Common Cryptocurrency Questions
Cryptocurrency is the hottest thing in the world, and no one can get enough of it. But what is cryptocurrency? How do you buy it? And why are people so excited about it? Here's a quick overview of all the most common questions about cryptocurrency.
Is it legal?
Cryptocurrency is legal in most countries, but it's not regulated by any government. You can use cryptocurrency if you follow your country’s laws and regulations. You can't buy or sell cryptocurrency there if a country has banned cryptocurrency.
Some countries have banned cryptocurrency entirely, like Algeria and Bolivia—and others where only specific types of cryptocurrency are forbidden (like Venezuela).
What is a Satoshi?
- The satoshi is the smallest unit of Bitcoin, with one satoshi being equal to 0.00000001 BTC.
- The name Satoshi Nakamoto is a play on words, as the word Satoshi means “clear thinking; wise” in Japanese, while Nakamoto means “central origin”.
Can I mine cryptocurrency?
Yes, you can mine cryptocurrency. Mining is adding transaction records to Bitcoin's public ledger of past transactions. This ledger of past transactions is called the blockchain, as it is a chain of blocks. The blockchain confirms transactions to the rest of the network as having taken place.
Bitcoin nodes use the blockchain to distinguish legitimate transactions from attempts to re-spend coins that have already been spent elsewhere.
How many coins are there?
There are only 21 million Bitcoin. There are only 21 million Litecoin. There are only 21 million Ethereum. There are only 21 million Ripple, and so on.
Each of these cryptocurrencies has a total supply cap, which means that the number of coins available will never exceed this amount. When a cryptocurrency is mined, its supply increases according to the rules set out by its protocol—but it will never go above its maximum limit.
Do I have to report cryptocurrency gains to the IRS?
Who accepted Bitcoin first?
The first person to accept bitcoin was a programmer named Laszlo Hanyecz, who received 10,000 bitcoins (which was worth about $25 at the time) to order two pizzas from Papa John's. This transaction happened on May 22nd, 2010, and is considered as the first use of Bitcoin in real life.
The second person to accept Bitcoin for anything other than pizza was Michael Marquardt, who sold his old car for 2,500 Bitcoins on June 15th, 2010. The third person to buy Bitcoin was a man from California called Richard Branson, who started taking Bitcoins for one flight ticket per day from September 27th, 2010, onward.
What's the best way to get started in cryptocurrency?
If you're new to cryptocurrency, the best way is through a wallet. Wallets are like traditional bank accounts, but they store your digital money. If you have an email address, you can use it as an example of what a wallet looks like:
That said, wallets aren't the only way to get started in cryptocurrency. We've got you covered if you already have a bitcoin account and want help buying some bitcoin or other cryptocurrency!
If you're looking for investment advice on how much money to spend on cryptocurrencies and which ones look promising—and where not to invest—we can help with that too!
What are a private key and a public key?
A private key is a secret number that allows you to spend your bitcoins. Your private key is needed to sign the transaction and authorize it.
A public key is a general number that lets other people send you bitcoins. It's not very long, so it's hard to memorize and easy to copy (which makes it great for sharing). You provide this number when someone wants to pay you.
These two keys are related mathematically, but they're mathematically linked in such a way that even if one person knows both of them, he or she can't calculate the private key from the public key or vice versa without an enormous amount of computation power on his or her part (which would cost more than what would be gained by trying). The only way they'd be able to do it is if they had access to your computer while running something called an “elliptic curve algorithm,”–and even then, there's no guarantee that the attacker could get into your computer in time before someone else started spending those funds elsewhere! But here's how we generate these keys:
Why does Bitcoin use so much power?
Bitcoin uses more power than any other cryptocurrency. The bitcoin network alone consumes more electricity than the entire country of Denmark, which is one of the most energy-rich countries in the world. It uses more electricity than all of Ireland and Cyprus combined!
This is because there are a finite number of bitcoins that computers can mine on the bitcoin network (21 million). This means that as time goes on, it will take increasingly expensive hardware to mine new bitcoins — so miners need to use ever-more powerful rigs to keep up with their competition.
How long does it take for my transaction to be completed?
The time it takes for a transaction to be completed depends on several factors:
- The fee you pay. Higher fees can help your transaction get confirmed faster, but they also cost more in fiat currency. When choosing how much to pay in payments, consider how long you need your marketing to take place and whether or not paying with another cryptocurrency would be more beneficial.
- Network congestion. If there's too much traffic on the network at once, this can slow down confirmation times for all transactions being sent through it—and some networks are slower than others by nature of their design or implementation.
We hope these answers have helped answer some of your questions about cryptocurrency. As we move forward, many more questions need to be answered, so if you want to learn more about any of the topics mentioned above, please feel free to reach out!