What You Need to Know Bitcoin

For anyone starting to use Bitcoin, there are some important things you should know. Bitcoin works very differently than the traditional banks that you are used to. It is important to take some time to inform yourself before using Bitcoin for any substantial amount of money. With the right precautions, using Bitcoin can be even safer than using your physical wallet.

Bitcoin payments are irreversible

Bitcoin transactions cannot be reversed; they can only be voluntarily refunded by the person receiving the funds. Unlike credit cards, banks, or PayPal, there is no central place for you to complain to if a problem arrises. This also means that there is no one to control what you can or can’t do with your own bitcoins. With this great freedom comes great responsibility, so be extra careful before sending bitcoins to anyone you don’t already know or trust.

Securing your wallet

Bitcoin allows you to transfer any amount of money, anywhere in the world, instantly, and irreversibly. This makes it incredibly useful to people all over the world, but also makes it an attractive target for hackers. When used properly, Bitcoin is very safe, but it is important to always take the appropriate steps to keep your bitcoins safe.

Bitcoin prices

Like all things, the price of bitcoins is set by the laws of supply and demand. Because the supply of Bitcoin is mathematically limited to twenty-one-million units, as more and more people start using bitcoin, the increased demand combined with the fixed supply will cause the price to increase. The fact that the number of people worldwide using bitcoin is still relatively small, means the price of bitcoin in terms of government issued money can swing wildly. The overall trend has indisputably been up, but there have been many sharp corrections along the way, and will likely be many more in the future.

Bitcoin exchanges

There are hundreds of bitcoin exchanges around the world. Most countries already have at least several. Due to inefficiencies in the traditional banking system, the exchanges may have slightly different prices. If the price difference is large enough, people will earn money by doing arbitrage to bring the prices back in line with each other. If an exchange consistently has a substantially different price than other exchanges, that is a strong sign of trouble, and it is likely best to stay away.

Bitcoin is not automatically anonymous

A substantial amount of effort is required in order to use Bitcoin anonymously, and because all bitcoin transactions are stored publicly forever on the Bitcoin blockchain, just because no one has linked your identity to a transaction today, doesn’t mean that they won’t be able to tomorrow. The good news is that many wallet providers are starting to build in easy to use privacy enhancing tools that make it easy for normal people to protect their privacy.

Unconfirmed transactions

A Bitcoin transaction is usually seen by the whole network within a few seconds, and will be confirmed into the next block in about 10 minutes. While it is technically possible that a specific transaction will not be confirmed into the blockchain, most merchants and businesses happily accept payments with zero confirmations. Compared to the months long chargeback period for credit cards, bitcoin transactions are confirmed at lightning speed.

Bitcoin is new

Bitcoin is new. With all new things unexpected bugs or surprises may arise. As each day goes by, and the bitcoin ecosystem grows, it becomes more and more unlikely that major new bugs will be found, and thus safer and safer for people trust and rely on. Currently people rely on Bitcoin to do hundreds of millions of dollars worth of transactions each month.

Government taxes and regulations

Many jurisdictions require you to pay various forms of taxes on all sorts of things, including bitcoins. While Bitcoin gives anyone the ability to transact privately with anyone else, anywhere in the world, it is your own decision if you choose to adhere to the tax and other legal or regulatory mandates issued by various governments.