Bitcoin explained

Learn everything there is to know about the world of Bitcoin. Whether you want to inform yourself about Bitcoin in general or you are keen to find out how payments and security measures of the world's best known cryptocurrency work.

We at BitBucks want to help, to bring Bitcoin payments into the life of everybody.

Bitcoin for beginners

Do you need banks in order to use Bitcoin?

No. Bitcoin is a monetary protocol for the Internet. You can use Bitcoin in the same way as you access a website. Access is enabled by wallet software, which is available in various models free of charge, or by direct connection to a node.

How do I get Bitcoin?

Generally from digital wallets or currency exchanges. These exist in virtually every country. These facilities will usually confirm the identity of their customers via video-based methods. You can then purchase Bitcoin via a bank transfer, or in some cases using other payment methods such as credit cards, PayPal and others.
Many countries also have platforms for direct trade between private individuals, which are quite popular. There are often vending machines from which you can buy Bitcoin, and you can purchase credit vouchers in kiosks.
An alternative to the purchase of Bitcoin is acceptance. You can accept Bitcoin as payment for goods or services that you provide. In some countries, employees or freelancers may be able to convert part of their salary or fee payments into Bitcoin.

Is Bitcoin legal?

In almost all countries, the use of Bitcoin to send and receive money is permitted. In a few countries this is restricted or completely forbidden. Please seek reliable information as to the legal situation regarding Bitcoin in your country.

What is Bitcoin?

Bitcoin is a virtual currency, also known as a cryptocurrency. It was developed in 2009 and has grown at a rapid rate since then. Bitcoin is accepted in almost every country in the world; more than 500 million dollars have been transferred via this method to date. It gives an unprecedented degree of financial autonomy to its users.

Who can use Bitcoin?

Anyone who has access to the Internet. Everyone is equal with Bitcoin; the network does not require permission. Age, gender, religion, social status, origin - Bitcoin does not recognise these categories.

Who does Bitcoin belong to?

Bitcoin is, in essence, an open-source software. This means that it belongs to no-one - and everyone. No-one can build a fence around Bitcoin - everyone has access.

Why choose Bitcoin over other virtual currencies?

There are 1,000 virtual currencies, and none of these offer any significant advantages over Bitcoin. Bitcoin is the face of the financial revolution, the brand name of virtual currencies, the best-known and most widely accepted of them all. Why, then, would anyone want to start from scratch with another currency?

Why is Bitcoin so revolutionary?

Bitcoin is a truly international currency which is inflation-resistant, private, autonomous, does not require consent and cannot be censored. There is no central bank devaluing money through inflation, nor any banks or other middle-men conducting the transfer between sender and receiver. Bitcoin transactions are without borders. The user's private key gives full ownership of Bitcoin units, and with a passphrase you can even store it in your head. 

Bitcoin payments

How can I trace a transaction?

Bitcoin transactions are part of the blockchain and are therefore stored in every node of the network. “Blockexplorer” allows transactions to be traced using the address or transaction ID. This is helpful in ascertaining that a transaction has actually occurred.

How do I send Bitcoin?

It's simple: copy the recipient's address into a field, enter the amount, and click "Send". In most wallets, you can specify the amount in your local currency, so no conversion is required. Payment requests or the payment protocol are often used. These already include the amount. You can either activate it by clicking on it or copy it into the send field. Mobile Wallets scan transaction requests. In this case you only have to confirm the transaction.

What are payment URIs and the payment protocol?

A payment URI is a request for payment that many wallets can generate. These define a target address, an amount and may include a notification for the sender such as the order number. These can be scanned in like a QR code or copied into the send field of a wallet. One click on the payment URI opens the wallet with the pre-formulated transaction.
The payment service provider BitPay uses the payment protocol. This enables BitPay to set fees for a transaction and transfer this amount to the miner itself. In this way, BitPay can increase the success rate of its payments. This payment method is used in the same way as the URI: you can scan it in, click the link or copy it into a wallet. In any case, not all wallets support the payment protocol.

What are transaction fees?

A Bitcoin transaction attracts a fee which is paid to the miner. Under normal circumstances the fees amount to 1-5 cents, however during peak times these may increase noticeably to values of 50 cents or even 1 euro. If you pay too little in fees, you will have to wait longer for confirmation of your transaction. Most wallets select the appropriate fees. Wallets like BitBucks, in which transactions can also be internally calculated, can save you fees and accelerate confirmation of your transactions.

What is a transaction?

With a transaction, you transfer Bitcoin from your wallet to another party. This transaction will be signed off with your private key and forwarded to the node in the Bitcoin network. This is propagated across the whole network until it reaches a miner, which can confirm the transaction. 

What is the difference between Bitcoin and PayPal?

PayPal is a closed system. The money that is moved via PayPal remains in that system, and can only be accessed through PayPal software. Bitcoin, on the other hand, is an open system. The user can transfer money directly, without a middle-man. At the same time, this means there is a market for middle-men who can provide users with an interface for Bitcoin and, with something like BITBUCKS, payments are cheaper and more convenient.

What is the lightning network?

The lightning network is a so-called “offchain” network. It does not transport Bitcoins to the blockchain, but operates through “payment channels”. These increase the privacy of transactions and the scalability of the system, but so far they still offer users reduced convenience and security.
An alternative to the lightning network is a fiduciary wallet such as BitBucks, which carries out transactions for users within its own system. This is less autonomous, like lightning, however results in the same effect in terms of scalability and can be better integrated into a convenient user interface.

Where can I make payments with Bitcoin?

In theory, everywhere there is Internet. Unlike national currencies, however, there is no obligation to accept Bitcoin as legal tender, and so individual merchants may choose to accept it or not. At any rate, there are shops and stores in almost every country in the world that accept payments in Bitcoin, as well as numerous international online providers. Many merchants are also willing to accept Bitcoin on request.

Bitcoin security

Are Bitcoin Payments anonymous?

No, bitcoins payments are not anonymous. The blockchain stores every transaction including sender and receiver. However, bitcoins payment is pseudonymous: The blockchain does not know any private data, but only signatures and addresses. Bitcoin thus allows a degree of privacy that goes far beyond that of banks and payment service providers.

Can Bitcoin be seized?

If you save your Bitcoin so that only you have the private key: no. Strong cryptographic measures ensure that Bitcoin can only be accessed by someone in possession of the private key. If this is kept secret, no-one else can remove your Bitcoin.

Can Bitcoin transactions be censored?

If you make the transaction yourself - no. Transactions are pseudonymised and processed by a network without distinction. As Bitcoin is a decentralised network, there is no central location with the power to prevent other nodes from carrying out and verifying transactions - as long as these are covered and valid according to the rules of the network. 

How can I store my private key?

Your wallet will usually store your private key by saving it in a locked file. You can also print out the private key as a “cold wallet” and remove it from the Internet. 
You should know that you have sole responsibility for the security of your key. If you lose it, then you will lose your Bitcoin. Wallets such as BITBUCKS, which store the key for their customers, can offer inexperienced users an additional level of protection against key loss.

How does Bitcoin protect against inflation?

Central banks are able to increase the total quantity of money in circulation using fiat money, but with Bitcoin this is determined by an algorithm. The miner can only mine the volume of Bitcoin that is specified in the protocol at any one time. Anyone can verify the current amount of Bitcoin in circulation and predict future quantities. At present there are more than 17.5 million units of Bitcoin, and the creation of new coins reduces by half every four years. There will never be more than 21 million Bitcoin.

What is a wallet?

A wallet is software you can use to administer your Bitcoin. There are many different wallets for all common computer systems. You can choose between local and online wallets. A local wallet gives greater independence and privacy, while an online wallet can offer more convenience. 

What is an address?

Bitcoin is sent to an address. An address is an approximately 35-digit combination of symbols. This has a similar function to an IBAN number in bank transfers: you transfer money by entering this code into the relevant field of the transfer form. Unlike IBAN numbers, your wallet can contain an almost infinite number of addresses.