Bitcoin Wiki - User contributions [en]

How bitcoin works

2011-06-10T06:44:58Z

Kinaro:

This page explains the basic framework of Bitcoin's functionality.

==Cryptography==

There are several cryptographic technologies that make up the essence of Bitcoin.

First is [http://en.wikipedia.org/wiki/Public-key_cryptography public key cryptography]. Each coin is associated with its current owner's public [http://en.wikipedia.org/wiki/Elliptic_Curve_DSA ECDSA] key. When you send some bitcoins to someone, you create a message ([[transaction]]), attaching the new owner's public key to this amount of coins, and sign it with your private key. When this transaction is broadcast to the bitcoin network, this lets everyone know that the new owner of these coins in the owner of the new key. Your signature on the message verifies for everyone that the message is authentic. The complete history of transactions is kept by everyone, so anyone can verify who is the current owner of any particular group of coins.

This complete record of transactions is kept in the [[block chain]], which is a sequence of records called [[block|blocks]]. All computers in the network have a copy of the block chain, which they keep updated by passing along new blocks to each other. Each block contains a group of transactions that have been sent since the previous block. In order to preserve the integrity of the block chain, each block in the chain confirms the integrity of the previous one, all the way back to the first one, the [[genesis block]]. Record insertion is costly because each block must meet certain requirements that make it [[difficulty|difficult]] to generate a valid block. This way, no party can overwrite previous records by just forking the chain.

Both the chaining, and the difficulty, are achieved via the [http://en.wikipedia.org/wiki/SHA-2 SHA256] [http://en.wikipedia.org/wiki/Cryptographic_hash_function cryptographic hash function]. The hash function essentially takes a block of data, and transforms it, in an effectively-impossible to reverse or to predict way, into a large integer. Making the slightest change to a block of data changes its hash unpredictably, so nobody can create a different block of data that gives exactly the same hash. Therefore, by being given a short hash, you can confirm that it matches only a particular long block of data. This way, Bitcoin blocks don't have to contain serial numbers, as blocks can be identified by their hash, which serves the dual purpose of identification as well as integrity verification.

The [[difficulty]] factor is achieved by requiring that this integer is below a certain threshold - the data in the block is perturbed by a [[nonce]] value, until the data in the block hashes to produce an integer below the threshold - which takes a lot of processing power. This low hash value for the block serves as an easily-verifiable [[proof of work]] - every node on the network can instantly verify that the block meets the required criteria.

With this framework, we are able to achieve the essential functions of the Bitcoin system. We have verifiable ownership of bitcoins, and a distributed database of all transactions, which prevents [[#Double_spending|double spending]].

==Bitcoin mining==

We have mentioned in the previous section that adding a block to the block chain is difficult, requiring time and processing power to accomplish. So what incentive does anyone have to spend the effort to produce a block, if it takes up all these resources? The answer is that the person who manages to produce a block gets a reward. This reward is two-fold. First, the block producer gets a bounty of some number of bitcoins, which is agreed-upon by the network. (Currently this bounty is 50 bitcoins; this value will halve every 210,000 blocks.) Second, any [[transaction fees]] that may be present in the transactions included in the block, get claimed by the block producer.

This gives rise to the activity known as "bitcoin mining" - using processing power to try to produce a valid block, and as a result 'mine' some bitcoins. The network rules are such that the [[difficulty]] is adjusted to keep block production to approximately 1 block per 10 minutes. Thus, the more miners engage in the mining activity, the more difficult it becomes for each individual miner to produce a block. The higher the total difficulty, the harder it is for an attacker to overwrite the tip of the block chain with his own blocks (which enables him to double-spend his coins. See the [[weaknesses]] page for more details).

Besides being important for maintaining the transaction database, mining is also the mechanism by which bitcoins get created and distributed among the people in the bitcoin economy. The network rules are such that over the next hundred years, give or take a few decades, a total of 21 million bitcoins will be created. Rather than dropping money out of a helicopter, the bitcoins are awarded to those who contribute to the network by creating [[block]]s in the [[block chain]].

==Double spending==

The block chain which is constantly being generated by the Bitcoin network works as a common agreement about the order in which bitcoin transactions have taken place. Placing the transactions in a sequence is necessary so that things like the double-spending of coins and negative balances can be avoided. Simply announcing each transaction is not enough to establish the order of the transactions, because different computers may receive the announcement at different times.

Unlike conventional banking systems, there is no central place where this "log" of transactions is stored. What happens is the broadcasting of small pieces (the blocks), each stating that it is a continuation of a previous block. Thus, it is possible for many proposed continuations to the block chain to exist at the same time. There can also be multiple continuations to each of these continuations, forming many branches and sub-branches, like a tree. When this happens, each computer in the network must decide for itself which branch is the "correct" one that should be accepted and extended further.

The rule in this case is to accept the "longest" valid branch. Choose from the branches of blocks that you have received, the path, the total "difficulty" of which is the highest. This is the sequence of blocks that is assumed to have required the most work (CPU time) to generate. For Bitcoin, this will be the "true" order of events, and this is what it will take into account when calculating the balance to show to the user. "Valid" means that Bitcoin will reject branches which don't contain a strong enough [[proof of work]] or contain invalid transactions (i.e. calculating a wrong balance, giving more money than you have, generating more bitcoins than is allowed at the time, etc).

It is still possible that, as new blocks are constantly being generated, at some later time, some other branch will become the longest branch. However, it takes significant effort to extend a branch, and nodes work to extend the branch that they have received and accepted (which is normally the longest one). So, the longer this branch becomes compared to the second-longest branch, the more effort it will take for the second-longest branch to catch up and overcome the first in length. Also, the more nodes in the network hear about the longest branch, the more unlikely it becomes for other branches to be extended the next time a block is generated, since the nodes will accept the longest chain.

Therefore, the more time a transaction has been part of the longest block chain, the more likely it is to remain part of the chain indefinitely. This is what makes transactions non-reversible and this is what prevents people from double-spending their coins. What the receiver of each transaction does, after money has been supposedly transferred to him/her is to check how long the block chain following the said transaction has become, because the more blocks are added to the longest branch after the transaction, the less likely is it that some other branch will overcome it.

When the block chain after the transaction has become long enough, it becomes near-impossible for another branch to overcome it, and so people can start accepting the transaction as true. This is why 'blocks' also serve as 'confirmations' for a transaction. Even if another branch does overcome the one with the transaction, most of the blocks will have been generated by people who have no affiliation with the sender of the coins, as a large number of people are working to generate blocks. Since transactions are broadcasted to all nodes in the network, these blocks are just as likely to contain the transaction as the blocks in the previously-accepted branch.

Bitcoin relies on the fact that no single entity can control most of the CPU power on the network for any significant length of time, since, if they could, they would be able to extend any branch of the tree they chose, and faster than any other branch can be extended, making it the longest branch, and then permanently controlling which transactions appear in it.

==See also==

* [[Introduction]]
* [[Getting started]]
* [[Using Bitcoin]]
* Bitcoin [[FAQ]]

==External Links==

* http://www.bitcoin.org/smf/index.php?topic=2487.0 A forum thread with some good 'for-the-layperson' explanations of how bitcoin works.

[[Category:Introduction]]

Meetups

2011-06-10T06:41:23Z

Kinaro:

Don't add everyone who's going in the "Who?" column, just prominent Bitcoin members and organizers. Also see [http://bitcoin.meetup.com bitcoin.meetup.com]

{| class="wikitable"
|-
! Group
! When?
! Where?
! Who?
! Other Notes
|-
|
| 7:00 PM, June 16
|
| Boston, MA
|
|-
| [http://www.meetup.com/bitcoin New York Bitcoin Users]
| 7:00 PM, 2nd Saturday of every month ([http://www.meetup.com/bitcoin/events/past past meetings])
| OnlyOneTV Studios - 290 Fifth Ave New York, NY
| Bruce Wagner (Organizer) and others
|
|-
| [http://www.meetup.com/BitcoinDC Washington, DC Bitcoin Users]
| 7:00 PM, 1st Monday of every month ([http://www.meetup.com/BitcoinDC/#past past meetings])
| Northside Social, 3211 Wilson Blvd Arlington, VA
| [[User:Dduane|Darrell Duane]] (Organizer) and others
|
|-
| [http://www.meetup.com/Silicon-Valley-Bitcoin-Users Silicon Valley Bitcoin Users]
| 7:00 PM, Tuesday, June 14, 2011 ([http://www.meetup.com/Silicon-Valley-Bitcoin-Users/events/past past meetings])
| 140B S Whisman Road Mountain View, CA
| Brian Mcqueen and others
|
|-
| [http://www.meetup.com/BitcoinChicago Chicago]
| No regular schedule yet ([http://www.meetup.com/BitcoinChicago/events/past past meetings])
| Sunnyvale Art Gallery Cafe, 251 W El Camino Real Sunnyvale, CA
| Igor
|
|-
| [http://www.meetup.com/denver-bitcoin Denver]
| First meeting June 4th, 2011 ([http://www.meetup.com/denver-bitcoin/events/past past meetings])
| Gypsy House Cafe - 1279 Marion St Denver, CO
| bearbones
|
|-
| [http://www.meetup.com/bitcoinSF Bitcoin SF]
| Saturday, June 4, 2011 ([http://www.meetup.com/bitcoinSF past meetings])
| SFSU - 1600 Holloway Ave. San Francisco, CA
| Brian Mcqueen and others
|
|-
| [http://www.meetup.com/Los-Angeles-Digital-Currency-Innovators-Group Los Angeles Digital Currency Innovators]
| Thursday July 7th, 2011, 7 PM
| (mt)/Media Temple, Culver City, CA
| [[User:sgornick|Stephen Gornick]] (Interim organizer) and others
| Seeking meetup coordinator
|-
| [http://www.meetup.com/Las-Vegas-Bitcoin-Users Las Vegas Bitcoin Users]
| Thursday, June 9, 2011, 7:00 PM ([http://www.meetup.com/Las-Vegas-Bitcoin-Users#past past meetings])
| Putters, 6945 South Rainbow Boulevard, Las Vegas, NV
| Mark Russell
|
|-
| [http://www.meetup.com/Bitcoin-Twin-Cities-Users-Meetup Bitcoin Twin Cities Users]
| Friday, June 10, 2011, 6:30 PM
| Joule - 1200 Washington Ave S Minneapolis, MN
| Mac Manson
|
|-
| [http://www.hive13.org/?p=310 Hive13 Hackerspace]
| Bitcoin Exchange, Every Tuesday, 7:30 PM
| Hive13 - 2929 Spring Grove Avenue, Cincinnati, OH
|
|
|-
| [[Melbourne Bitcoin Community]]
| Forming
| Suggest a location, and a date and time
| @da2ce7 on Freenode Channel: #bitcoin-aus
|
|-
| [[Bitcoin:Tokyo meetup|Tokyo]]
|
|
| [[User:MagicalTux|Magical Tux]] (Organizer) and others
|
|-
| [http://meetup.com/Bitcoin-Canada Vancouver Canada]
| ([http://www.meetup.com/Bitcoin-Canada/#past past meetings])
| The Brickhouse - 730 Main St.
| humble (and others)
|
|-
| [http://www.bitcoin.org/smf/index.php?topic=6725.0 Zurich Switzerland]
| Semi-regular, about once a month
| Oliver Twist Pub
| Stefan Thomas (weusecoins), Mike Hearn (bitcoinj), bitdragon, Luzius (Wuala), more ...
|
|-
| [[Seattle Bitcoin Meetup]]
| Anybody interested?
| Suggest a location, and a date and time
| dacoinminster
|
|-
|}

[[Category:Local]]

[[de:Treffen]]

Help:Introduction

2011-06-10T06:35:50Z

Kinaro: /* Currency */

The purpose of this page is to provide a general overview of the Bitcoin system and economy.

==Basic Concepts==

===Currency===

Alice is far away from Bob and wants to buy his [http://www.grasshillalpacas.com/alpacaproductsforbitcoinoffer.html Alpaca socks]. In return, she wants to send him a dollar. A dollar bill is a piece of paper which is very easy to create (by those who can), but which is accepted by people in exchange for valuable products and services in the real world, such as the socks Alice wants to buy. One simple thing Alice can do is put a dollar bill in an envelope, mail it to Bob, and then wait for Bob to send the socks to her.

===Banks===

Another thing Alice can do is to "wire" the money to Bob. She can do that by first giving her dollar bills to an institution called a bank, the job of which is to safe-keep Alice's dollar bills and, in return, to give Alice a written promise (called a "bank statement") that, whenever she wishes, she can come to the bank to take back the same number of dollar bills that she deposited. Since the money is still Alice's, she is entitled to do with it whatever she pleases, and the bank (like most banks), for a small fee, will do Alice the service of "giving" the dollar bills to Bob instead of her. This could be done by sending a person to Bob's door, with Alice's dollar bills in hand (or, better, fresh new dollar bills, if Alice's dollar bills are in bad condition), but usually it is done by Alice's bank by giving the dollar bills to Bob's bank and informing them that the money is for Bob, who will then see the amount in his next statement, or, if he is in a hurry, the next time he contacts his bank asking about how much money they have for him.

Since banks have many customers, and bank employees require money for doing the job of talking to people and signing documents, banks in recent times have been using machines such as ATMs and web servers, that do the job of interacting with customers instead of paid bank employees. The job of these machines is to learn what each customer wants to do with his/her money and, to the extent that it's possible, act on what the customer wants (for example, ATMs can hand cash). In the end, there is very little human involvement in this process, most of the time. The people can always know how much money out of the money that the bank is safe-keeping is theirs, and they are confident that the numbers they see in their bank statements and on their computer screens stand for the number of dollar bills that they can get from the bank at any time they wish. They can be so sure of that, that they can accept those numbers in the same way they accept paper dollars (this is similar to the way people started accepting paper dollars as they accepted gold or silver).

However, the fact that machines are used does not change the structure of this system, which is, as it was, based on a central authority (the bank) which is responsible for keeping records about how much money belongs to whom. Everybody has to rely on this central authority to be honest (i.e. to say the truth about how much money they are safe-keeping in total, or at least to make the paper money available upon demand from the owners). Also, every person has to identify him/herself to this authority, by giving his/her real name, in order to be allowed to get their paper bills back or to send money to another person.

Bitcoin is a system of owning and voluntarily transferring amounts of so-called bitcoins, in a manner similar to an on-line banking interface, but anonymously and without reliance on a central authority to decide on what is true. These bitcoins are valuable because they require the spending of real resources (CPU time and electricity) to produce, cannot be spent more than once, and cannot be removed from a person's ownership without illicit access to his/her computer.

==Bitcoin Basics==

===Preventing stealing===
To guarantee that an eavesdropper, Eve, cannot access other people's bitcoins by creating transactions in their names we use a [[Wikipedia:Public-key_cryptography|public key system]] to make digital signatures. In this system, each person, such as Alice and Bob, has a pair of public and private keys which he/she stores in a safe [[Wallet|wallet]]. Only the user with his secret private key can sign a document, such as the transaction to give some of his bitcoins to somebody else, but any one can validate the signature using the user’s public key.

* Bob sends his public key to Alice.
* Alice adds Bob’s public key along with the amount she wants to transfer, to the transaction.
* Alice signs the transaction with her secret private key.

As a result, anyone who knows the public keys of both Alice and Bob can now see that Alice agreed to transfer the amount to Bob, because nobody other than Alice has Alice's private key. Alice would be foolish to give her private key to other people, as this would allow them to sign transactions in her name, removing funds from her balance.

Later on, when Bob will transfer the same coins to Charley, he will do the same thing: receive from Charley his public key, add a new transaction to the chain of transactions and sign it with his (Bob) private key. But only Bob can do this, because only Bob has the private key which is necessary for signing and which is the only private key to match Bob’s public key that is already in the chain.

Eve cannot change who the coins belong to by replacing Bob’s public key with her public key, because Alice signed the transfer to Bob using her private key, declaring that the coins which belonged to her now belong to Bob, and Alice's private key is kept secret from Eve. So if Charley accepts that the original coin was in the hands of Alice he will also accept the fact that this coin was later passed to Bob and now Bob is passing this same coin to him.

===Preventing double-spending===
This is how we guarantee that Alice cannot replicate the coin and use it in more than one transaction (this is the main innovation behind Bitcoin):

* Details about the [[Transactions|transaction]] are [[Network|sent and forwarded]] to all or as many other computers as possible.
* A constantly growing chain of [[Blocks|blocks]] that contains a record of all transactions is collectively maintained by all computers (each has a full copy).
* To be accepted in the chain, transaction blocks must be valid and must include [[proof of work]] (one block generated by the network every 10 minutes).
* Blocks are chained in a way so that, if any one is modified, all following blocks will have to be recomputed.
* When multiple valid continuations to this chain appear, only the longest such branch is accepted and it is then extended further.

When Bob sees that his transaction has been included in a block, which has been made part of the single longest and fastest-growing block chain (extended with significant computational effort), he can be confident that the transaction by Alice has been accepted by the computers in the network and will be permanently recorded, preventing Alice from creating a second transaction with the same coin.

In theory, Alice could attempt to generate spoofed blocks in which her past usage of the same coin does not appear and try to send these blocks to everyone as evidence that the coin is still hers. However, that past transaction, which contains a signature from Alice, has already been announced, has already been distributed to a very large number of computers in the bitcoin network and a block containing it has already been generated by someone (otherwise, the first receiver of the coin would have no confirmation). Since the process of generating a valid block is designed to take a [[Proof_of_work|long time]], Alice will be unable to compete with all these computers in the rate at which she can generate blocks. Bob will receive many more blocks from third persons than Alice alone will ever be able to generate, and some of the newer blocks will contain Alice's previous transaction, telling Bob that Alice has already spent her coin. The only way for Alice to remove her transaction is to create a parallel chain which is longer than the one generated by everybody else and which doesn't contain her transaction, as only the longest chain is accepted. To remain the longest, it also has to grow faster than any other chain, so as to prevent any block generator from adding Alice's transaction to the chain. To do that, Alice has to be in a position to permanently command the majority of the CPU power on the network; something we assume no single person or organization can do. Therefore, as long as the people who control a majority of the CPUs are not cooperating with Alice, her transaction will be permanently recorded and she will be unable to create another transaction with the same coin.

===Anonymity===
Bitcoin "accounts" do not have people's names on them and do not have to correspond to individuals. Each balance is simply associated with a randomly generated public-private key pair and the money "belongs" to whoever has the private key and can sign transactions with it. The transactions that are signed using those keys also don't have to include names.

A [[Address|Bitcoin address]] mathematically corresponds to a public key and looks like this:

:15VjRaDX9zpbA8LVnbrCAFzrVzN7ixHNsC

Each person can have many such addresses, each with its own balance, and this can make it more difficult to identify which person owns what amount. In order to protect his [[Anonymity|privacy]], Bob can even generate a new public-private key pair for each individual transaction. So David receiving the coin from Charley will not be able to identify who is the second person in the list of transactions (not without asking Charley).

===Creation of coins===
As we saw, both Bob and Charley need to verify that the original coin from Alice is valid. Alice cannot simply generate coins instantly, out of thin air, because the appearance of a coin is a transaction that needs to be accepted by others.

According to current software, the way that new coins are slowly introduced is this: every computer that manages to generate a block is allowed to put one transaction there in which it gains 50 BTC, without this amount having to come from somewhere. This amount is an incentive for people to perform the computation work required for block generation. However, it is currently agreed that the reward for generating a block will be reduced to half every 4 years. Meaning that, at some point in the year 2013, the majority of the CPUs will stop accepting blocks in which the generating transaction adds 50BTC to the sum of money, and they will only accept blocks adding half that amount. The same thing will happen in the years 2017, 2021, 2025 and so on, unless different Bitcoin client software has prevailed in the network.

Since this incentive will eventually diminish, another way for Alice to gain bitcoins when she generates blocks is to accept [[Transaction_fee|transaction fees]]. There is a voluntary transaction fee that can be paid in every transfer of bitcoins, the amount of which is chosen, and paid, by the person who sends the money. This amount is given to the person who generates the "proof-of-work" block in which the transaction appears, which is necessary for the transaction to be accepted. Since Alice is free to include in her block whichever set of transactions she wants, she can choose to include only the transactions with the highest transaction fees. If everybody acts that way, then eventually, and depending on the total number of transactions, a minimum transaction fee will be required for a transaction to appear in the chain of blocks.

==Putting it all together==
Directly experience the system in action by visiting [http://blockexplorer.com/ Bitcoin Block Explorer].
The site shows you the latest blocks in the block chain. The [[Block_chain|block chain]] contains the agreed history of all transactions that took place in the system.
Note how many blocks were generated in the last hour, should be around 6. Also notice the number of transactions and the total amount transferred in the last hour (last time I checked it was about 64 and 15K.)
This should give you an indication of how active the system is.

Next, drill into one of these blocks.
Start by noticing that the block's [[hash|hash]] begins with a run of zeros, this is what made making it so difficult.
The computer that generated this block had to run on many ''Nonce'' values (also listed on the block's page) until it found one that generated this run of zeros.
Next notice the line titled ''Previous block'', each block contains the hash of the block that came before it, this is what forms the chain of blocks.
Now notice all the transactions the block contains. The first transaction is the income earned by the computer that generated this block. It includes a fixed amount of coins created out of thin air and possibly fee collected from other transactions in the same block.

Drill into any of the transactions and you will see how it is made from one or more amounts coming in and out.
The fact that there can be more than one incoming and outgoing amounts, allow the system to join and break amounts in any possible way allowing for any fractional amount needed (usually cents.)
Each incoming amount is a transaction from the past (which you can also drill to) coming from an address of someone
and each outgoing amount is addressed to someone and will be part of a future transaction (which you can also drill too if it also had already taken place.)

Finally you can drill into any of the [[Address|addresses]] and see what public information is available.

To get an impression of the amount of activity on the Bitcoin network, you might like to visit the monitoring websites [[Bitcoin Watch]] and [[Bitcoin Monitor]]. The first has general statistics on the amount and size of transactions, while the latter shows a real-time visualization of events on the Bitcoin network.

''So that all sounds good! How do I help? [[Helping Bitcoin|How to help Bitcoin]]''

==See Also==

* [http://www.youtube.com/watch?v=Um63OQz3bjo What is Bitcoin?] video introduction
* Installing Bitcoin [[getting started]]
* [[How bitcoin works]]
* [[Using Bitcoin]]
* A gentle introduction to Bitcoin - [[BitcoinMe]]
* Another introduction, ''The Rebooting Of Money'' podcast is found at [[Bitcoin Money]]

[[zh-cn:简介]]

[[de:Einführung]]

Secure Trading

2011-06-10T06:32:39Z

Kinaro:

''Secure Trading Online''

This topic is a guide on how to set up your online identity and best practices for trading with others in the Bitcoin community.

==Introduction==
Within the Bitcoin community, many are very careful with their security and identity. This is primarily for two reasons:
# There is no violent body to cover your back for you, or, more simply, there are no courts to seek assistance from if your transaction sours.
# One’s reputation is the most important thing that any user has; traders will take very little risk with new users who have not proven themselves (as they could just be last week’s scammer with a new identity).

The Bitcoin community uses a few tools to help protect privacy, and thus identity. The first and most important is a [[Securing Your Computer|Secure Computer]]. 

'''Before proceeding please make sure you have completed the [[Securing Your Computer]] guide; this guide assumes that your computer is secure both physically and in software.'''

If you are trading within Canada you are encouraged to use Interac e-transfer and Clearcoin as outlined on [[Secure Trading-CAD-interac|this page]].

==Creating a secure identity==
The first step is to create a cryptographically secure public-private key-pair. This will be used as the basis of keeping both your wallet (see [[Securing your wallet]]) and your identity secure.

===Creating your first PGP key-pair===
A PGP key-pair serves two very important functions:
# To sign information with an unforgettable signature
# To decrypt things that other people encrypt for you

This allows you to both conduct business privately (encryption), and give out promises that you cannot deny making (signature).

==== Microsoft Windows:====
* Install GPG4Win: http://www.gpg4win.org/ 

This contains all the key management and generation tools for Microsoft Windows.

====All:====
# Install Thunderbird: https://www.mozillamessaging.com/en-GB/
# Setup your email account with Thunderbird.
# Install the Enigmail plugin for Thunderbird: https://addons.mozilla.org/en-US/thunderbird/addon/enigmail/ 

Upon loading Enigmail, Thunderbird will ask you to make a new ‘identity,’ follow this wizard and you will have created your identity. 
You should backup your private key in a secure place. Secondary, you should create a revocation certificate and store that in a different secure place (maybe print it out and store it in your fire safe).

===Register with [#bitcoin-otc]===
Follow the guide here: http://wiki.bitcoin-otc.com/wiki/Using_bitcoin-otc

===Register the same username at the popular places:===
* [[Bitcoin Forum]]
* [[Bitcoin.it_Wiki|Bitcoin Wiki]]
* [[Bitcoin:Community_portal#IRC_Chat|Freenode IRC]]
Use a strong and different password for each of these places, keeping your passwords in a secure place. This will allow other people in the community to track you across the different Bitcoin related sites. Also making identity theft online more challenging.

==Best Practices with trading==
===Use Bitcoin-OTC===
* Always require the user to become registered with #bitcoin-otc.
* Require a signed message from the fingerprint quoted at: http://bitcoin-otc.com/viewgpg.php
* Follow additional [http://wiki.bitcoin-otc.com/wiki/Using_bitcoin-otc#Risk_of_fraud recommendations] for avoiding fraud.

===Make sure both parties agree to the terms of the trade with signed messages===
* Get a PGP signed quote, and check the signature.
* Send a PGP signed receipt.
This allows either party to go public if the trade has become sour and stops your trading partner from claiming the details of the agreement were somehow different. 

Search the Bitcoin Forum for the username of the person that you are trading with. Check if the user has provided constructive and useful advice to other parties. And, most importantly, check for any claims that the user has scammed.

===Use an escrow===
Trading might benefit from an escrow such that bitcoins are disbursed only after contract terms have been met. 

A popular online escrow is [[ClearCoin]].

Found in Bitcoin's community are trusted individuals willing to act as independent, third-party escrow brokers.

[[de:Sicheres_Handeln]]
[[zh-cn:交易安全]]

User:Kinaro

2011-06-10T05:12:59Z

Kinaro: Created page with "Oh, hi. I'm an advocate of Bitcoin fixing a few things."

Oh, hi. I'm an advocate of Bitcoin fixing a few things.

Myths

2011-06-10T05:07:39Z

Kinaro:

Let's clear up some common Bitcoin misconceptions.

== Bitcoin is just like all other digital currencies; nothing new ==

Nearly all other digital currencies are centrally controlled. This means that:
* they can be printed at the subjective whims of the controllers
* they can be destroyed by attacking the central point of control
* arbitrary rules can be imposed upon their users by the controllers

Being decentralized, Bitcoin solves all of these problems.

== Bitcoins don't solve any problems that fiat currency and/or gold doesn't solve ==

Unlike gold, bitcoins are:
* easy to transfer and store
* easy to verify authenticity

Unlike fiat currencies, bitcoins are:
* predictable and limited in [[Controlled_Currency_Supply|supply]]
* not controlled by a central authority

Unlike electronic fiat currency systems, bitcoins are:
* potentially anonymous
* assets cannot be frozen

== Bitcoin is backed by CPU cycles ==

It is not correct to say that Bitcoin is backed by CPU power. A currency being "backed" by something means that it is pegged to something else via a central party at a certain exchange rate. You cannot exchange bitcoins for the computing power that was used to create them. Bitcoin is in this sense not backed by anything. It is a commodity in its own right. Similar to gold - is gold backed by anything? No! It's just gold. The same applies with Bitcoin.

The Bitcoin currency is ''created'' via processing power, and the integrity of the block chain is ''protected'' by the existence of a large network of computing nodes from certain possible [[Weaknesses#Attacker_has_a_lot_of_computing_power|attacks]]. And that is all.

== Bitcoins are worthless because they aren't backed by anything ==

Gold isn't backed by anything either, except its intrinsic, physical value. Bitcoins have properties inherent to its design that are subjectively valued by individuals. This valuation is demonstrated when individuals freely exchange for or with bitcoins. Please refer to the [http://en.wikipedia.org/wiki/Subjective_theory_of_value Subjective Theory of Value]. See also myth [https://en.bitcoin.it/wiki/Myths#Bitcoin_is_backed_by_CPU_cycles Bitcoin is backed by CPU cycles].

== Bitcoins value is based on how much electricity and computing power it takes to mine them ==

This statement is an attempt to apply to Bitcoin the [http://en.wikipedia.org/wiki/Labor_theory_of_value labor theory of value], which is generally accepted as false. Just because something takes X resources to create does not mean that the resulting product will be worth X. It can be worth more, or less, depending on the utility thereof to its users.

In fact the causality is the reverse of that (this applies to the labor theory of value in general). The cost to mine Bitcoins is based on how much they are worth. If Bitcoins go up in value, more people will mine (because mining is profitable), thus [difficulty] will go up, thus the cost of mining will go up. The inverse happens if bitcoins go down in value. These effects balance out to cause mining to always cost the amount of bitcoins it produces.

== Bitcoins have no intrinsic value (unlike some other things) ==

It is true that bitcoins have no intrinsic value, in the [http://en.wikipedia.org/wiki/Intrinsic_value_%28numismatics%29 numismatic sense], in other words, value in any realm outside of being used as a medium of exchange.

However, while some tangible commodities do have intrinsic value, that value is generally much less than its trading price. Consider for example that gold, if it were not used as an inflation-proof store of value, but rather only for its industrial uses, would certainly not be worth what it is today, since the industrial requirements for gold are far smaller than the available supply thereof.

While historically intrinsic value, as well as other attributes like divisibility, fungibility, scarcity, durability, helped establish certain commodities as mediums of exchange, it is certainly not a prerequisite. While bitcoins lack 'intrinsic value' in this sense, they make up for it in spades by possessing the other qualities necessary to make it a good medium of exchange, equal to or better than [http://en.wikipedia.org/wiki/Commodity_money commodity money].

Value is ultimately determined by what people are willing to trade for - by supply and demand.

== Bitcoins are illegal because they're not legal tender ==

Short answer: chickens aren't legal tender either, but bartering with chickens is not illegal.

There are a [http://en.wikipedia.org/wiki/Local_currency number of currencies] in existence that are not official government-backed currencies. A currency is, after all, nothing more than a convenient unit of account. While national laws may vary from country to country, and you should certainly check the laws of your jurisdiction, in general trading in any commodity, including digital commodities like Bitcoin, game currencies like WoW gold or Linden dollars, is not illegal.

== Bitcoin is a form of domestic terrorism because it only harms the economic stability of the USA and its currency ==

http://en.wikipedia.org/wiki/Definitions_of_terrorism#United_States according to this, you need to do violent activities to be considered a terrorist for legal purposes. This has no bearing on politicians and idiotic US attorney's public remarks.

Also, Bitcoin isn't domestic. It's a worldwide community. See this map of Bitcoin nodes
http://forum.bitcoin.org/?topic=2346.0

== Bitcoin will only enable tax evaders which will lead to the eventual downfall of civilization ==

Cash transactions hold the same level of anonymity but are still taxed successfully. It is up to you to follow the applicable state laws in your home country, or face the consequences.

== Bitcoins can be printed/minted by anyone and are therefore worthless ==

Bitcoins are not printed/minted. Instead, [[Blocks]] are computed by miners and for their efforts they are awarded a specific amount of bitcoins + transaction fees. See [[Blocks]] for more information on how this process works.

== Bitcoins are worthless because they're based on unproven cryptography ==

SHA256 and ECDSA which are used in Bitcoin are well-known industry standard algorithms. If you believe that these algorithms are untrustworthy then you should not trust Bitcoin, credit card transactions or any type of electronic bank transfer.

== Early adopters are unfairly rewarded ==

Early adopters are rewarded for taking the higher risk with their time and money.

In more pragmatic terms, "fairness" is an arbitrary concept that is improbable to be agreed upon by a large population. Establishing "fairness" is no goal of Bitcoin, as this would be impossible.

The vast majority of the 21 million Bitcoins still have not been distributed. By starting to mine or acquire bitcoins today, you too can become an early adopter.

== 21 million coins isn't enough; doesn't scale ==

One Bitcoin is divisible down to eight decimal places. There are really 2,099,999,997,690,000 (just over 2 quadrillion) maximum possible atomic units in the bitcoin design.

The value of "1 BTC" represents 100,000,000 of these. In other words, each is divisible by up to 10^8.

As the value of the unit of 1 BTC grows too large to be useful for day to day transactions, people can start dealing in smaller [[Units|units]], such as milli-bitcoins (mBTC) or micro-bitcoins (μBTC).

== Bitcoins are stored in wallet files, just copy the wallet file to get more coins! ==

No, your wallet contains your secret keys, giving you the rights to spend your bitcoins. Think of it like having bank details stored in a file. If you give your bank details (or bitcoin wallet) to someone else, that doesn't double the amount of money in your account. You can spend your money or they can spend your money, but not both.

== Lost coins can't be replaced and this is bad ==

Bitcoins are divisible to 0.00000001, so this is not a problem. If you lose your coins, all other coins will go up in value a little. Consider it a donation to all other bitcoin users.

A related question is: Why don't we have a mechanism to replace lost coins? The answer is that it is impossible to distinguish between a 'lost' coin and one that is simply sitting unused in someone's safe.

== It's a giant ponzi scheme ==
In a Ponzi Scheme, the founders persuade investors that they’ll profit. Bitcoin does not make such a guarantee. There is no central entity, just individuals building an economy.

A ponzi scheme is a zero sum game. Early adopters can only profit at the expense of late adopters. Bitcoin has possible win-win outcomes. Early adopters profit from the rise in value. Late adopters profit from the usefulness of a stable and widely accepted p2p currency.

Not to be confused with the [[Bitcoin randomizer|Bitcoin Randomizer]] which is a game that really is self-described as a Ponzi scheme.

== Finite coins plus lost coins means deflationary spiral ==
As deflationary forces may apply, economic factors such as hoarding are offset by human factors that may lessen the chances that a [[Deflationary spiral]] will occur.

== Bitcoin can't work because there is no way to control inflation ==

Inflation is simply a rise of prices over time, which is generally the result of the devaluing of a currency. This is a function of supply and demand. Given the fact that the supply of bitcoins is fixed at a certain amount, unlike fiat money, the only way for inflation to get out of control is for demand to disappear. Temporary inflation is possible with a rapid adoption of Fractional Reserve Banking but will stabilize once a substantial number of the 21 million "hard" bitcoins are stored as reserves by banks.

Given the fact that Bitcoin is a distributed system of currency, if demand were to decrease to almost nothing, the currency would be doomed anyway.

The key point here is that Bitcoin as a currency can't be inflated by any single person or entity, like a government, as there's no way to increase supply past a certain amount.

Indeed, the most likely scenario, as Bitcoin becomes more popular and demand increases, is for the currency to increase in value, or deflate, until demand stabilizes.

== The Bitcoin community consists of anarchist/conspiracy theorist/gold standard 'weenies' ==

The members of the community vary in their ideological stances.

== Anyone with enough computing power can take over the network ==

CONFIRMED, see [[Weaknesses]].

That said, as the network grows, it becomes harder and harder for a single entity to do so. Already the Bitcoin network's computing power is on par with some of the world's fastest supercomputers.

What an attacker can do once the network is taken over is quite limited. Under no circumstances could an attacker take anybody else's money. An attacker's capabilities are limited to taking back their own money that they very recently spent, and preventing other people's transactions from receiving confirmations. Such an attack would be very costly in resources, and for such meager benefits there is little rational economic incentive to do such a thing.

== Bitcoin violates governmental regulations ==

Name them if you can.

See also the [[Myths#Bitcoins_are_illegal_because_it_s_not_legal_tender|legal tender]] question.

== Fractional reserve banking is not possible ==

It is possible. There is no fundamental difference between classical currencies and Bitcoin as it applies to banking. Banks will still be free to take in bitcoins and present them to customers as "available for withdrawal" while still lending most of those bitcoins to a different customer for a profit. Some of those bitcoins will be held in reserves in case of a bank run. It will be up to the bank to hold a sufficient supply of reserves in order to prevent insolvency in the event of a bank run. Central banks were established to enforce reserve requirements and so, with Bitcoin lacking a central bank, some banks will almost surly collapse, taking their customers' deposits with them.

See [http://en.wikipedia.org/wiki/Fractional-reserve_banking Fractional reserve banking].

Conventional banks in the United States guarantee that account holders can withdraw 100% of their dollars based on their "word" and the fact that they are backed up by the [http://en.wikipedia.org/wiki/Federal_Deposit_Insurance_Corporation FDIC]. This program insures depositors up to a certain amount (currently $250K USD per depositor). The FDIC is widely known to have reserves sufficient to cover only a very small fraction of the total deposits it insures though the FDIC itself can be considered to be backed up by the US Congress in the event of its insolvency. After politically desired, the FDIC's role could be extended to insure Bitcoin banks and establish a minimum reserve requirement. Such a change would only happen after public outrage occurs after the inevitable collapse of major Bitcoin banks.

Because Fractional Reserve Banking is possible with bitcoins, the money supply of bitcoins (which includes demand deposits) can greatly exceed 21 million.

== Point of sale with bitcoins isn't possible because of the 10 minute wait for confirmation ==

Transactions '''can''' take tens of minutes to become ''confirmed'', and this won't change for the foreseeable future. Even after the computing power of the network is orders of magnitude larger than today, the difficulty of generating a block will self-adjust to maintain a target of 6 blocks per hour. Three potential solutions to allow POS transactions are:

1) For small transactions, simply assume the customer isn't ripping you off. Give the customer his latte immediately after the transaction posts to the network. The transaction should propagate through the network almost instantly, allowing the seller to see the transaction within seconds (albeit with zero confirmations.) The cost of a double-spend attack should make small-scale fraud not worthwhile.

2) Utilize a [http://www.bitcoin.org/smf/index.php?topic=423.msg3819#msg3819 'listening' period] prior to rendering the service or good. This has yet to be formally implemented in the standard Bitcoin client, but would allow a vendor to receive the transaction and then monitor the Bitcoin network for a certain period of time (maybe 10 seconds) for possible double spends. Vendors might utilize specialized payment processors with multiple well-connected nodes for this purpose. As explained by Satoshi, the network nodes only accept the first version of a transaction they receive to incorporate into the block they're trying to generate. When you broadcast a transaction, if someone else broadcasts a double-spend at the same time, it's a race to propagate to the most nodes first. If one has a slight head start, it'll geometrically spread through the network faster and get most of the nodes. Therefore, the longer the listening period goes without a double spend attempt, the far less likely a double-spend attempt will actually succeed. If a double-spend is detected, the vendor is notified: no latte.

3) Create a network of transaction hubs. These entities would communicate using a common API. They would float short-term loans between each other to facilitate instant transactions.

Imagine that Alice uses Carol's Clearinghouse as her hub, and Bob uses Dave's Anonymous Exchange. Both Alice and Bob have accounts with their respective hubs, and have already deposited some bitcoins in their accounts. When Alice wants to buy a latte from Bob at a point of sale, Alice tells Carol "I want to send Bob ''x'' bitcoins. He uses Dave's Anonymous Exchange." After checking that Alice's account does contain at least ''x'' bitcoins, Carol sends a message to Dave, saying "Credit Bob's account with ''x'' bitcoins immediately; I'll send you the real bitcoins in the next block." Bob instantly sees his balance increase, and gives Alice her latte.

As always, trust is required - Alice has to trust Carol, and the hubs have to trust each other. Due to competition, various hubs could develop with vastly different fee structures, membership requirements, trustability, etc.

(But the point of Bitcoin is you don't need trust to execute the transaction, in the above description of option 3 you replaced the bitcoins with a trust-based centralized authority.)

== After 21 million coins are mined, no one will generate new blocks ==

When operating costs can't be covered by the block creation bounty, which will happen some time before the total amount of BTC is reached, miners are expected to earn profit from [[transaction fees]].

== Bitcoin has no built-in chargeback mechanism, and this isn't good ==

'''Why some people think this is bad''': Chargebacks are useful for limiting fraud. The person handling your money has a responsibility to prevent fraud. If you buy something on eBay and the seller never ships it, PayPal takes funds from the seller's account and gives you back the money. This strengthens the eBay economy, because people recognize that their risk is limited and are more willing to purchase items from risky sellers.

'''Why it's actually a good thing''': Bitcoin is designed such that your money is yours and yours alone. Allowing chargebacks implies that it is possible for another entity to take your money from you. You can have either total ownership rights of your money, or fraud protection, but not both. That said, nothing prevents the creation of services overlayed on top of Bitcoin that provide fraud protection services.

The statement "The person handling your money has a responsibility to prevent fraud" is still true; the power has been shifted into your own hands. Fraud will always exist. It's up to you to only send bitcoins to trusted entities. It is possible to trust an online identity without ever knowing their physical identity; see the [http://wiki.bitcoin-otc.com/wiki/OTC_Rating_System OTC Web of Trust].

== Quantum computers would break Bitcoin's security ==

Yes, but quantum computers don't yet exist and probably won't for a while. Bitcoin's security can be [http://en.wikipedia.org/wiki/Post-quantum_cryptography upgraded] if this were considered an imminent threat.

See the implications of quantum computers on public key cryptography here http://en.wikipedia.org/wiki/Quantum_computer#Potential

The ''risk'' of quantum computers is also there for financial institutions, like banks, because they heavily rely on cryptography when doing transactions.

== Bitcoin mining is a waste of energy and harmful for ecology ==

No more so than the the wastefulness of mining gold out of the ground, melting it down and shaping it into bars, and then putting it back underground again. Not to mention the building of big fancy buildings, the waste of energy printing and minting all the various fiat currencies, the transportation thereof in armored cars by no less than two security guards for each who could probably be doing something more productive, etc.

As far as mediums of exchange go, Bitcoin is actually quite economical of resources, compared to others.

== Shopkeepers can't seriously set prices in bitcoins because of the volatile exchange rate ==

Your assumption is that bitcoins must be sold immediately to cover operating expenses. If the shopkeeper's back-end expenses were transacted in bitcoins as well, then the exchange rate would be irrelevant. Larger adoption of bitcoins would make prices [http://en.wikipedia.org/wiki/Sticky_%28economics%29 sticky]. Future volatility is expected to decrease, as the size and depth of the market grows.

In the meantime, many merchants simply regularly pull the latest market rates from the exchanges and automatically update the prices on their websites. Also you might be able to buy a put option in order to sell at a fixed rate for a given amount of time. This would protect you from drops in price and simplify your operations for that time period.

== Like Flooz and e-gold, bitcoins serve as opportunities for criminals and will be shut down ==

* Hopefully Bitcoin will grow to the point where no single organization can disrupt the network, or would be better served by helping it.
* Terrorists fly aircraft into buildings, but the governments have not yet abolished consumer air travel. Obviously the public good outweighs the possible bad in their opinion.
* Criminal law differs between jurisdictions.

== Bitcoins will be shut down by the government just like Liberty Dollars were ==

Liberty Dollars started as a commercial venture to establish alternative US currency, including physical banknotes and coins, backed by precious metals. This, in and of itself, is not illegal. They were later shut down for counterfeiting and intent to fraud after the coins, which contained less than $1 worth of silver, were put into circulation with the general money supply, supposedly having a value of 1 USD. These actions were encouraged by the makers of Liberty Dollars.

Bitcoins are not necessarily equal in value to dollars or any other currency and no one is saying they are. No member of the public will be tricked into accepting a bitcoin instead of a dollar.

Of course, actually 'shutting down' the decentralized Bitcoin network is rife with its own set of difficult considerations.

== Bitcoin is not decentralized because the developers can dictate the software's behaviour ==

The Bitcoin protocol was originally defined by Bitcoin's inventor, Satoshi Nakamoto, and this protocol has now been widely accepted as the standard by the community of miners and users.

Though the developers of the official Bitcoin client still exert influence over the Bitcoin community, their power to arbitrarily modify the protocol is very limited. Since the release of Bitcoin v0.3, changes to the protocol have been minor and always in agreement with community consensus.

Protocol modifications, such as increasing the block award from 50 to 100 BTC, are not compatible with clients already running in the network. If the developers were to release a new client that the majority of miners perceives as corrupt, or in violation of the project’s aims, that client would simply not catch on, and the few users who do try to use it would find that their transactions get rejected by the network.

Apart from the “official” Bitcoin client, other clients are available (and currently in development) from other groups of developers. As long as these clients adhere to the Bitcoin protocol, it is impossible for the developers of the official client to stop them from competing for blocks, because the network cannot tell them apart from official clients.

[[de:Mythen]]

Helping Bitcoin

2011-06-10T04:50:06Z

Kinaro: Significant overhaul

{{Template:Stub}}

The question is: how does one 'help' Bitcoin if it is an online currency that is not managed by any one individual? Often, those who take an interest in Bitcoin are at a loss as to how they can provide their support for this community. This article aims to offer some direction.

==Join the ''Bitcoin Community''==

Find a community that you would naturally be a part of that accepts and supports Bitcoin, be it your workplace, schools, neighborhood, or online. The Bitcoin community is made up simply of the many supporters of the currency from all over the world. Spread the word—inform others wherever and whenever you can.

==Be Creative==

Everyone possesses their own unique talents and abilities; these qualities are what make us the people we are and bring us together. Utilize your skills and creativity to assist.

* '''Crack''' the Bitcoin source. This may prove useful to those familiar with coding.

* '''Mine'''. If you're into high-efficiency computing, creating a strong miner will definitely get you going.

* If you own a business, '''accept Bitcoin for your services'''. You may also wish to encourage other businesses to follow in your footsteps.

* '''Speculate''' in Bitcoin. This improves its liquidity and helps every other person using Bitcoin to carry out real transactions.

Every task and part that people take on adds stability and flexibility to the Bitcoin economy.

==Third: Be Wise==

Everyone has limited resources, and not all people think in the same way that you do. Trust no one, research, and expect the unexpected.

Help:FAQ

2011-06-10T04:13:02Z

Kinaro: /* 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 tangible. 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 five 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 than 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? ===

10 minutes is 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]].

=== Doesn't Bitcoin unfairly benefit early adopters? ===
Early adopters have a large number of bitcoins now because they took a risk and invested resources in an unproven technology. By so doing, they have helped Bitcoin become what it is now and what it will be in the future (hopefully, a ubiquitous decentralized digital currency). It is only fair they will reap the benefits of their successful investment.

In any case, any bitcoin generated will probably change hands dozens of time as a medium of exchange, so the profit made from the initial distribution will be insignificant compared to the total commerce enabled by Bitcoin.

=== Is Bitcoin a Ponzi scheme? ===
In a Ponzi Scheme, the founders persuade investors that they’ll profit. Bitcoin does not make such a guarantee. There is no central entity, just individuals building an economy.

A ponzi scheme is a zero sum game. Early adopters can only profit at the expense of late adopters. Bitcoin has possible win-win outcomes. Early adopters profit from the rise in value. Late adopters profit from the usefulness of a stable and widely accepted p2p currency.

The fact that early adopters benefit more doesn't alone make anything a ponzi scheme. Apple stocks aren't ponzi even though the early investors got rich.

==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.

Technically speaking, mining is the calculation of a [[hash]] of the previous block and a [[nonce]]. If the hash value is found to be less than the current [[difficulty]], a new block is formed and the miner gets 50 newly generated Bitcoins. If the hash is not less than the current difficulty, a new nonce is used, and a new hash is calculated. This is done thousands or millions of times per second by each miner.

===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]]

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[[Category:Technical]]
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