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FAQ

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Learn The Basics In Our FAQ Section

Eliminate your confusion about Bitcoin and cryptocurrency technologies.

What is Bitcoin?

Bitcoin with a capital B is a payment system in the same way that credit cards and Paypal are payment systems. When you see bitcoin written in lowercase, the word is referring to an actual currency such as dollars, yen, and Euros.

Who created Bitcoin?

Whoever invented Bitcoin is basically the Banksy of finance. The currency was created in 2009 by an unknown person who goes by the alias of Satoshi Nakamoto.

Who controls the Bitcoin network?

While Visa, Inc. may control Visa, there is no Bitcoin, Inc. that controls bitcoin. There is no need for a middle man when it comes to bitcoin transactions. The Bitcoin network is a peer-to-peer network that created and maintains the blockchain – a type of shared transaction ledger.

How does Bitcoin work?

A bitcoin transaction occurs when there is a transfer of value between two different Bitcoin wallets. This transaction gets included in the blockchain. The Bitcoin wallet keeps a private key (or seed) which is a secret bit of data that is used to sign the transactions. This furnishes mathematical proof that the transfer of value has occurred and that it came from the owner of the wallet.

Is Bitcoin legal?
At this point, the legality of Bitcoin depends on where the user lives. In the United States, yes it is. Different states and countries, however, may or may not regulate money transmitting businesses. The legality of bitcoin depends on what you do with it.
Is Bitcoin useful for illegal activities?
While bitcoin has been used for the purchase of illegal items, they are more often used for normal and legal transactions. Bitcoin is not completely anonymous, as IP addresses of senders can still be tracked.
Can Bitcoin be regulated?
Bitcoin is not currently regulated, although the subject has been much debated in many countries the world over. Many figureheads in the cryptocurrency industry worry that too much regulation could discourage further innovation and would go against one of the original points of the technology – privacy.
What about Bitcoin and taxes?
Cryptocurrencies are subject to tax by the IRS. The sale or exchange of any convertible virtual currency always has tax implications, whether it is used to pay for goods or services.

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How are Bitcoins created?
Bitcoins are created through a competitive process called mining. Through this process, individuals are rewarded with bitcoins by the network. Bitcoin miners process transactions and use specialized hardware to secure the network. Miners solve extremely complex math problems that send more bitcoins into circulation.
Why do Bitcoins have value?
Bitcoin has value because people are using it. It is a popular unit to accept and trade in because others are doing so. Bitcoin is useful as a form of payment, and its value is measured by its growing base of merchants, startups, and users who are willing to accept them.
What determines Bitcoin's price?
Bitcoin’s price or value is based on the economic principle of supply and demand.  If people want more bitcoin than is currently available, the price goes up and bitcoin becomes more valuable.
Can Bitcoins become worthless?
The only way bitcoin could ever become worthless is if there was suddenly no demand for it. Due to the fact that there will only be 21 million bitcoins ever in existence, bitcoin price is on track for a steady increase.
How does Bitcoin mining work?
About every ten minutes, mining computers gather several hundred pending bitcoin transactions (otherwise known as a “block”) and transform them into a math puzzle. The miner that finds the solution earns a 25 bitcoin reward after another 99 blocks are added to the transaction ledger.
Isn't Bitcoin mining a waste of energy?
Sure, Bitcoin uses electricity to power their network, but so do banks. When compared to the cost of the electricity required to operate all bank branches on a daily basis, Bitcoin’s mining electricity costs honestly aren’t as large as they may seem at first.
How does mining help secure Bitcoin?
Mining is the process of adding new transaction records to Bitcoin’s public ledger of recent and past transactions (otherwise known as the blockchain.) This process confirms that a transaction has taken place.
Is Bitcoin secure?
Bitcoin and other cryptocurrencies can be kept secure in analog form. It is important to research the safety and security of the wallet in which you keep your bitcoins. You can’t send, receive, or spend bitcoins without a wallet. A wallet is the cryptocurrency equivalent of a bank account. Bitcoin wallets provide you with private keys, which are used during bitcoin transactions. As long as your private keys are secure, so is your bitcoin.
Hasn't Bitcoin been hacked in the past?
Like any other type of software, Bitcoin’s security depends on how quickly problems are found and fixed.  Over time, security flaws have been noted and addressed. When a bitcoin is stolen, this doesn’t compromise its value. New security features have been developed in recent years such as offline wallets, hardware wallets, and wallet encryption.
Could users collude against Bitcoin?
It is not easy to change Bitcoin protocol, and it’s impossible to generate an unlimited amount of bitcoin out of nowhere. Spending the funds of others and corrupting the network are likewise impossible.
Is Bitcoin vulnerable to quantum computing?
In order to protect bitcoin and other cryptocurrencies, new cryptography standards must be developed and put into place alongside current bitcoin protocol. Such technologies do already exist and others are in various states of development. As it stands, developers and cryptographers are taking such a proactive stance that this threat won’t be as great ten years from now as previously feared.
Why do I have to wait for confirmation?
A confirmation tells you that the bitcoin has left your wallet and has entered someone else’s. Each transaction is confirmed by a block. A new block is created about every ten minutes. Some companies or services only require one confirmation; however, greater payments sometimes require up to six.
How much will the transaction fee be?
Transaction fees have evolved over time. Up to date transaction fees can be located at https://bitcoinfees.earn.com/.
What if I receive a bitcoin when my computer is powered off?
Your computer does not have to be on for you to receive bitcoin. The next time your wallet updates, the bitcoin will be there. Remember that what is stored in your wallet are your private keys, not the bitcoin itself.
What does 'synchronizing' mean and why does it take so long?
Synchronization is the validation of each transaction found within the blockchain. When you first get your wallet, it may take quite awhile for all of the past transactions in the blockchain to be validated. The Bitcoin blockchain is over 110GB as of 2017. It can be faster to use your wallet on a mobile device, or if you’re a beginner, it’s always best to start with a fast, lightweight client.

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