have some very specific features. These features are incompatible with leveraging the computation for other purposes.

==Help==
===I'd like to learn more. Where can I get help?===

* Read the [[Introduction|introduction to bitcoin]]
* See the videos, podcasts, and blog posts from the [[Press]]
* Read and post on the [[Bitcoin:Community_portal#Bitcoin_Community_Forums|forums]]
* Chat on one of the [[Bitcoin:Community_portal#IRC_Chat|Bitcoin IRC]] channels
* Listen to [http://omegataupodcast.net/2011/03/59-bitcoin-a-digital-decentralized-currency/ this podcast], which goes into the details of how bitcoin works

==See Also==

* [[Man page]]
* [[Introduction]]

[[zh-cn:FAQ]]
[[fr:FAQ]]
{{fromold|bitcoins}}

[[Category:Technical]]
[[Category:Vocabulary]]

Man page

2011-03-24T01:21:42Z

Jabowery: Electrical energy

This page is for frequently asked questions that do not yet appear in the main [[FAQ]].

It's also a place for questions in progress, so feel free to ask new questions, or answer and/or refine existing answers.

== Ask your question here: ==
How much electrical energy per transaction is projected?

== Answered Questions ==

=== How does it work (for non-geeks) ===

====Why can't somebody just create a version of the software that gives you extra bitcoins?====

When you spend some bitcoins, the software on your machine has to prove to the software running on everybody else's machine that those bitcoins are valid.

How does it do that? Well, it is a little bit complicated; you've got to understand how bitcoins are created, and how they are traded.

First, how they're created: 50 bitcoins are created approximately every 10 minutes. Everybody who is trying to create bitcoins is in a race to try to find those 50 bitcoins; they are really hard to find, but, once found, it is easy to verify that, yes, indeed, your bitcoin software found them, so you get to spend them.

Second, how they're traded: Imagine you did find 50 bitcoins (well, your computer found them by running the bitcoin software for a few months or a year-- they are not easy to find, and are harder to find the more people who are looking for them). You trade them to me by sending them to my bitcoin address. Inside the software, a messages is created and then broadcast to everybody that says "These 50 bitcoins that we all agree are valid are hereby officially traded to somebody else (me-- well, one of my bitcoin receiving addresses, actually)."

Now I've got them. If you try to trade those same 50 bitcoins to somebody else, it won't work-- everybody running Bitcoin sees all the trades, so if you try to spend the same coins a second time everybody else's software will reject your attempt to cheat.

And that's it-- that's how it works. Bitcoins are scarce because only about 50 are created every ten minutes. And you can't claim to have more than you really have because everybody else can check to see if your coins really were created by the "race" process, or if they were from valid trades.

=== Uncatagorized ===

==== Why did this generation give me more bitcoins than normal (like 50.07)? ====

You collected a [[transaction fee]].

==== Why must users back up their wallets every 100 actions? ====

Bitcoin transactions send bitcoins to a specific public key. A Bitcoin address is an encoded hash of a public key. In order to use received bitcoins, you need to have the private key matching the public key you received with. This is sort of like a super long password associated with an account (public key). Your Bitcoin wallet contains all of the private keys necessary for spending your received transactions. If you delete your wallet without a backup, then you no longer have the authorization information necessary to claim your coins, and the coins associated with those keys are lost forever.

Creating a new address generates a new pair of public and private keys, which are added to your wallet. Each keypair is mostly random numbers, so they cannot be known prior to generation. If you backup your wallet and then create a new address, the keypair associated with the new address will not be in the old wallet because the new keypair is only know ''after'' creating it. Any coins received at this address will be lost if you restore from the backup.

The situation is made somewhat more confusing because the receiving addresses shown in the UI are not the only keys in your wallet. Each Bitcoin generation is given a new public key, and, more importantly, each sent transaction also sends a random number of bitcoins back to yourself at a new key. When sending bitcoins to anyone, you generate a new keypair for yourself and simultaneously send bitcoins to your new public key and the actual recipient's public key. This is an anonymity feature -- it makes tracking Bitcoin transactions much more difficult.

So if you create a backup, send some bitcoins, and then restore from the backup, some bitcoins will be lost. Bitcoin has not deleted any keys (keys are ''never'' deleted) -- it has created a new key that is not in your old backup and then sent bitcoins to it.

To mitigate this problem, the wallet contains a pool of 100 queued keys. When you need an address for whatever reason (send, "new address", generation, etc.), the key is not actually generated freshly, but taken from this pool. A brand new address is generated to fill the pool back to 100. So when a backup is first created, it has all of your old keys plus 100 unused keys. After sending a transaction, it has 99 unused keys. After a total of 100 new-key actions, you will start using keys that are not in your backup. Since the backup does not have the private keys necessary for authorizing spends of these coins, restoring from the old backup will cause you to lose bitcoins.

Linux users can setup cron by running 'crontab -e' and adding this line:
01 */1 * * * /usr/local/bin/backupwallet.sh

backupwallet.sh:
<pre>#!/usr/bin/env bash

GPGU="My GPG User"

TS=$(date "+%Y%m%d-%H-%M")

WALLET=/tmp/wallet${TS}
WALLET_E=/tmp/wallet${TS}.crypt

~/bin/bitcoind backupwallet $WALLET
/usr/bin/gpg -r "$GPGU" --output $WALLET_E --encrypt $WALLET
~/bin/s3cmd put $WALLET_E s3://NAME_OF_MY_S3_BUCKET
rm $WALLET $WALLET_E</pre>

The shell script does:
* Call bitcoind backupwallet to create a time/date-stamped wallet file.
* GPG encrypt the wallet with my public key.
* Copy the result to an off-machine backup location.

It's using Amazon S3, which is itself redundantly backed up to multiple geographic locations automatically. Replace the s3cmd with an scp to copy somewhere if you're not an S3 user; you could even ftp somewhere, since the wallet is encrypted it doesn't matter if somebody is eavesdropping

==== How many nodes are there? ====

You can get a rough estimate by counting the number of users on the [irc://irc.lfnet.org/bitcoin #bitcoin] channel at irc.lfnet.org. Most Bitcoin nodes are constantly connected to this channel while running, though Bitcoin can be configured not to do so. A more accurate number can be gotten by running Bitcoin nonstop for a few days and then using [https://github.com/gavinandresen/bitcointools bitcointools] to analyze your addr.dat file. This shows the "last seen" times for ''all'' Bitcoin nodes.

=== Economics ===

==== I've lost my wallet, is there a way to recreate the lost coins in the system? ====
No, coins that are lost are lost forever.
The lost coins will not be recovered or regenerated at any time.

==== Where does the value of Bitcoin stem from? What backs up Bitcoin? ====

Bitcoin has value because it is accepted as payment by many. The initial market value was achieved when people speculated, that because of its properties, the currency would be accepted by others later on.

When we say that a currency is backed up by gold, we mean that there's a promise in place that you can exchange the currency for gold. In a sense, you could say that Bitcoin is "backed up" by the price tags of merchants and currency exchangers - a price tag is a promise to exchange goods for a specified amount of currency. Of course, price tags may or may not be as long-term promises as those made by central banks or governments.

It's a common misconception that Bitcoins gain their value from the cost of electricity required to generate them. Cost doesn't equal value - hiring 1,000 men to shovel a big hole in the ground may be costly, but not valuable. Also, even though scarcity is a critical requirement for a currency to be useful, it alone doesn't make anything valuable. Your fingerprints are scarce, but that doesn't mean they have any exchange value.

At the time of this writing, Bitcoin's chain of proof is the result of over 6 quadrillion cryptographically secure, verified calculations carried out by many independent computers. This large and growing input of energy and technology is part of Bitcoin's value, and represents a substantial investment of resources by Bitcoin users in creating the benefits of a trustworthy medium of exchange.

==== Isn't the minting process a waste of resources? ====

All currencies need a method for regulating the money supply and creating circulation. To make Bitcoin secure, a large amount of computer work is required. The Bitcoin process for introducing new coins into circulation is designed to make the currency secure by encouraging users to perform the necessary computational work by awarding the role of introducing new coins into circulation in rough proportion the amount of computer power contributed to this goal.

=== Technical ===

==== Can generating nodes charge different transaction fees, or is this enforced by the network? ====

Currently a generating node can charge whatever [[transaction fee]] they want. A transaction that doesn't pay the fee won't be included in any blocks produced by that node, but it will appear in later blocks by cheaper generators.

It is [http://www.bitcoin.org/smf/index.php?topic=165.msg1595#msg1595 possible] for the network to enforce a fee rate, but this is not currently implemented. If [[Satoshi]] tried to implement this, only ''generating'' nodes would have a vote in whether the change would be accepted, so the change would have to be beneficial in some way to generators (ie, not too low).

==== Does including more transactions in your block slow down your hashing rate? ====

Not at all. You're hashing the block header, which contains only a fixed-size hash of all the transactions.

==== Why is it using so much CPU? ====

If you have "Generate coins" turned on, Bitcoin will calculate millions of [[hash|hashes]] per second in an attempt to solve the current [[block]]. This will use all of your idle CPU time, but Bitcoin runs at a low priority, so none of your other programs should be slowed down. Turning off coin generation should eliminate most CPU usage.

==== Why can't it be doing something useful for humanity instead? ====

[[hash|SHA-256 hashing]] has very specific properties that we need. In particular, it generates (with predictable CPU required) numbers that are for all practical purposes purely random, but in a way that is easily verifiable. There are no known "beneficial" calculations that could replace this.

This CPU time and electricity is not entirely wasted, though: it helps protect the network from attack.

==== How much network traffic does the bitcoin client generate? ====

Almost none. These statistics were recorded before the outgoing connection limit was reduced from 15 to 8, so the current usage is probably even lower:

* Bytes sent without Bitcoin: 2475590 (2.4MiB) per day
* Bytes received without Bitcoin: 2798454 (2.7MiB) per day
* Bytes sent with Bitcoin (not port forwarded): 2210854 (2.1MiB) per day
* Bytes received with Bitcoin (not port forwarded): 4699445 (4.5MiB) per day
* Bytes sent with Bitcoin (port forwarded): 20879040 (19.9MiB) per day
* Bytes received with Bitcoin (port forwarded): 10954438 (10.4MiB) per day

==== Can we expand the transaction protocol so it includes a message as well as an amount? ====

The current implementation already supports processing arbitrary data in transactions through the complex transaction scripting mechanism. However:
* You will be charged 0.01 BTC per kilobyte, just like all other transactions.
* ECDSA (the public-key algorithm used by Bitcoin) doesn't support encryption, so you'll have to use something else if you want encryption.
* The ability to actually use this feature to send messages will probably never be implemented in Bitcoin. It's not what the block chain was designed for.

==== What happens when two nodes generate a block at the same time? ====

This is very unlikely to happen but if it does: The tiebreak is which block the NEXT block builds on.

Each node sends out it's 'winning' block. Some nodes on the network will hear about 'block A' first and assume it is the winning block, and some will hear about 'block B' first and assume it is the winning block. Then each 'half' will proceed hashing from there trying to generate the next block as normal.
If a machine with 'block B' as its predecessor wins the next race by generating 'block C', it becomes the official winner, and the nodes who were working on A give up and start on C. (In this case the generator of 'block A' might be disappointed, because he thought he generated some coins, but he didn't because the network decided his block was no longer valid.)

Note: block A and block B will usually contain the same list of transactions. Transactions not included will be made available to other future blocks for inclusion into the chain.

==== What happens if someone sends me some coins but I am not connected? ====

Any transfer to a 'valid' address should be successful.
You don't need to have a client running to receive bitcoins.
Once you create an address, any coins sent to it will just sit there waiting for you to spend them.

==== Can I start bitcoind without it becoming a daemon process? ====

No. That is expected to be added to the client at some point.

=== Technical (Windows) ===

==== Why am I not downloading any blocks? ====

Add bitcoin.exe to the "Excluded processes" list of Microsoft Security Essentials.

=== Developing ===

==== Is there a mailing list? ====
Yes. http://sourceforge.net/mailarchive/forum.php?forum_name=bitcoin-list

==== Is there a test network? ====
Yes, run Bitcoin or bitcoind with the -testnet switch (beginning with version 0.3.14).

There is a -testnet version of the Bitcoin Faucet at https://freebitcoins.appspot.com/TEST/.

==== How do I build bitcoin? ====
Forum thread on building v0.3: http://www.bitcoin.org/smf/index.php?topic=298.msg2366#msg2366
There are some [http://heliacal.net/~solar/bitcoin/bitcoin-linuxbuild.pdf Build notes for linux type systems (pdf)]

== See Also ==

* [[FAQ]]

{{fromold|more_faqs}}

[[Category:Technical]]