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What is a Bitcoin - Frequently Asked Questions (FAQ)

Bitcoins came to my attention while I was trying to make money online by Paid-To-Click (PTC) and Traffic Exchange sites. I kept seeing ads on bitcoins. I thought they were just some passing fads or trends.

But as more and more ads kept flashing before my eyes, I became interested. So I read about bitcoins and was intrigued.

Here, I am going to try to explain bitcoins in the simplest way possible.

What is a bitcoin?


A bitcoin is an electronic currency, something like a digital money. It is also called a cryptocurrency.

Since bitcoins are digital, it follows that they are not tangible like dollars, they are not printed or minted because they operate independently of a central bank. They are decentralized and not controlled by any central authority.

Can I Use Bitcoins Like Normal Money?


Bitcoins are virtual coins with their own monetary value and you can use them to buy things electronically. Just like dollars and euros, bitcoins can be traded digitally.

The big difference between bitcoins and conventional money is that bitcoins are decentralized which means no financial institution controls its network. Bitcoins do not need banks to move and store them.

You can use them to purchase products and services online, or you can keep them safely and hope that they increase in value.

Who Invented Bitcoins?


Bitcoin was launched in 2009 by someone called Satoshi Nakamoto who proposed an electronic payment system based on mathematical proof.

No one knows who Nakamoto is. No one knows whether the bitcoin inventor is Japanese or not. It is believed that Satoshi Nakamoto is a pseudonym.

No one exactly knows whether Satoshi Nakamoto is a man, a woman, or a group of programmers. But one thing is sure, Satoshi Nakamoto invented the bitcoin.

No one can find any personal information even after Satoshi Nakamoto slowly disappeared from the scene in 2010. In 2011, someone heard that Satoshi Nakamoto “had moved on to other things.”

How Are Bitcoins Created?


Bitcoins are not physically printed or minted by any bank, instead, bitcoins are created digitally by a community of people. They are mined using powerful computers.

The bitcoin protocol, the rules that make bitcoin work, says that only 21 million bitcoins can be mined. As of 2016, over half of those have already been mined and in circulation.

What is Bitcoin Mining?


Bitcoins are mined into existence but it is not anything like a miner swinging his pickaxe against a wall of rocks to extract coal, ore or other minerals from the earth.

The good news is that you don’t have to go to a mining site below the ground because all you have to do is use your computer to mine bitcoins.

The not-so-good news is that you have to use powerful computer rigs which are quite costly to start mining bitcoins, and the electricity that you need to power such computers can eat into your budget.

Successful bitcoin miners are rewarded with a number of bitcoins when they solve difficult and puzzling mathematical problems.

That is how the cryptocurrency gets into circulation.

And not only that, because miners also keep the bitcoin network secure by approving transactions.

So aside from releasing new bitcoins, bitcoin miners also add transactions to the block chain.

What is a blockchain?


A blockchain is a public ledger of all bitcoin transactions. It is always growing as blocks are constantly added to the blockchain.

Compared to conventional banking, the blockchain is like the full history of banking transactions.

Bitcoin transactions are entered chronologically in a blockchain just like bank transactions.

If blockchains are the banking transactions, blocks are the individual bank statements.

According to the bitcoin protocol, the blockchain database is shared by all participating nodes (computers connected to the bitcoin network).

What is a bitcoin address?


One thing you need to know is that bitcoin transactions involve bitcoin wallet addresses.

You send/receive or buy/sell bitcoins through your bitcoin address.

A bitcoin address is a unique number generated by your bitcoin wallet. It is a series of about 34 alphanumeric characters.

Example of a bitcoin address: "16WjMvaySu7xFQRdBZBUoQjGXPsPuQDCKX"

When I want to receive bitcoins from another person, he would want to have my address to send the bitcoins to me.

When I want to send bitcoins to someone, I would send the bitcoins to his bitcoin address.

Again, you get your bitcoin address from your bitcoin wallet.

What is a Bitcoin Wallet?


A bitcoin wallet is a place to store your bitcoins. You can think of it as your bank account. Before you start earning your bitcoins, you have to set up your bitcoin wallet first.

The bitcoin wallet allows you to receive bitcoins, store them, and send them to others.

The two main types of bitcoin wallets are:


1. Software wallet – you can install this on your own computer or mobile device. You have complete control over your bitcoins’ security but they can be complicated to install and to maintain.

2. Web wallet or hosted wallet – hosted by a third party, easier to use but you have to depend on the provider for the protection of your coins.

When you are new to the world of bitcoins, you can start by setting up an account with any of the following bitcoin wallets:
  • Coinbase
Coinbase is a web wallet type that is best suited for beginners. You can buy and sell bitcoins directly from Coinbase.
  • Electrum
Electrum is a software wallet with a high level of security. Your wallet is encrypted by default to protect your bitcoins from hackers.
  • Blockchain.info
Blockchain.info is a web wallet which provides a simple set-up and mobile access to your account. It is one of the easiest and quickest ways to get a bitcoin wallet, recommended for beginners.
This is a bitcoin wallet that is more than just  a bitcoin wallet. I recommend this to all Filipinos since coins.ph has its headquarters in the Philippines. It is easy use as a bitcoin wallet, and most of all, easy to cash out your bitcoins.

Reasons To Use Bitcoins


Many online merchants are now accepting bitcoins in their stores.

You may have some apprehensions about bitcoins but take a look at some of the reasons that people opt to use bitcoins:

1. Bitcoins are Fast

You know that checks take time to clear, wire transfers can take a bit of a time to go through but bitcoin transactions can be done in a matter of minutes.

2. Bitcoins are Decentralized

No central authority controls bitcoins. You own your bitcoins. But there are those who feel uncomfortable with the thought that bitcoins are not backed by financial institutions.

3. Bitcoins Safeguard Your Payment Information

Bitcoin transactions don’t require you to give up personal information.

Bitcoins use two keys: a public key, and a private one. The bitcoin address that you send to people to receive bitcoins is your public key. Your private key is tucked away in a hidden place.

Don’t worry… you may think this is complicated but it really is not. In reality, you don’t even have to worry about this public/private keys, unless your bitcoins run in millions, then by all means, digest everything you can on how to protect your bitcoins.

4. Bitcoins Safeguard Your Privacy

Bitcoin transactions are transparent since all are recorded in the blockchain. But your personal privacy is safeguarded since all people see are the bitcoin addresses without knowing who owns them.

You Can Create Your Own Bitcoins


Can you produce your own money without the government running after you? You can’t!

In the bitcoin world, you are encouraged to produce your own bitcoins. You can buy or you can mine them yourself if you have the right equipment.

If you want to get into bitcoin mining and you have invested in equipment and electricity, you can leave your machine on and let the software run. While you are sleeping, your machine is working, mining your own bitcoins, and producing money for you.

Important Bitcoin Denominations:


The smallest unit of a bitcoin (BTC) is called Satoshi (named after the inventor). Here are the important bitcoin units of denominations:


  • BTC - Bitcoin (now worth $2,849.81 - still fluctuating)
  • mBTC - millibitcoin (1 thousandth of a BTC) --> 1,000 mBTC = 1BTC
  • µBTC - microbitcoin (1 millionth of a BTC) --> 1,000,000 µBTC = 1 BTC
  • Satoshi - (100 millionth of a BTC) --> 100,000,000 Satoshis = 1 BTC

How Can You Earn Bitcoins Online?


Below are 3 Ways You can Earn Bitcoins Online:


1. Bitcoin Mining:
Bitcoin Mining Machine

Bitcoin mining is a good way to earn money online. Imagine earning 25 bitcoins every 10 minutes. As of today,1 bitcoin equals $2,800 but this rate is still fluctuating.

You could use your computer’s CPU to mine for bitcoins but it would probably take you forever just to mine 1 bitcoin using an ordinary computer rig.

If you are that serious about getting into bitcoins, invest in a bitcoin mining machine. These machines are built purposely to mine as many bitcoins as possible, as quickly as possible.

Investment: $5,999 to $12,995

2. Buy & Sell Bitcoins:

If you don’t have that much money, you can buy and sell bitcoins but you have to be ready for its fluctuating rate.It could be worth a thousand today but tomorrow, it can go as low as $500. Who knows? But you could also make a killing when the price suddenly climbs up.

3. Earn Bitcoins By Viewing Ads

You can also earn bitcoins by viewing ads, just like many PTC sites where you earn a fraction of a dollar but instead of dollars, you earn fraction of a bitcoin.

Like any other online "make-money-activities" you have to watch out for those sites that are out to scam you.

One of the sites that can be trusted and where I earn a portion of my bitcoin stash is called BtcVic.



4. Bitcoin Faucets:

You can always go to a bitcoin faucet. Most bitcoin faucets give out satoshis (from 50 to 100,000) every 5 – 30 minutes. But don’t count on claiming the higher numbers because it rarely happens.

The best bitcoin faucets can give at least 20 satoshis every 5 minutes. You are allowed to claim 120 times within 24 hours.

Imagine 1 bitcoin is now equal $2,800 so even if you start to accumulate a few Satoshis from here and there, you are still going to earn a bit of money just by clicking every 5 minutes. You can do your usual daily activities while clicking away. You might get lucky and hit the jackpot.

Click Here to Read More about Bitcoin Faucets!



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