How are bitcoins created?

2019-11-15T18:41:36-08:00November 15th, 2019|Categories: |

New bitcoins are generated by a competitive and decentralized process called "mining". This process involves individuals that are rewarded by the network for their services. Bitcoin miners are processing transactions and securing the network using specialized hardware and are collecting new bitcoins in exchange. The Bitcoin protocol is designed in such a

Why do bitcoins have value?

2019-11-15T18:40:46-08:00November 15th, 2019|Categories: |

Bitcoins have value because they are useful as a form of money. The Bitcoin price can be highly volatile. Bitcoin has the characteristics of money (durability, portability, fungibility, scarcity, divisibility, and recognizability) based on the properties of mathematics rather than relying on physical properties (like gold and silver) or trust in

What determines bitcoin’s price?

2019-11-15T18:42:39-08:00November 15th, 2019|Categories: |

The price of a bitcoin is determined by supply and demand. When demand for bitcoins increases, the price increases, and when demand falls, the price falls. There is only a limited number of bitcoins in circulation and new bitcoins are created at a predictable and decreasing rate, which means

Can bitcoins become worthless?

2019-11-15T18:43:05-08:00November 15th, 2019|Categories: |

Yes. History is littered with currencies that failed and are no longer used, such as the German Mark during the Weimar Republic and, more recently, the Zimbabwean dollar. Although previous currency failures were typically due to hyperinflation of a kind that Bitcoin makes impossible, there is always potential for technical failures, competing

Is Bitcoin a bubble?

2019-11-15T18:43:39-08:00November 15th, 2019|Categories: |

A fast rise in price does not constitute a bubble. An artificial over-valuation that will lead to a sudden downward correction constitutes a bubble. Choices based on individual human action by hundreds of thousands of market participants is the cause for bitcoin's price to fluctuate as the market seeks

Is Bitcoin a Ponzi scheme?

2019-11-15T18:44:48-08:00November 15th, 2019|Categories: |

A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money, or the money paid by subsequent investors, instead of from profit earned by the individuals running the business. Ponzi schemes are designed to collapse at the expense of the last investors

Won’t the finite amount of bitcoins be a limitation?

2019-11-15T18:46:26-08:00November 15th, 2019|Categories: |

Bitcoin is unique in that only 21 million bitcoins will ever be created. However, this will never be a limitation because transactions can be denominated in smaller sub-units of a bitcoin, such as bits - there are 1,000,000 bits in 1 bitcoin. Bitcoins can be divided up to 8

Doesn’t Bitcoin unfairly benefit early adopters?

2019-11-15T18:45:54-08:00November 15th, 2019|Categories: |

Some early adopters have large numbers of bitcoins because they took risks and invested time and resources in an unproven technology that was hardly used by anyone and that was much harder to secure properly. Many early adopters spent large numbers of bitcoins quite a few times before they

Won’t Bitcoin fall in a deflationary spiral?

2019-11-15T18:46:54-08:00November 15th, 2019|Categories: |

The deflationary spiral theory says that if prices are expected to fall, people will move purchases into the future in order to benefit from the lower prices. That fall in demand will in turn cause merchants to lower their prices to try and stimulate demand, making the problem worse

Isn’t speculation and volatility a problem for Bitcoin?

2019-11-15T18:47:26-08:00November 15th, 2019|Categories: |

This is a chicken and egg situation. For bitcoin's price to stabilize, a large scale economy needs to develop with more businesses and users. For a large scale economy to develop, businesses and users will seek for price stability. Fortunately, volatility does not affect the main benefits of Bitcoin as a

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