Top 5 Bitcoin Questions

3 years ago

Many have heard about Bitcoin but they never got to use it due to the perceived complication of cryptocurrencies.

That is why today, we’ve decided to dispel your doubts and answer the most popular questions about Bitcoin.

1. What happens when the last Bitcoin is mined?

The Bitcoin network is supported by the miners who process the transactions by recording them to blocks, receiving a reward of new coins for themselves in the process. Today, the reward for the block completion is 12.5 Bitcoins. It is halved approximately every four years. Therefore, by 2040, almost all Bitcoins will have been mined. In that future, the miners will need about 100 years to obtain the last coins.

As such, many people are worried about the following question: what will happen if the miners stop receiving the reward for their work after the last Bitcoin is obtained? Wouldn’t they decide to just turn off their equipment and be off with it?

The fact is, besides the new Bitcoins, miners receive fees for processed transactions. It is believed that by the time Bitcoin is depleted, its price and the popularity of the network will have been grown so much that fees will be sufficient for the profitability of mining.

2. Is it possible to cancel a cryptocurrency transaction?

When dealing with centralized payment systems, we are allowed to make a mistake. For example, you specified the wrong amount or wrong recipient, and then you immediately write to the support service with a request to cancel the transaction. But with a cryptocurrency, this trick does not work.

Bitcoin gives users freedom from banks, but at the same, personal responsibility becomes very important. In the Bitcoin network, no one can block your account or cancel an ongoing transaction. There are cases when, due to an incorrectly entered address, the user sent 800 Bitcoins to the account of the already bankrupt Mt.Gox exchange, while someone else mixed up the transfer amount with the commission fee, paying 80 Bitcoins to the miners at once.

That is why before sending any transaction to the Bitcoin network, it is necessary to check the address of the recipient, the transfer amount and the commission fee amount. Because the blockchain — it does not forgive mistakes.

3. What if it wouldn’t be enough Bitcoins for everyone?

The Bitcoin emission is limited. There will be no more than 21M coins precisely. To date, more than 17M Bitcoins have been extracted, that is, over 80%. At the same time, according to the results of various studies, 4M to 6M coins are inaccessible, because their owners have lost access to their wallets — well, somehow.

So does it turn out that Bitcoins will be catastrophically limited, and that it wouldn’t be enough for everyone? Fortunately, this is not the case. Each Bitcoin is divided into 100M parts, which are called Satoshi in honor of the creator of the first cryptocurrency. You can buy, sell, spend, do whatever with 1/10, 1/100, 1/1000 or even less of the Bitcoin.

4. How much does Bitcoin transaction cost?

It is often told that Bitcoin has extremely expensive transaction fees, but everything is relevant. At the end of June 2018, a transaction of 48 500 Bitcoins was recorded, which at the time was approximately $280M. For this transaction, a commission fee of only 4 cents was paid. On the other hand, at the time of writing this article, the average commission fee for the BitInfoCharts analytical portal is $0.50 to $0.60. Let's dive in how this is possible.

Before confirmation, all transactions go into the vault called memory pool, or mempool for short. There, the transactions wait until the miners include them to a block. However, the miners are trying to pick the transactions with the highest fee, so the less the user decided to pay for the transaction, the more likely that their transaction will be left for later.

Bitcoin wallets offer recommended amounts of a fee, which is calculated based on the current workload of the network. This way, it ensures that the transaction will be quickly processed. But if you want to speed up your transaction or vice versa, you don’t rush anywhere, you just adjust the commission fee at your discretion.

5. Why and how long does it take to confirm a transaction?

After the miners have included the transaction to the block, the recipient can now see the new Bitcoins in their account, but they cannot use them yet because it would require to wait for six transaction confirmations, and this usually takes time.

The first confirmation attaches your transaction to the block and records it to the blockchain. The next confirmations are blocks obtained by the miners after your transaction was initially attached to the block. If it takes about 10 minutes to create one block, then six confirmations will have to wait about 1 hour.

Such a mechanism of the Bitcoin network cannot be called convenient, but it is a technical necessity to protect against possible break-ins. Obtaining 6 confirmations indicates that the probability of a network attack or information forgery is only 0.1%.

There are even stricter rules for miners. They can use the extracted bitcoins only after 100 confirmations.