Frequently Asked Questions About Bitcoin

In this FAQ, we have tried to answer the questions that are most often asked by newcomers to the world of cryptocurrencies. General Questions What is bitcoin? How can I get bitcoins? Can I buy bitcoins with Paypal? Where can I find the Bitcoin user forum? How are new bitcoins created? How many bitcoins are there now? How many parts is bitcoin divided into? How should I call shares of bitcoin? How will the block reward decrease when it reaches very low values? How long will it take to create all the coins? If no more coins are produced, will new blocks be created? But if no more coins are created, what happens if bitcoins are lost? Wouldn't this be a problem? What will happen if someone generates a new chain of blocks or another digital currency will make Bitcoin a thing of the past? Economics What is provided by bitcoin? What supports it? What happens if someone buys all the existing bitcoins? Will bitcoin cause a deflationary spiral? Does bitcoin provide unfair benefits for early adopters? Is Bitcoin a pyramid scheme? Is Bitcoin a bubble? I lost my “wallet” (wallet.dat file). The abbreviation BTC is used to indicate the price or quantity (for example: 100 BTC). Bitcoin intangible. It's just a number tied to a bitcoin address. More complete information can be obtained from the article “What is bitcoin?” How can I get bitcoins? There are many ways to purchase bitcoins: Accept bitcoins as payment for goods or services. There are several exchanges where you can exchange them for traditional currencies. Find a merchant and exchange it for cash. Create a new block (currently yields 12.5 bitcoins). Participate in the joint creation of the block. More complete information can be obtained from the article “How to get BTC?” Can I buy bitcoins with Paypal? While it is possible to find someone who wants to sell you bitcoin with Paypal, most major exchanges and exchanges do not allow you to fund your account with Paypal.. Because it's not uncommon for someone to pay for a Bitcoin purchase with Paypal, get their Bitcoins, and then fraudulently complain to Paypal that they didn't receive their item.. In such cases, Paypal very often takes the side of the scammer, and therefore the exchangers do not allow this method of replenishing the account. Where can I find the Bitcoin user forum? Russian-language support can be found on the forum The largest multilingual forum is How are new bitcoins created? New coins are generated by a network node every time it finds a solution to a mathematical problem (i.e.. creates a new block) which is difficult to execute and can demonstrate a proof of work. The block reward is automatically adjusted so that 10,500,000 BTC will be created in the first 4 years of the Bitcoin network.. The amount is halved every 4 years, i.e.. 5,250,000 over the next 4 years, 2,625,000 over the next four years, and so on. Thus, the total number of coins will be 21,000,000 BTC. Blocks should be created, on average, every 10 minutes. As the number of people trying to create these blocks changes, the difficulty of creating new coins will change to maintain this value.. Difficulty changes every 2016 blocks. The probability that someone will create a block is based on the ratio of the speed of the system used to the combined speed of calculation of all other systems generating blocks in the network. How many bitcoins are there now? The number of blocks multiplied by the number of coins in the block is equal to the sum of the existing coins. The number of coins in a block is 50 BTC for the first 210,000 blocks, 25 BTC for the next 210,000 blocks, then 12.5 BTC, and so on.. The reward for the found block drops by 2 times every 210,000 blocks. If you do not trust sites that display the current number of emitted bitcoins, you can calculate it yourself, knowing the number of blocks and the emission reduction algorithm. How many parts is bitcoin divided into? Technically, bitcoin can be divided up to 8 decimal places using existing data structures, so 0.00000001 BTC is the smallest amount at the moment. Ideas about securing even smaller parts of bitcoin may be relevant in the future if the need arises. How should I call shares of bitcoin? At the moment, there is a lot of discussion about the names of bitcoin shares.. The main candidates are: 1 BTC = 1 bitcoin 0.01 BTC = 1 cBTC = 1 cento-bitcoin (also known as bitcent) 0.001 BTC = 1 mBTC = 1 milli-bitcoin (also called mbit (pronounced “ambit”) or millibit) 0.000 001 BTC = 1 µBTC = 1 micro-bitcoin (also called a jubit or microbit). There are many arguments against the 0.01 BTC special case, as it is unlikely to represent anything significant while the Bitcoin economy is in the growth stage (and it certainly does not equal 0.01 dollars or euros). Also, do not call 0.01 BTC a cent, a penny or a penny.. This is the world currency. The only exception is Satoshi, the smallest unit of bitcoin at the moment. 0.000 000 01 BTC = 1 satoshi in honor of Satoshi Nakamoto, the pseudonym of the inventor of bitcoin. How will the block reward decrease when it reaches very low values? Reward after 0.00000001 BTC will become 0. No more coins will be created. The calculation is done as a bitwise right shift of a 64-bit integer, which means that it is divisible by 2 and rounded down. The integer is equal to the value in BTC * 100,000,000. It is in this form that BTC is stored on your account in a bitcoin client.. Keep in mind that with existing rules, it will take about 100 years before there are problems in splitting bitcoin apart. How long will it take to create all the coins? The last block that will create coins will be block #6,929,999. It will be created around the year 2140. Then the total number of coins in circulation will be 20,999,999.9769 BTC. Even if the separation accuracy is increased from the current 8 decimal places, the total amount of BTC in circulation will always be just below 21 million (assuming everything else remains the same). For example, with 16 decimal places, the total number of coins will be 20,999,999.999999999496 BTC. If no more coins are produced, will new blocks be created? Of course! Even before the end of the creation of coins, the use of transfer fees will become the main income when creating a block. When the creation of the coins is over, there will be a need to maintain the ability to use bitcoin, and then the full reward for creating the block will be transfer fees.. Therefore, even after block No. 6 929 999, more and more blocks will be created for making transfers. But if no more coins are created, what happens if bitcoins are lost? Wouldn't this be a problem? According to the law of supply and demand, the fewer bitcoins available, the higher the demand for the remaining bitcoins, which will therefore have a higher value.. So, if bitcoins are lost, then the rest of the bitcoins will increase in price to compensate for the loss, i.e.. the number of bitcoins needed to buy something decreases. It's a deflationary economic model. As the average transaction size decreases, transfers are likely to operate in milli- or micro-bitcoins. The bitcoin protocol uses a base block of one hundred millionth of a bitcoin (“satoshi”), but unused bits are also available in the protocol. In the future, they can be used to refer to even smaller parts. What will happen if someone generates a new chain of blocks or another digital currency will make Bitcoin a thing of the past? The Bitcoin block chain cannot be easily rewritten, this is a consequence of one of bitcoin's central security mechanisms.. The system accepts the chain of blocks that is the longest and most complex, i.e. the one on which more work has been spent. And since each next block is produced from the previous one, it will take more calculations to create a new chain than was invested in the generation of bitcoin coins in the entire history of its existence.. Otherwise, such a chain will not be accepted.. And as bitcoin grows and develops, over time it becomes more and more difficult to overtake all the capacities involved in it.. This does not eliminate the possibility of a double-spending attack, but its capabilities are also quite limited. A much more real threat could be the displacement of bitcoin by another virtual currency.. As bitcoin develops, all its new shortcomings may emerge, which other new electronic currencies may no longer have.. However, this does not mean that bitcoin will immediately become a thing of the past. Economics What is provided by bitcoin? What supports it? Bitcoins are valuable because they are accepted as payment.. When we say a currency is backed by gold, we mean that there is a place where you can exchange currency for gold.. In a sense, we can say that bitcoin is backed by the price that the seller has set for the goods, i.e.. the seller's promise to exchange the goods for a certain amount of currency. The main misconception is that bitcoins derive their value from the cost of the electricity needed to create them.. Cost Doesn't Equal Value – Hiring 1,000 people to dig a big hole in the ground can be costly, but not essential. Although scarcity is an important requirement for a useful currency, the currency itself cannot do anything of value.. For example, your fingerprints are scarce, but that doesn't mean they have value. What happens if someone buys all the existing bitcoins? What if someone bought up all the gold in the world? Well, you can try to buy it, but the seller will raise the price of gold until the buyer runs out of money.. Not all bitcoins are for sale. Just like with gold, no one will be able to buy bitcoins that are not up for sale. Will bitcoin cause a deflationary spiral? See article Deflationary spiral. Does bitcoin provide unfair benefits for early adopters? Early adopters have a large amount of bitcoin at the moment because they took the risk and invested resources in untested technology. In doing so, they have helped Bitcoin become what it is now and are helping to become what it should become in the future (hopefully a widespread decentralized digital currency). Therefore, it is only fair that they reap the rewards of their successful investment. In any case, any bitcoin created will change hands dozens of times as a medium of exchange, so the profits made from the initial distribution will be negligible compared to the overall level of commercial activity on the bitcoin network. Is Bitcoin a pyramid scheme? In a pyramid scheme, the founders convince investors that they will make a profit. Bitcoin does not provide such a guarantee. There is no central entity, only individuals building the economy. In a pyramid scheme, early participants can only profit from those who come after them. But Bitcoin has possible win-win outcomes. The first participants profit from the rate increase. Late entrants profit from stability and a widely accepted digital currency. The fact that the first participants are more profitable does not make it possible to draw a conclusion about a financial pyramid. Apple stock was not a pyramid scheme, although the early investors got rich. Is Bitcoin a bubble? Yes, just like the euro and the dollar. They only have value when exchanged for something, and no value when used. If everyone suddenly stops accepting your dollars, euros or bitcoins, the “bubble” will burst, and their value will fall to zero.. But this is unlikely to happen: even in Somalia, where the government disappeared 20 years ago, Somali shillings are still accepted as payment. I lost my “wallet” (wallet.dat file). Will I be able to recover my money? No. Lost money lost forever. They will not (and cannot be) restored or regenerated. Will the loss of wallets and the scarcity of bitcoin lead to high deflation, destroying bitcoin? Unlike most currencies, bitcoin is likely to experience gradual deflation over time given its limited supply of 21 million.. coins. This number was known from the very beginning of the project, and the rate of their generation also remains predictable. In addition, there is a danger in the bitcoin system that does not threaten other currencies: if a bitcoin user loses his wallet, then the money on it disappears forever, if the wallet is not found again. Disappear from general circulation including. That is, as users lose their wallets, the number of btc will not only not increase or remain unchanged, but will slowly decrease. As a result, according to the laws of supply and demand, it is assumed that the value of coins will constantly increase.. But in reality, no one knows exactly what will happen to a currency that is subject to constant deflation.. However, bitcoin has a good solution to this situation: it can be divided up to very small values.. Thus, even if people lose most of the bitcoins, the system should still function normally.. No one knows exactly what will happen as coins are lost from use, but it does not seem to pose such a dire threat as many believe. Receiving and Sending Payments Why do I have to wait 10 minutes before I can spend the money I received? 10 minutes is the average time to find a block. Depending on luck, finding a block can take more or less than 10 minutes. Blocks (displayed as a “confirmation” in the client interface) are a way to reach an agreement on who owns and how much bitcoin. Once the block is found, everyone agrees that you now own your received coins, so you can spend them. Before a block with your transfers is found, some nodes on the network believe otherwise, as someone may be trying to trick the system by trying to cancel the transfer. The more confirmations of the transaction, the less chance of cancellation. Only 6 blocks or 1 hour is enough to make cancellation almost impossible. This is much better than credit cards, which can be refunded even after three months of the original transaction! Why exactly ten minutes? This is a compromise chosen by Satoshi between the propagation time of new blocks in large networks and the amount of work spent due to chain splitting.. If these words don't make any sense to you, don't worry.. Reading the technical documentation should clear things up. Do you have to wait 10 minutes to sell or buy something with bitcoin? No, it is wise to sell things without waiting for confirmation, but only if the deal does not have a high value. When people ask this question, they tend to think of applications such as supermarkets or snack machines.. Transfers without confirmation still appear in the interface of the client program, but you cannot spend the received bitcoins. However, you can speculate about the risk involved in assuming that you can spend them in the future.. In general, when selling things that are fairly cheap (such as snacks, digital downloads, etc.), unconfirmed transfers will not present a problem if you are working with a well-matched network node. I sent some bitcoins and they haven't arrived yet! Where are they? Do not panic! There are a number of reasons why your bitcoins may not be showing up and many ways to diagnose them.. First of all, check the current block number in the bottom right corner of your client and compare with that. If these numbers differ by more than 1 or 2, then you need to wait until the block with your transfer is loaded. If not, it is quite possible that your translation has not yet been included in the block. You can check pending transactions online by going here and looking for your address. If the translation is in that list, then you need to wait for it to be included in the block before it will be displayed in the client. Please be aware that if the transfer is based on coins that have been recently received, then the transfer will take longer. For example, someone just sent you a coin and you decide to send it right away, your transfer will take longer, although you can speed up the transfer with a fee of 0.01 BTC. Zero fee transfers can take hours or even days. Why is my bitcoin address constantly changing? Every time a transfer arrives at the address specified in the “Your address” section, the client changes it to a new address. Thus, the client recommends that you use a new address for each transfer in order to increase anonymity. All your old addresses can still be used: you can see them in Settings -> Your receiving addresses. What is the transfer fee? Some transfers may require a transfer fee for faster confirmation. The transfer fee is processed and received by the block creator. The latest version of the client evaluates the need for a commission and its amount. The commission is added to the payment amount. For example, if you send 1.234 BTC and the client requests a fee of 0.0005 BTC, then 1.2345 BTC will be deducted from your balance to complete the transfer, and the recipient will receive 1.234 BTC. Since the fee is related to the amount of data that makes up the transfers, and not the amount of bitcoins sent, the fee can seem very low (0.0005 BTC for a 1000 BTC transfer) and very high (0.005 BTC for a transfer of 0.02 BTC, or about 25%). If you receive small amounts (for example, small payments from joint mining), then the sending fee will be higher. Is it possible to extend the protocol to include both the payment amount and the message? At the moment, the ability to transfer external data in transactions already exists (through complex scripting mechanisms). However: For each kilobyte, an amount of 0.01 BTC will be charged (as is currently the case with regular transactions). ECDSA (the public key algorithm that Bitcoin uses) does not support encryption, so you cannot encrypt this message. This feature is unlikely to be used in Bitcoin itself.. The block chain was not meant for that. If you send BTC to a non-existent address, will they be sent? Is there a check for the existence of an address? Will leave, no check. The recipient will be the lucky owner of the key to this address in the indefinite future. Where do my payments go from? Can I influence it? In the official client at the moment (Bitcoin 0.9) there is no possibility to choose the sending address. The address is selected from the oldest transactions. Since this can potentially reduce the level of anonymity, there is a solution in the form of a patch to the official client and even patched binaries, see the developer's page Where is the wallet physically located (wallet.dat file)? The wallet.dat wallet file can be located in different places depending on the operating system. On Windows, this is %APPDATA%Bitcoin, if more expanded, then: Windows XP – drive:/Documents and Settings/username/Application Data/Bitcoin Windows Vista, 7, sever 2008 – drive:/Users/username/AppData/Roaming/ Bitcoin On Linux you can find it at ~/.bitcoin/ and on Mac OSX at /Users/username/Application Support/Bitcoin/ What happens if someone sends me money and I don't networks? Any transfer to the “correct” address must be successful. You do not need to be connected to the network to receive money on the Bitcoin network. As soon as you connect (or create an address), the money sent to it will be available to you. Network Do I need to set up a firewall for the bitcoin client to work? The client usually connects to other hosts on TCP port 8333. You need to allow outgoing TCP connections on port 8333 if you want your bitcoin client to connect to more nodes. The client will also try to connect to IRC (TCP port 6667) to connect to other hosts. If you want to restrict your firewall rules to multiple ISPs and/or don't want to allow IRC connections, you can find stable hosts in the backup host list. If your ISP is blocking public IRC ports, note that lfnet is also listening on port 7777. Connecting to this alternate port currently requires either recompiling the client or changing the routing rules. For example, on Linux, you can bypass blocking port 6667 like this: echo >> /etc/hosts iptables -t nat -A OUTPUT -p tcp –dest –dport 6667 -j DNAT –to-destination :7777 -m comment –comment “bitcoind irc connection” How does the mechanism for finding other clients work? The client finds other clients primarily by using dns seed and by connecting to an IRC server (#bitcoin channel on If a connection to the IRC server cannot be established (for example, when connecting via TOR), the built-in host list will be used to query for addresses of other hosts. Why are my blocks not loading? Add bitcoin.exe to the allowed list in your antivirus. Running bitcoin.exe with the -rescan switch can also help, it will recheck all chains. Can I download blocks from a third-party server, and not myself? You can find an archive with blocks on third-party servers, but it is not recommended for paranoids or just those who have enough time. How long does the Bitcoin client take to sync after the first install? What is he doing at this time? The official client from during synchronization downloads the entire block chain and checks for itself that all the rules of the bitcoin system have been correctly observed. This check requires many hard disk accesses, so the total sync time depends on the speed of the disk and to a lesser extent on the speed of the processor.. This can take from a couple of hours on a fast SSD drive to several days on a slow hard drive.. So leaving your computer to synchronize the blocks, check that your computer's power-saving settings will not turn off its hard drive.. Until the client downloads all the latest blocks, your last payments will not be seen by the client and displayed in the wallet. If you do not want to wait for blocks to load at all, then you can install another lightweight client, such as Multibit or Electrum. Although these clients are theoretically worse in terms of security. If each transfer goes through the entire network, then the Bitcoin network can become very large? The bitcoin protocol allows the writing of lightweight client programs that can use the bitcoin network without downloading the entire transfer history. Since traffic is constantly increasing, such clients will be developed. Network nodes with a complete history may become a separate service at some point. With some software changes, full bitcoin nodes can easily keep up with VISA and MasterCard using fairly modest hardware (a couple of modern servers). It is worth noting that the MasterCard network is designed in the same way as the Bitcoin network – as a peer-to-peer broadcast network. What are the types of transactions in the Bitcoin network? Transactions are of three types: Generating coins, the so-called coinbase transaction Redistributing coins between key owners, such a transaction contains “inputs” and “outputs”. Text messages Read more in the article “Bitcoin Transactions” Why do I only have 8 connections? See Do I need to configure a firewall for the bitcoin client to work? Mining What is mining? Mining or extraction is the process of spending computing power in order to find blocks and thus create new bitcoins.. The essence of mining is to search for such a number that the hash sum from it satisfies the requirements of the current complexity for “block sealing”, while the one who finds this number is paid a certain amount, at the moment it is 12.5 BTC. More detailed information about mining can be found in the Mining FAQ. Why was the “Generate Coins” option removed from the client? In the early days of bitcoin, it was very easy to find new blocks with a normal processor.. With the increase in the number of miners, the complexity of creation has increased so much that the time for finding a block by the processor has increased to several years.. The only cost-effective way to mine is to use modern high-performance graphics cards, FPGA or ASIC miners with special software and / or join a joint mining pool. Since CPU mining has become essentially useless, the option has been removed from the client GUI. Is mining used for any useful calculations? Mining calculations are internal to the Bitcoin network and are not linked to any other distributed computing projects.. They serve to secure the bitcoin network, which is useful in itself. Isn't this a waste of energy? The expenditure of energy to create a free monetary system is hardly a waste. In addition, the services required to run widespread monetary systems, such as banks and lending companies, also consume energy, perhaps even more than bitcoin. Why don't we use calculations that would be useful for other purposes as well? To ensure the security of the bitcoin network, settlements must have some very specific features that are incompatible with settlements for other purposes. How does proof-of-work help the security of the bitcoin network? To give a general idea of the mining process, imagine the following: Payload = Random number = 1 Hash = SHA2( SHA2(Payload + Random number) ) The work done by the miner consists of from iterating over random numbers until the hash function is equal to a value that has the rare property of being less than a certain target value. (In other words: the hash “starts with a certain number of zeros.”) As you can see, the mining process itself does not compute anything special.. It simply tries to find a random number, which – combined with the payload – gives a hash with special properties. The advantage of using such a mechanism is that it is very easy to check the result: given the payload and a specific random number, only one call to the hash function is needed to make sure that the hash has the desired properties.. Since there is no known way to find the hash other than simple brute force, this can be used as a “proof of work” in which someone has invested a huge amount of computing power to find the right random number for a given payload. This feature is used in the bitcoin network to provide various aspects. An attacker who wants to inject a malicious payload into the network will need to make the necessary proof of work before it is accepted.. And as long as the main part of the computing power is in the hands of honest miners, they will always be able to get ahead of the attacker. What happens if two nodes generate a block at the same time? This rarely happens, the block will be accepted, after which the next one will be found earlier. That is: two nodes send their “winning” blocks at the same time. Some nodes learn first about the block from the first node (“block A”), others learn about the block from the second (“block B”). Each part of the network will continue hashing from this block, trying to generate the next block.. If the machine that generates the next block (“block C”) uses block B, then block B will be considered the “winner”, and nodes using block A will move to block C. (of course, this can upset the one who generated block A, because. he hoped that he would receive coins for this, but his block became invalid as a result of the “victory” of block B). How much can I earn? Calculate on a calculator. If you do not know the speed of the device, look at this table. Technical problems When I try to start Bitcoin, I get an error loading blkindex.dat, how to deal with it? This can happen when Bitcoin is shut down incorrectly.. Don't forget to make backup copies of the wallet.dat file, as it may well become corrupted during an emergency shutdown of the application. Try the following: Close the Bitcoin program (check in the manager), backup the wallet.dat file (usually in %APPDATA%Bitcoin) delete all files in the %APPDATA%Bitcoin folder except wallet.dat, uninstall the Bitcoin program install the latest available version of bitcoin and don't downgrade any more start bitcoin and wait for all blocks to download check balance and sent/received transfers how to upgrade bitcoin wallet version from old to new one? Close the Bitcoin program (check in the manager), make a backup copy of the wallet.dat wallet file (usually in %APPDATA%Bitcoin) Erase everything in %APPDATA%Bitcoin except blocks (blk0001.dat and blkindex.dat) and wallet (wallet .dat). Uninstall Bitcoin like a regular program through the Control Panel if it was installed through the installer, or delete the software folder if it was downloaded and unpacked from the archive Install a new version of Bitcoin by downloading the installer from the official website Development Does the project have a mailing list Bitcoin? Yes, link. Does the Bitcoin project have a testing network? Take a look at this post: link What version of the program did Bitcoin get wallet encryption from? Wallet encryption has appeared since Bitcoin version 0.4.0, in the previous version – 0.3.24 there was no encryption and the keys in the wallet.dat file were in the clear. Also in version 0.4.0, the version of Berkeley DB (bdb version 4.8) was also updated, so in case of downgrading to earlier versions, using the working folder of the new wallet will lead to a program error. To be able to downgrade, make a backup of the entire working folder with the wallet before upgrading to Bitcoin version 0.4.0 and higher. Backward compatibility is maintained, i.e.. version 0.4.0 installed over version 0.3.24 will see all downloaded blocks and funds on the account. Where can I get the source codes for the official Bitcoin client? Here is a link to the source codes of the official Bitcoin client. How can I build bitcoin from source? 0.3 build thread: link, Notes on Building Bitcoin on Linux (pdf) The FAQ is constantly updated, if you have questions that might be helpful to others, feel free to post them in the forum and they will be posted.