General

Who invented Bitcoin?

Bitcoin was introduced in 2008 on a cryptography mailing list by the pseudonym Satoshi Nakamoto. Who this is and whether it is a single person or a group is unknown, though many have tried to uncover the real identity over the years.

Who controls Bitcoin?

Nobody controls Bitcoin. Or, if you prefer: Bitcoin is controlled by everyone using Bitcoin. Bitcoin is an open network, available for everyone to participate in, and rules on the validity of transactions etc. is defined only by the the Bitcoin protocol and software.

In practice, all participants have some power, but it differs depending on their role in the network,

  • Volunteer developers write the code that everybode else use. They can decide what new functions to implement or what changes to make.
  • Users decide whose code to run, or what wallet, exchange etc. to use. If there are competing ideas about what is the true Bitcoin (see for exemple Bitcoin Cash) this is how users can exercise their power.
  • Miners create the blocks of transactions that are essential to the network. However, even if 90% of miners would decide to change some rule they have to get the support of users, exchanges etc. since they otherwise would be producing blocks for a Bitcoin variant that nobody uses.

Who is Satoshi Nakamoto?

Satoshi is the person (or group) who created Bitcoin, in theory as well as through a fully functional implementation. It is still unknown who is behind this pseudonym. Many have tried to uncover the true identiy of Satoshi but so far noone has been able to prove anything.

Below are a few examples of people who have been rumoured to be Satoshi, but most likely are NOT:

  • Dorian Nakamoto. In 2014 Newsweek published an article claiming that they had identified Satoshi but very few believe that they found the right man. The most obvious reason is that the way he expresses himself bears absolutely no resemblance to Satoshi's writings.
  • Craig Wright. In 2015 Wired wrote that Craig "either invented bitcoin or is a brilliant hoaxer who very badly wants us to believe he did". Everything we know indicates that the latter is true. Proving that one is Satoshi is as simple as cryptographically signing a message, but to this day Craig has not been able to do this. He has tried to fool people that he did though.

Is Bitcoin anonymous?

Bitcoin is often referred to as a pseudonymous system. The ledger (the blockchain) that stores all transactions is completely open for everyone to read but you will only find Bitcoin adresses (such as 1Bg3LnGW8DfYuP4vUdVRnneqZerM6d1BuZ) that can't be direclty tied to a real person.

But, since transactions are open or everyone to see it is possible through some detective work to figure out quite a lot of information. Imagine, for example, that your friend Bob at some point sent you some bitcoin. You then know that a certain sender address belongs to Bob. You might also know about a donation address that the organisation "We love guns" published on their web site. Now, if you see a transaction from Bob's address to the address of this organisation you probably know a little bit about a secret interest of Bob.

The way to protect against such things is to never reuse Bitcoin addresses. Most wallets automatically create new addresses every time you want to receive a payment, so you shouldn't have to worry to much about that. Also note that Bob could claim that the address actually belongs to a third party service that he uses. So while you can figure out a lot it is hard to definitely prove anything.

Also see How Bitcoin works.

How is a bitcoin worth anything?

Bitcoins are worth something simply because there is a demand. The demand is there because of the properties that make bitcoin usable as money. For something to be usable as money, some of the things you want is that:

  • It is divisible. If you want to buy a piece of gum, having the smallest denomination being a dollar would be impractical. It also wouldn't be practical if there was nothing between 1 dollar and 100 dollars. Bitcoin is even better than cash in this sense, comparable to money in a bank account.
  • It is easy to transfer. Cash might be better than Bitcoin if you're standing right next to the person you want to transact with, but a lot worse if you are on the other side of the planet. Bitcoin is also better than money in a bank account, if the other person has his account with another bank.
  • It has a stable value. One prerequisite for this is that the amount of money is predictable, which is true for Bitcoin since the system is completely transparent. At this time though, the value of Bitcoin is anything but stable, but this will likely improve as more and more people are using it.

For a more detailed explanation, see the article Why is Bitcoin worth anything?

What does it cost to send bitcoin?

The transaction fee that you want to attach to a transaction is actually up to you, but the amount will determine how quickly your transaction is confirmed. Most wallets will help you choose a suitable fee.

Transaction fees vary quite a lot, depending on how many other people want to send transactions at the same time. Technically. the size of the fee is not related to the amount you want to send but to the amount of data required. For example, your transaction will be larger if you are sending from an address that has received a lot of small transactions. Still, this is something you usually don't have to care that much about.

Can Bitcoin be used to send microtransactions?

Bitcoin is a peer-to-peer network where every transaction has to be broadcasted to all participating nodes whcih means that quite a lot of storage, processor time and network traffic is used if a lot of transactions per second are transmitted. Some people claim that this is possible on the blockchain if only large enough blocks are allowed (the block size is currently restricted to around 2 MB) but the most probable solution is that microtransactions are instead handled in a layer on top of Bitcoin.

The most promising technology for this right now is the Lightning Network, that is already being accepted by some stores. Read more about the Lightning Network here.

Is Bitcoin a Ponzi scheme?

Many have claimed that Bitcoin is some sort of fraud. This is actually quite an odd thing to say, considering that Bitcoin is a completely transparent system where the source code is available for everyone to read and where no single person or authority is in control of the system. This is about as far from a fraud as you can get. A Ponzi scheme is usually charactarized by the lack of transaparency which allows someone to fool investors, something that is not event technically possible with Bitcoin.

One warning though. There are a lot of projects out there that have tried to "ride the wave" and attract investors using similar names to Bitcoin. One example of such a scam is Onecoin.

Why is a bitcoin so expensive?

There will only be slightly less than 21 million bitcoin in total so the limited supply combined with a high, global demand is why the price may seem high. All bitcoin combined is currently valued at around 100 billion dollars which is still just a fraction of the value of gold.

Do understand though that there is no need to buy 1 whole bitcoin. Bitcoin is divisible down to 8 decimals and the smallest unit, 0,00000001 bitcoin, is called a satoshi. You can still buy 1000 satoshi for a dime.

Will Bitcoin make me rich?

Just like with any kind of asset it is of course possible to make money or lose money by speculating. You have probably heard of people getting rich through bitcoin but please don't believe that this a certain path to riches.

Use the same logic that you do when buying stocks. Learn the details so that you know exactly what you are investing in and if you still believe that the tech has a future, by all means, buy some bitcoin.

How many bitcoins exist?

See this graph for the current number. During the first 210 000 blocks (around 4 years) 50 new bitcoins were created in each block. For the following 4 years 25 bitcoins were created and now we are down to 12,5 bitcoins per block. It goes on like this until no more bitcoin are created.

Technical

What is a private key?

Imagine that your bitcoin is stored in a mail box. This mail box has an address, that you can give to anyone, and a key that only you have access to. People can send you bitcoin since they have your address but only you can access then. Unless you lose your key!

These mail boxes are stored in the block chain. You are responsible for the keys. that are usually kept in a wallet. So, strictly speaking your bitcoins are not in your wallet, only your keys are. If you are not careful other people may get hold of your keys and steal your bitcoins. If you lose your keys, nobody can access your bitcoins. There are no lock smiths that you can call in this digital world.

If you want to understand more about this on a technical level, see the following article:

  • How Bitcoin works

When will all bitcoins have been created?

The last block that produces new bitcoins is block number 6929999. This block will be generated around the year 2140 and the total amount of bitcoins will then be 20,999,999.9769 (almost 21 million).

When bitcoins are no longer created, will blocks still be created?

Yes! Even before all bitcoins have been created a large portion of miners income will be from transaction fees. When bitcoins are no longer created, transaction fees will guarantee that blocks are still created.

Could Bitcoin be hacked?

Bitcoin has been around for almost 10 years now. In the very beginning a bug was actually found that made it possible to create new bitcoins. This bug was quickly fixed and all users switched to the updated version so that the creation of new bitcoins was reverted.

Since then thousands of people have vetted the code, trying to find weak spots, without success. As the reward for hacking Bitcoin is huge (imagine being able to steal money, anonymously) and we know that so many have tried we can be pretty comfortable now, knowing that there is likely no way to hack it. The fact that Bitcoin is an open and transparent system is a big advantage - if there is a flaw chances are that someone would have found it by now.

Now, there are risks associated with exchanges and wallets, those have been hacked a number of times. Read more about how to protect yourself against this in choosing a wallet.

What is SegWit?

SegWit is a technical improvement of Bitcoin that was deployed in 2017.

Primarily, SegWit was intented to solve a problem known as transaction malleability. The transaction ID used to identify a certain Bitcoin transaction could be changed by modifying the signatures slightly (without invalidating them) and thereby making it look as though a transaction had not happened. Someone searching for the transaction in the block chain would not find it. which caused a problem for wallets, exchanges and others.

SegWít solves this by moving the signatures out of the transaction into another data structure. This also had the side effect that more transactions could be fitted in a block, since the actual transactions were now smaller.

If you want to dive into the details, please see continue here:

Segregated Witness, Part 1: How a Clever Hack Could Significantly Increase Bitcoin's Potential

Legal & taxes

Do I have to pay taxes if I make a profit trading?

For Swedish citizens, see this link:

Skatteverket: Kryptovalutor

For other jurisdictions, try this article:

What about Bitcoin och VAT?

In 2015 the EU court of justice ruled that Bitcoin should be regarded the same way as other currencies for VAT purposes. This means that bitcoin in itself should not be treated as a service/good and is exempt from VAT but also that commission made on exchanging Bitcoin with other currencies is exempt.

Is Bitcoin legal?

The answer is generally "yes" but it is a complicated questions that depends on what jurisdiction you are in. Checkout Wikipedia's page Legality of bitcoin by country or territory for an overview.

Get started with Bitcoin

Taking your first steps in the world of Bitcoin can be intimidating. By creating an account at Coinbase you get both a wallet a simple way to acquire bitcoins. You also get 10 dollars for free when making your first purchase if you use the link below.
Coinbase.com

Speculate in altcoins?

If you want to buy other crypto currencies such as Ether, Litecoin or Monero, all of those and many others are available at Binance. First get some bitcoins, then create an account at Binance, deposit your Bitcoin and you are ready to start trading!
Binance.com