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Author Topic: Bitcoin: Frequently Asked Questions!  (Read 16977 times)
Anarchology
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« on: December 31, 2013, 09:14:32 PM »

We understand that Bitcoin isn't exactly the easiest concept to grasp even for those who have been following the phenomena for years now. It is difficult to explain, and in many cases relies on the user to do their own research into the digital currency. Rather than try to make a FAQ page of our own by presenting our own limited knowledge of what seems to be a limitless topic, we will do our best to compile the information pertinent to our members so that they may build on their own understanding of what Bitcoin is.

Please note that many of the Question & Answer posts you will see in this topic are pulled verbatim from reputable Bitcoin-related websites, and is not to be taken as the opinion of Anarchy Nation or its staff. Each one of these posts will have a link to the original content. It is also worth noting that the Q&A will be pick-and-choose rather than providing all of the Q&A from certain sites. This is to ensure that just the important information is provided to members seeking to use Bitcoin on the site. Members discussing other aspects of Bitcoin ranging from what's new in the news to Bitcoin mining techniques are more than welcome to be posted in this section.

Members who have questions regarding Bitcoin are also encouraged to post them up in the section this topic is hosted!


General Bitcoin FAQ

Specific to Anarchy Nation Bitcoin Use FAQ
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« Reply #1 on: January 01, 2014, 06:20:39 PM »

Bitcoin is a consensus network that enables a new payment system and a completely digital money. It is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen. From a user perspective, Bitcoin is pretty much like cash for the Internet. Bitcoin can also be seen as the most prominent triple entry bookkeeping system in existence.
Source: Bitcoin.org


Bitcoin is a peer-to-peer payment network based on an open source protocol and a digital currency used in the network. Introduced in 2009 by pseudonymous developer Satoshi Nakamoto, Bitcoin is one of several so-called cryptocurrencies as it uses public-key cryptography. When paying with Bitcoin, no exchange of digital notes or tokens takes place between buyer and seller. Instead, the buyer requests an update to a public transaction log, the blockchain. This master list of all transactions shows who owns what bitcoins currently and in the past and is maintained by a decentralized network that verifies and timestamps payments. The operators of this network, known as "miners", are rewarded with transaction fees and newly minted Bitcoins.
Source: Wikipedia


What is Bitcoin?

Source: WeUseCoins.com

Bitcoin - What is it?

Source: Khan Academy on YouTube

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« Reply #2 on: January 01, 2014, 06:23:40 PM »

Bitcoin is the first implementation of a concept called "crypto-currency", which was first described in 1998 by Wei Dai on the cypherpunks mailing list, suggesting the idea of a new form of money that uses cryptography to control its creation and transactions, rather than a central authority. The first Bitcoin specification and proof of concept was published in 2009 in a cryptography mailing list by Satoshi Nakamoto. Satoshi left the project in late 2010 without revealing much about himself. The community has since grown exponentially with many developers working on Bitcoin.

Satoshi's anonymity often raised unjustified concerns, many of which are linked to misunderstanding of the open-source nature of Bitcoin. The Bitcoin protocol and software are published openly and any developer around the world can review the code or make their own modified version of the Bitcoin software. Just like current developers, Satoshi's influence was limited to the changes he made being adopted by others and therefore he did not control Bitcoin. As such, the identity of Bitcoin's inventor is probably as relevant today as the identity of the person who invented paper.
Source: Bitcoin.org
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« Reply #2 on: January 01, 2014, 06:23:40 PM »




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« Reply #3 on: January 01, 2014, 06:25:37 PM »

Nobody owns the Bitcoin network much like no one owns the technology behind email. Bitcoin is controlled by all Bitcoin users around the world. While developers are improving the software, they can't force a change in the Bitcoin protocol because all users are free to choose what software and version they use. In order to stay compatible with each other, all users need to use software complying with the same rules. Bitcoin can only work correctly with a complete consensus among all users. Therefore, all users and developers have a strong incentive to protect this consensus.
Source: Bitcoin.org
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« Reply #4 on: January 01, 2014, 06:40:19 PM »

From a user perspective, Bitcoin is nothing more than a mobile app or computer program that provides a personal Bitcoin wallet and allows a user to send and receive bitcoins with them. This is how Bitcoin works for most users.

Behind the scenes, the Bitcoin network is sharing a public ledger called the "block chain". This ledger contains every transaction ever processed, allowing a user's computer to verify the validity of each transaction. The authenticity of each transaction is protected by digital signatures corresponding to the sending addresses, allowing all users to have full control over sending bitcoins from their own Bitcoin addresses. In addition, anyone can process transactions using the computing power of specialized hardware and earn a reward in bitcoins for this service. This is often called "mining".
Source: Bitcoin.org



The basics for a new user
As a new user, you can get started with Bitcoin without understanding the technical details. Once you have installed a Bitcoin wallet on your computer or mobile phone, it will generate your first Bitcoin address and you can create more whenever you need one. You can disclose your addresses to your friends so that they can pay you or vice versa. In fact, this is pretty similar to how email works, except that Bitcoin addresses should only be used once.

Balances - block chain
The block chain is a shared public ledger on which the entire Bitcoin network relies. All confirmed transactions are included in the block chain. This way, Bitcoin wallets can calculate their spendable balance and new transactions can be verified to be spending bitcoins that are actually owned by the spender. The integrity and the chronological order of the block chain are enforced with cryptography.

Transactions - private keys
A transaction is a transfer of value between Bitcoin wallets that gets included in the block chain. Bitcoin wallets keep a secret piece of data called a private key or seed, which is used to sign transactions, providing a mathematical proof that they have come from the owner of the wallet. The signature also prevents the transaction from being altered by anybody once it has been issued. All transactions are broadcast between users and usually begin to be confirmed by the network in the following 10 minutes, through a process called mining.

Processing - mining
Mining is a distributed consensus system that is used to confirm waiting transactions by including them in the block chain. It enforces a chronological order in the block chain, protects the neutrality of the network, and allows different computers to agree on the state of the system. To be confirmed, transactions must be packed in a block that fits very strict cryptographic rules that will be verified by the network. These rules prevent previous blocks from being modified because doing so would invalidate all following blocks. Mining also creates the equivalent of a competitive lottery that prevents any individual from easily adding new blocks consecutively in the block chain. This way, no individuals can control what is included in the block chain or replace parts of the block chain to roll back their own spends.

Going down the rabbit hole
This is only a very short and concise summary of the system. If you want to get into the details, you can read the original paper (PDF file) that describes the system's design, and explore the Bitcoin wiki.
Source: Bitcoin.org
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« Reply #5 on: January 01, 2014, 07:03:18 PM »


While it may be possible to find individuals who wish to sell bitcoins in exchange for a credit card or PayPal payment, most exchanges do not allow funding via these payment methods. This is due to cases where someone buys bitcoins with PayPal, and then reverses their half of the transaction. This is commonly referred to as a chargeback.
Source: Bitcoin.org



AN Admin Note: Be mindful of what sites you use to purchase bitcoins if you are new to them. The sites linked to above provide many third-party options for the purchase, sales, and overall use of bitcoins. Do your research on any of those services before ever giving them your personal information.
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« Reply #6 on: January 01, 2014, 07:57:44 PM »

Bitcoin payments are easier to make than debit or credit card purchases, and can be received without a merchant account. Payments are made from a wallet application, either on your computer or smartphone, by entering the recipient's address, the payment amount, and pressing send. To make it easier to enter a recipient's address, many wallets can obtain the address by scanning a QR code or touching two phones together with NFC technology.

Source: Bitcoin.org
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« Reply #7 on: January 01, 2014, 08:08:30 PM »

Advantages

Payment freedom - It is possible to send and receive any amount of money instantly anywhere in the world at any time. No bank holidays. No borders. No imposed limits. Bitcoin allows its users to be in full control of their money.
    Very low fees - Bitcoin payments are currently processed with either no fees or extremely small fees. Users may include fees with transactions to receive priority processing, which results in faster confirmation of transactions by the network. Additionally, merchant processors exist to assist merchants in processing transactions, converting bitcoins to fiat currency and depositing funds directly into merchants' bank accounts daily. As these services are based on Bitcoin, they can be offered for much lower fees than with PayPal or credit card networks.

Fewer risks for merchants - Bitcoin transactions are secure, irreversible, and do not contain customers’ sensitive or personal information. This protects merchants from losses caused by fraud or fraudulent chargebacks, and there is no need for PCI compliance. Merchants can easily expand to new markets where either credit cards are not available or fraud rates are unacceptably high. The net results are lower fees, larger markets, and fewer administrative costs.

Security and control - Bitcoin users are in full control of their transactions; it is impossible for merchants to force unwanted or unnoticed charges as can happen with other payment methods. Bitcoin payments can be made without personal information tied to the transaction. This offers strong protection against identity theft. Bitcoin users can also protect their money with backup and encryption.
    Transparent and neutral - All information concerning the Bitcoin money supply itself is readily available on the block chain for anybody to verify and use in real-time. No individual or organization can control or manipulate the Bitcoin protocol because it is cryptographically secure. This allows the core of Bitcoin to be trusted for being completely neutral, transparent and predictable.

Source: Bitcoin.org (advantages)

Disadvantages

Degree of acceptance - Many people are still unaware of Bitcoin. Every day, more businesses accept bitcoins because they want the advantages of doing so, but the list remains small and still needs to grow in order to benefit from network effects.
    Volatility - The total value of bitcoins in circulation and the number of businesses using Bitcoin are still very small compared to what they could be. Therefore, relatively small events, trades, or business activities can significantly affect the price. In theory, this volatility will decrease as Bitcoin markets and the technology matures. Never before has the world seen a start-up currency, so it is truly difficult (and exciting) to imagine how it will play out.

Ongoing development - Bitcoin software is still in beta with many incomplete features in active development. New tools, features, and services are being developed to make Bitcoin more secure and accessible to the masses. Some of these are still not ready for everyone. Most Bitcoin businesses are new and still offer no insurance. In general, Bitcoin is still in the process of maturing.

Source: Bitcoin.org (disadvantages)

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« Reply #8 on: January 01, 2014, 08:17:24 PM »

You should never expect to get rich with Bitcoin or any emerging technology. It is always important to be wary of anything that sounds too good to be true or disobeys basic economic rules.

Bitcoin is a growing space of innovation and there are business opportunities that also include risks. There is no guarantee that Bitcoin will continue to grow even though it has developed at a very fast rate so far. Investing time and resources on anything related to Bitcoin requires entrepreneurship. There are various ways to make money with Bitcoin such as mining, speculation or running new businesses. All of these methods are competitive and there is no guarantee of profit. It is up to each individual to make a proper evaluation of the costs and the risks involved in any such project.
Source: Bitcoin.org
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« Reply #9 on: January 01, 2014, 08:19:27 PM »

Bitcoin is designed to allow its users to send and receive payments with an acceptable level of privacy as well as any other form of money. However, Bitcoin is not anonymous and cannot offer the same level of privacy as cash. The use of Bitcoin leaves extensive public records. Various mechanisms exist to protect users' privacy, and more are in development. However, there is still work to be done before these features are used correctly by most Bitcoin users.

Some concerns have been raised that private transactions could be used for illegal purposes with Bitcoin. However, it is worth noting that Bitcoin will undoubtedly be subjected to similar regulations that are already in place inside existing financial systems. Bitcoin cannot be more anonymous than cash and it is not likely to prevent criminal investigations from being conducted. Additionally, Bitcoin is also designed to prevent a large range of financial crimes.
Source: Bitcoin.org
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« Reply #10 on: January 03, 2014, 06:34:19 PM »

Why don’t we ask for the Bitcoin-equivalent of the U.S. Dollar, but rather a set Bitcoin amount? The reason for this is so that we keep the currency being transacted as the same for that type of transaction. For our other means of VIP donations through Ribbon.co and their partner Dwolla, USD is the set currency. All others across the world seeking VIP through these means would have their country’s currency translated to USD given the current exchange rates.

The same is applied to Anarchy Nation’s acceptance of Bitcoin. When we accept Bitcoins, we are doing so by setting designations in BTC (Bitcoins). Just like we would have set the amount of $10 USD (VIP for one year) over the past three years, we will also set the amount of BTC. The amounts for the different tiers of VIP Status are set at an initial percentage higher than the other processes that we use. Those will be discussed in the next section.
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« Reply #11 on: January 03, 2014, 06:35:20 PM »

Those using Bitcoin in order to purchase VIP will see that the purchasing amount in USD is lower in BTC. This meaning that using Bitcoins to purchase a VIP Membership will cost you more than it would than if you were to choose to use the services through Ribbon and Dwolla currently offered. This is intentional, and is for a certain reasons. There are two particular reasons, and they are explained below:

First, Bitcoins are not nearly as easy to transfer into dollars. Anarchy Nation uses ad revenue and membership purchases in order to pay for the servers that run the site. The current means of becoming VIP pay us in USD that can directly be used to fund the servers. However, Bitcoins are not as easy to transfer over to a medium that is useful to pay the bills, and exchanging Bitcoins to USD does have their surcharges.

Second, Bitcoin is a volatile currency, if not an entity that resembles a stock. The worth of Bitcoin is not steady like the U.S. Dollar or the Euro. It fluctuates in real-time, and can have really dramatic changes in a single day where purchasing power can double or halve itself within hours.

For these reasons, the cost in Bitcoins is a little more than what one would expect using the other services. However, we would like to give a little tip to those using Bitcoin to become VIP: Pay attention to the current price of Bitcoins. It would be wise to purchase at a time when their worth is on the lower end.

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« Reply #12 on: January 03, 2014, 06:42:52 PM »

Though we can’t really predict exactly how long the verification process of transactions will take, feedback from the prospective VIP member is very important. Below are some key actions a member (or a current guest) should take after completing a BTC transaction:

  • Be a Member - Registration is free, and doesn’t take more than 5 minutes to complete. If you aren’t a member, become one so that we can quickly add VIP after everything checks out.
    Note: If you have already registered, but not receiving the activation notice, email the Admin through the Contact page.
  • Private Message Admin – If you already have an account, and have no problems logging into it, use the Private Message function to contact the Admin (Anarchology). Be sure to provide any information regarding your transaction and the VIP tier you have chosen.
  • Email the Admin – You can use our Contact page regardless if you have a membership or not. In order to speed up the process, be sure to not only include your transaction information, but also your username and the exact email address used to setup your account.

As a side note, be sure only to discuss your transactions with the Admin through these means. Do not create a public topic on the site providing your information!
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« Reply #13 on: January 03, 2014, 06:45:53 PM »

We can offer some initial help for those who already have somewhat of a grasp obtaining and sending Bitcoins. However, there are just far too many different websites and wallet clients out there that we cannot troubleshoot the workings of each and every one of them.

If you are using one of those many different online services that deal with and transfer Bitcoins, you might find their customer service better than the opinions of staff on this site. Much of what we could help you with only revolves around completed transactions that we see in our transaction history and being able to find that given member to unlock VIP for their accounts.

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« Reply #14 on: January 03, 2014, 06:46:40 PM »

The first step is having the transaction completed and verified. This is said to take anywhere from 10 minutes to an hour to complete with most wallet clients and online services. The time that this process takes is out of our control.

Once a transaction is verified and noticed on our end, we then wait for the member to come forward to claim the transaction. The process of receiving and sending Bitcoins is relatively anonymous, so there is no way for us to know exactly who the member is without them properly contacting us to claim the transaction.


See:  What is the fastest way to become VIP with Bitcoin?

Once the transaction is completed and the member contacts the Admins, we will then manually add VIP Status to your account. Regardless of how a member purchases VIP Status, their account status is not automatically updated. It takes an Admin to manually change the account over to VIP. For this reason, it may take up to 24 hours from the time a transaction is verified and member located to the time that their account is updated to VIP Status.

In every case, we send out both a Private Message and email to that member verifying that their account has been upgraded to VIP.

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