Most frequent questions and answers
Bitcoin is a virtual currency managed by a decentralised computer protocol, and is therefore not controlled by a centralised entity.
Blockchain is shared public record which contains all the registered data from a cryptocurrency. All confirmed transactions are included in a blockchain. In this way, the wallets can calculate their expendable balance and the new transactions can be verified. The integrity and the chronological order of the blockchain are protected by encryption, and are unalterable and decentralised: they are replicated by different “hubs” distributed across the world, and do not belong to a single entity.
Bitcoin works thanks to data-mining activity.
Data-mining is a distributed support system used to confirm pending transactions, integrating them into the blockchain. This maintains chronological order in the blockchain, protects the network’s neutrality and enables different computers to comply with the status of the system. To be confirmed, the transactions have to be grouped into a block that respects very strict encryption rules that are then verified by the network. These rules prevent any former blocks from being modified, which would then invalidate any following blocks. Data-mining also creates the equivalent of a competitive lottery, which prevents anyone from easily adding new consecutive blocks into the blockchain. In this way, no one can control anything included in the blockchain, or replace any parts of the blockchain in order to reacquire what they’ve spent.
There are 21 million bitcoins in the world. Right now, there are roughly 17 million in circulation, as the remaining bitcoins are still to be data-mined.
The invention is attributed to a certain Satoshi Nakamoto, in that he was the one to sign the project’s statement that was put onto the network in 2009. This is actually a pseudonym, and his real identity has never been verified: it could therefore be attributed to a single person or to a group.
Seeing as it is a decentralised currency, there are no central entities that manage it or control it. Like with legal tender, bitcoin belongs the holder.
No, bitcoin is “pseudo-anonymous”. A currency is anonymous when its address is completely obscured in the blockchain, and so there is no way of tracing the address’ movement. However, it is “pseudo-anonymous” (as is the case with bitcoin) when you cannot associate an owner with the address, making it visible within its blockchain, and therefore traceable.
Bankitalia has stated that “in Italy, the buying, use and acceptance of virtual currencies as payment ought to be regarded as legitimate activities; the parties involved are free to commit themselves to paying sums that are not expressed in legal tender”. In Italy, there has not yet been any relevant legislation, so it can neither be considered legal or illegal. Despite this, in Italy, the buying, use, and acceptance of virtual currencies as payment are considered to be legitimate activities.
There is not one unequivocal factor that determines its value, but a series of interconnected variables. For example, bitcoin is available in a finite number, and as it slowly nears 21 million the price tends to increase, causing a deflation. The demand for bitcoin on the market also has an influence, given that a higher demand means an increase in price. Another factor to consider is the mainstream adoption rate. More people and businesses are starting to use bitcoin as a means of exchange, increasing therefore the value of this currency.
Yes, bitcoin is divisible down to the eighth decimal.
Bitcoin is a highly volatile currency: by volatility, we mean an asset with a high variation in value in a short space of time. An “economic bubble” means an overestimation in the value of the asset that, once it has “exploded”, its value returns to zero. In the history of bitcoin, despite its high volatility, its value has never nullified, but continued to register a trend in its growth.
No, a Ponzi scheme is a pyramid-based system where an entity or person attracts investors with a fake project. The first investors in the system are recompensated through the emergence of new entrants. The continuous entrance of new investors allows former investors to be periodically repaid, and contributes to the word-of-mouth that, in turn, feeds the system. Once the investors are finished, the system collapses, and both the new and old investors are no longer paid. Therefore, the creator of the scam deals with the entire amount, rendering it untraceable. Bitcoin, however, is based on a completely different system, run by an incorruptible computerised protocol, in which the value creation is linked to the work done by the data-miners and to the costs they incur, alongside the increase in value derived from the currency’s deflationary nature.
No, bitcoin cash is a fork of bitcoin: a project from the same blockchain that maintains the same DNA, but with a few added technical modifications that make it different.
Yes, anywhere with a commercial activity that accepts cryptocurrency in exchange for the product/service offered.
Bitcoins are created using a confirmation process of transactions within the network. This process is called “mining”.
Essentially, there are data-miners – people who make use of their mathematical capabilities to independently carry out a verification of the transactions in the bitcoin network.
Keeping computers switched on is costly in terms of their electric and economic consumption, so the same network repays the data-miners in bitcoin. This process can also be identified as an extraction process,
in that the network extracts bitcoins that are not yet in circulation to give to the miners. The process will end as soon as all the 21 million bitcoins are extracted.
The network will continue to function, leaving the data-miners the with the remaining income from the commission of the transaction validation, without generating bitcoins that initially supplied the network.
When someone wants to send you money, you do not need to be connected at the moment of transfer. It’s the same as someone sending an email. The sender just needs the address of the recipient in order to send the email. The moment the recipient logs into their account, they will see the message in their inbox. Analogically, when you access your wallet, you will see the amount appear for all transactions carried out while you were offline.
Yes, in that bitcoin is not stored on a local medium, but is deposited within a blockchain. Devices are only a means of installing wallets that hold private keys and, consequently, the currency.
Yes, there are just over 3000 ATMs in existence around the world, but in Italy there are just over 20.
No, once you have sent the amount to an address, the network codes the transaction in order to process it, and there is no way of withdrawing the transaction process.