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What is Bitcoin?

Bitcoin is a network of global consensus, that creates a new payment system and a fully digital money. This is the first decentralized p2p payment network that serves its users well, with no central government or intermediaries. From a user point of view, Bitcoin is very similar to the cash for the Internet. Bitcoin can also be viewed as a leading accounting system with a triple record.

Bitcoin is the first implementation of the concept "cryptocurrency", which was first described in 1998 Wei Dai. In cyberpunk e-mail newsletter, he proposed the idea of a new form of money to control emissions and the transaction that uses a cryptography instead of a central governing department. The first specification Bitcoin works and the proof of this principle was published in 2009 by Satoshi Nakamoto in cryptographic e-mail newsletter. Satoshi left the project in late 2010, and did not reveal details about his personality. The community has since grown exponentially, and now many developers are working on Bitcoin. Anonymity Satoshi often causes unreasonable doubt, the majority of which related to the lack of understanding the nature of the Open Source Bitcoin. Bitcoin protocol and software are in the public domain, and any developer anywhere in the world is able to view a copy of the program or do their personal modified version of the software Bitcoin. Just as in the current development, the impact of Satoshi was limited only by the code changes that take other people, and therefore it might be incorrect to say that it controls Bitcoin. As such, the identity of the inventor of Bitcoin as irrelevant today as the inventor of the identity of an ancient paper.

It's important to know, that no one owns a network of Bitcoin, just as no one owns the technology behind e-mail. Bitcoin is under control of bitcoin users around the world. While developers and improve the software, they can not be forced to change the protocol because users are free to choose what software and how they use. Bitcoin can work properly only with the full agreement between all users. Therefore, all users and developers are interested to protect this consensus.

There are no restrictions imposed. Bitcoin allows users full control over their money. It offers very low commission - bitcoin payments are currently made without any commission or with an incredibly low commissions. Members may include the commission in the transaction in order to get priority in processing - that gives a more rapid confirmation of a transaction network. In addition, there are processing companies, which help traders in the implementation of the transaction, translating into bitcoins allied currency, which are sent directly to the accounts of business day-to-day. Since these services are based on Bitcoin, they offer commissions that are much lower than when using PayPal or bank cards.

Bitcoin offers fewer risks for entrepreneurs - Bitcoin transactions are safe, reversible, and do not contain sensitive or personal information about the customer. This protects the business from losses caused by fraud or fraudulent refund, no need to meet the standards of PCI - safety standards payment card industry. Businesses can easily expand into new markets, which are not available, or credit card, or fraud ratings are unacceptably high. This results in lower commissions, expanding markets and reducing administrative costs.

Security and control - bitcoin users full control of their transaction; traders can not withdraw money without your knowledge or desire to, as can happen with other methods of payment. Bitcoin payments can be made without reference to the personal information of the transaction. This gives a powerful defense against identity theft.

Bitcoin Users can also protect their money with the help of backup and encryption. Transparent and neutral - all information relating to the money supply Bitcoin is always available for all units in the chain, you can check out and use in real time. No one person or organization can control or manipulate the bitcoin protocol because it is cryptographically protected. Therefore, the network Bitcoin can trust about what it is to continue to be neutral, transparent and predictable.

However, many people still do not yet know about Bitcoin. Every day, more and more companies accept bitcoins because they want to get the benefits, but they still do not have much to start a full-fledged network effect. Also, the market is vulnerable to currency fluctuations - The total value of bitcoins in circulation and the number of companies using Bitcoin is still insignificant compared to what it could be. Therefore, relatively small events, one-time deal, or the actions of individual companies may substantially affect the price of bitcoins. In theory, the fluctuations will decrease as they grow older bitcoin markets and technologies. Currency startups is a phenomenon which the world had never seen before, so imagine how it will be really difficult to develop - but at the same time, it captures the imagination.

Please, notice, that Bitcoin software is still in the beta stage, and a lot of unfinished features in active development. Still developing new tools, services and options to make Bitcoin safer and more accessible to the majority. Not all of these tools are ready for use. Most associated with Bitcoin companies are still at the initial stage of development, and do not offer any guarantees. In general, Bitcoin is still in the making.

How Bitcoin works?

From a user perspective, Bitcoin is the only mobile application, or computer program, which gives them access to bitcoin wallet and enables them to receive and spend bitcoins. That is how Bitcoin works for most users.

At the core of the network Bitcoin is a public register called blokchain, or "chain of blocks." This register contains the history of ever conducted transactions, allowing users' computers to check the validity of each transaction. The authenticity of each transaction is protected electronic signatures used in the relevant transactions addresses, allowing users to have full control over transferring bitcoins from their bitcoin addresses. In addition, anyone can engage in transaction processing, using specialized equipment and computer power and earn bitcoins for these services. This is commonly called "mining".

More and more companies and individuals are using Bitcoin, including offline companies, such as restaurants, hotels, law firms, and online services such as Namecheap, WordPress, Reddit and Flattr. Currently Bitcoin is still a relatively new phenomenon, but it is growing rapidly. By the end of August 2013, the value of bitcoins in circulation exceeded US $ 1.5 billion and daily turnover of bitcoin transactions in the millions of dollars.

A significant part of the credibility of the Bitcoin stems from the fact that it does not require any trust. Bitcoin source code is completely open, and the network is completely decentralized. This means that anyone has access to the complete source code at any time. Therefore, any developer in the world can see how Bitcoin works. Anybody can track in real time all bitcoin transactions and newly issued bitcoins. All payments are made without relying on third-party organization, and the whole system is protected by a reliable and well-proven cryptographic algorithms similar to those used in online banking. No organization or individual can not control Bitcoin, and the network is secure, even if not all of its users to trust.

Bitcoin virtual same as credit cards and online banking network that people use every day. Bitcoins can be used for online payments in real shops, as well as any other type of money. Bitcoin can also be exchanged for physical equivalents, such as coins Casascius, but usually, payment via mobile phone more convenient. Bitcoin balances are stored in a large distributed network, and they can not be modified by anyone fraudulently. In other words, Bitcoin users have exclusive control over their resources and bitcoins can not disappear just because they are virtual.

Bitcoin is arranged so as to allow all users to submit payments with a sufficient level of privacy comparable to other forms of payment. However, Bitcoin is not anonymous and can not offer the same level of confidentiality as cash. Using Bitcoin leaves a shared public record. There are various mechanisms to ensure users' privacy, and more in development. However, there is still a lot of work to correct these functions could be used by users.

Some doubts were expressed about the fact that the confidentiality of bitcoin transactions may be used for illegal purposes. However, it should be noted that Bitcoin is undoubtedly falls under the regulation, which is already taking place in existing financial systems. Bitcoin can not be more anonymous than cash, and are unlikely to prevent the carrying out of criminal investigations. In addition, Bitcoin is able to prevent a wide range of financial crimes.

Bitcoin protocol itself can not be changed without the consent of almost all of its users, who are free to decide what software to use. Attempts to assign special privileges to any local authorities in the global Bitcoin fact, in practice, unrealistic. Of course, any rich organization can invest in mining equipment to gain control of half the computer network capacity, enabling it to block or roll back the recent transaction. However, there is no guarantee that they will be able to achieve or maintain a position, because it would require constantly invest as much invested all other miners of the world put together.

However, it is possible to regulate the use bitcoins, like other financial instruments. Like dollar, Bitcoin can be used for a wide range of purposes which may be recognized as legitimate or not, according to the laws of each country. In this respect, Bitcoin is no different from other tools or resources, and can be regulated in different ways in different countries. You can do so that the use of Bitcoin will be difficult, with the help of rules and restrictions, and in this case is difficult to predict what percentage of users will continue to use this technology. The government, which decided to ban Bitcoin, prevent its domestic market and entrepreneurs to develop, resulting in overflow of innovation in other countries. The challenge for regulators, as always, is to develop effective solutions, while at the same time weakening the growth of emerging companies and markets.

How to get Bitcoin?

  • You can get bitcoins as payment for goods and services.
  • You are free to buy bitcoins in bitcoin exchangers.
  • You may exchange bitcoins through someone close to you.
  • You may mine bitcoins via Bitcoin Mining.

While there are people who sell bitcoins in exchange for payment by credit card or PayPal, the majority of exchangers do not allow replenishment of funds through these instruments. It happens due to the fact that people who have bought bitcoins via PayPal, then very often refuse payment. It usually occurs as a refund.

Bitcoin payments easier to implement than the payments on a plastic card, and it does not require opening a checking account. Payments are made through the program-purse installed on your computer or on your phone, by simply entering the recipient's address, the payment amount, and pressing the "send" button. To make it easier to enter the recipient's address, many purses may find the address in the form of a QR-code or using NFC technology.

Bitcoin system is unique in that the whole can be created only 21 million bitcoins. However, it will not be restricted because transactions can be nominated in small denominations - for example, in bits - every bit of it is one millionth of a Bitcoin. Bitcoin is divided to 8 decimal places (0.000 000 01) and potentially even further if necessary makes it possible to decrease the average size of a transaction.

It is important to know, that the construction of farms for mining activity is not easy, requires large investments funds, consumes huge amounts of electricity, take up much space, it requires special cooling and specific knowledge. Don't make a mistake of just purchasing mining equipment unless you have a real business plan. And if you get acquainted with the basics of the network Bitcoin, it becomes clear that the infusion of large capacities do not get an adequate salary, Bitcoin system will automatically rebuild the complexity of that issue does not exceed the desired volume, ie, receive over time you will become less. Further details can be found on the Mining article.

Mining

New Bitcoin are in a competitive and decentralized process, which is called "mining". This process implies that people receive compensation from the network for their services. Anyone who is engaged in mining, in fact processes transactions and provides network security by using specialized equipment, and for that gets new bitcoins.

Bitcoin protocol is designed so that the new bitcoins generated at a fixed rate. This makes bitcoin mining a very competitive business. When a larger number of earners joins the network, it becomes harder and harder to make a profit, and miners have to look for ways to reduce their operating costs. No central authority or developer, has no authority to, control or manipulate the system to increase their income. Each bitcoin site in the world will reject any transaction that is not subject to the rules followed by the entire system.

Bitcoin created with constantly reduced and predictable rate. The number of new bitcoins generated each year is automatically reduced by half, until production stops completely, and the total number of bitcoins issued no equals 21 million bitcoins. From this point, bitcoin miners will probably be maintained only a small stream of commissions for the transaction.

Some of those who supported the project before the other, have a large amount of bitcoins because they took all the risks and invested time and resources in an untested technology, which almost no one used, and which was much more difficult to adequately protect. Many of them have spent a huge amount of bitcoins, before they become so valuable, or bought a small number of them and earn more profits. There is no guarantee that bitcoins further rise or fall. This can be compared with investing in a startup, which can either purchase cost, thanks to its usefulness and popularity, or it can burn completely. Bitcoin has not yet grown out of short pants, it was designed with a very long-term prospect; it is difficult to imagine how it might be less biased to those who supported him before. In addition, today's users, too, can be "those who supported him before," for those who will come tomorrow.

Mining is a process, when you use computer resources to process transactions, network security, and the synchronization status of all users in the system. Mining can be perceived as data center Bitcoin, except that it was designed to be fully decentralized, with the participants may be in any country, and no one has control over the network. This process is called "mining" by analogy with the extraction of gold, because it is also a temporary mechanism used for the production of new bitcoins. However, unlike gold mining bitcoin mining generates a reward in exchange for essential services required for network security payments. Mining will still be needed even after the last bitcoin will be released.

Anyone can become a bitcoin miner running software on specialized equipment. Equipment for mining listens broadcast transaction through a decentralized ad hoc network and performs the necessary tasks for the processing and approval of these transactions. Bitcoin miners do this work because they can earn a commission from the transaction that pay users to more quickly commit the transaction, and the newly created bitcoins, which are produced according to the same formula. That new transactions have been confirmed, they should be included in the block, along with a mathematical justification of the work done. This evidence is very difficult to establish because there is no other way to do it other than trying to millions of calculations per second. Miner make these calculations, until their unit is not accepted by the system, and they receive a reward for it.

When more people start mining, the complexity of finding a new unit automatically increases the network, in order to ensure that the speed of finding a block of an average of 10 minutes. As a result, mining - a very competitive business, where no miner can control what is included in the chain of blocks. Proof of this work also depends on the previous block, to ensure that the chronological order of blocks in a chain. This makes it exponentially more difficult to reverse the previous transaction, because it would require translation of the work done for all subsequent blocks. When two blocks appear in one and the same time, miners working on the first block, which they have received, but switched to the longest chain block as the next block is found. This allows miner to maintain and protect the global consensus based on computing power.

Bitcoin miners can not cheat to increase their earnings, they can not make fraudulent transactions that could damage the Bitcoin network, because all bitcoin nodes reject any unit which contains incorrect information, according to the rules bitcoin protocol. Therefore, the network is secure, even if not all bitcoin miner can be trusted.

Energy use for the payment system and to ensure its security can not be called a waste. As with any other payment systems, the use of bitcoin entails operational costs. Services, that are necessary for the operation of existing financial institutions such as banks, credit cards, and transport for the collection, also used a lot of energy. However, full amount of power consumed for these services is not obvious and can not be easily measured.

Bitcoin Mining is designed so that over time it will become more refined, with specialized equipment, consume less energy, and its operating costs should be proportional to demand. When bitcoin mining becomes more competitive and less profitable, some miners exit business. In addition, all of the energy consumed in the mining somehow converted into heat, and the most successful will be those miners, who will also use this heat for something else. Optimized network of mining, is the one that does not consume any additional energy.

Mining creates a semblance of competitive lottery, which complicates the possibility of someone consistently adding new blocks in the transaction chain blocks. This protects the neutral network without giving someone one block any transaction. It also prevents the cancellation of someone's transactions made previously. Mining makes it exponentially more difficult to reverse the previous transaction, because it would require translation of the work done for all units subsequent to this transaction.

In the early days of Bitcoin, anyone could find a new block using the most common computer. As more and more people do mining, the complexity of finding the new units has grown and the only efficient way of mining today - is the use of specialized equipment. You can go to BitcoinMining.com for more information.

Full node

Bitcoin network can produce a much larger number of transactions per second than it actually produces today. However, do not expect that it is ready to scale to the level of the main card systems. Steps to remove existing restrictions already planned, and work in this direction is underway. Since the launch, every aspect of the network is in the process of continuous improvement, optimization and specialization - it is expected that this process will take at least another few years. As soon as the growing momentum network Bitcoin users can increasingly use lightweight software clients, and full network nodes can become more specialized service.

When a user loses his wallet contained therein means drop out of treatment. Lost bitcoins still remain in the chain of units, as well as the rest of bitcoins. However, bitcoins lost forever remain without movement, because there is no way to choose the private key (s) that would spend them. According to the law of supply and demand, the lower the bitcoins available, the more will be appreciated by those who remained in circulation, and therefore can be expected that all the remaining bitcoins bit added to the cost.

A full node is a program that runs on your computer and validates transactions and blocks on behalf of the network. Almost all full nodes also help the network by accepting transactions and blocks from other full nodes, validating those transactions and blocks, and then relaying them to further full nodes. Most full nodes also serve lightweight clients by allowing them to transmit their transactions to the network and by notifying them when a transaction affects their wallet. If not enough nodes perform this function, clients won’t be able to connect through the peer-to-peer network—they’ll have to use centralized services instead. Many people and organizations volunteer to run full nodes using spare computing and bandwidth resources—but more volunteers are needed to allow Bitcoin to continue to grow. This document describes how you can help and what helping will cost you.

Running a Bitcoin full node comes with certain costs and can expose you to certain risks. This section will explain those costs and risks so you can decide whether you’re able to help the network.

Miners, businesses, and privacy-conscious users rely on particular behavior from the full nodes they use, so they will often run their own full nodes and take special safety precautions. This document does not cover those precautions—it only describes running a full node to help support the Bitcoin network in general. Please consult an expert if you need help setting up your full node correctly to handle high-value and privacy-sensitive tasks.

It’s possible and safe to run a full node to support the network and use its wallet to store your bitcoins, but you must take the same precautions you would when using any Bitcoin wallet. Please see the securing your wallet page for more information.

Minimum Requirements

Bitcoin Core full nodes have certain requirements. If you try running a node on weak hardware, it may work—but you’ll likely spend more time dealing with issues. If you can meet the following requirements, you’ll have an easy-to-use node.

  • Desktop or laptop hardware running recent versions of Windows, Mac OS X, or Linux.
  • 50 gigabytes of free disk space
  • 2 gigabytes of memory (RAM)
  • A broadband Internet connection with upload speeds of at least 400 kilobits (50 kilobytes) per second
  • An unmetered connection, a connection with high upload limits, or a connection you regularly monitor to ensure it doesn’t exceed its upload limits. It’s common for full nodes on high-speed connections to use 200 gigabytes upload or more a month. Download usage is around 20 gigabytes a month, plus around an additional 40 gigabytes the first time you start your node.
  • 6 hours a day that your full node can be left running. (You can do other things with your computer while running a full node.) More hours would be better, and best of all would be if you can run your node continuously.
  • Note: many operating systems today (Windows, Mac, and Linux) enter a low-power mode after the screensaver activates, slowing or halting network traffic. This is often the default setting on laptops and on all Mac OS X laptops and desktops. Check your screensaver settings and disable automatic “sleep” or “suspend” options to ensure you support the network whenever your computer is running.

Possible Problems

  • Legal: Bitcoin use is prohibited or restricted in some areas.
  • Bandwidth limits: Some Internet plans will charge an additional amount for any excess upload bandwidth used that isn’t included in the plan. Worse, some providers may terminate your connection without warning because of overuse. We advise that you check whether your Internet connection is subjected to such limitations and monitor your bandwidth use so that you can stop Bitcoin Core before you reach your upload limit.
  • Anti-virus: Several people have placed parts of known computer viruses in the Bitcoin block chain. This block chain data can’t infect your computer, but some anti-virus programs quarantine the data anyway, making it more difficult to run Bitcoin Core. This problem mostly affects computers running Windows.
  • Attack target: Bitcoin Core powers the Bitcoin peer-to-peer network, so people who want to disrupt the network may attack Bitcoin Core users in ways that will affect other things you do with your computer, such as an attack that limits your available download bandwidth.

You may find all the needed information about installing and running full-node.

P2P

Bitcoin gives people the freedom to make transactions on their own terms. Each user can send and receive payments, as well as for cash, but can also participate in more complex contracts. Multiple signatures allow transactions to be accepted only if the network a specific number of certain people would agree to sign it. This allows you to develop future innovative dispute resolution service. This service will allow a third party to accept or reject the transaction, in case of disagreement between the parties without taking control of their money. In contrast to cash and other payment methods, Bitcoin always leaves a publicly available evidence that the transaction took place, which could potentially be used as a decision against companies with fraudulent activities.

An ad-hoc, decentralized, or a peer network is overlay computer network based on the equality of participants. There are no dedicated servers in such a network, and each node (peer) is both the client and the server function. Unlike client-server architecture, the organization can store network performance with any number and any combination of available nodes. Participants in the network are the peers.

There is some number of machines in the network, each able to communicate with any of the others. Each of these machines can send requests to other machines to provide any resources within the network and thus act as a client. As a server, each machine must be able to handle requests from other machines on the network to send something that has been requested. Each machine must also perform some auxiliary and administrative functions (eg, keep a list of other known computers-"neighbors" and maintain its relevance). Any member of the network does not guarantee its presence on a regular basis. It can appear and disappear at any time, but when the network reaches a certain critical size, a lot of machines work simultaneously.

Using the peer-to-peer (P2P) means that there is no central authority, which issues new money or records all transactions, in this system. Instead, these tasks are performed collectively by all network nodes. The benefits of this approach:

  • A simple transfer of money through the Internet, without having to trust middlemen. Third parties can not prevent or control your transactions.
  • Transactions through Bitcoin is practically free, whereas credit cards and online payment systems typically require a commission of 1-5% of the amount of each transfer in extra trading costs (which can reach several hundred dollars).
  • Lack of instability that causes the banking animation (fractional reserve banking) and central bank policy.
  • Limited inflation is monetary support system Bitcoin is distributed evenly (by CPU power) across the network, not monopolized by banks.

Marketplace & Exchange

Bitcoin have value because they are useful as a form of money. Bitcoin has all the characteristics of money (durability, portability, interoperability, lack of divisibility and recognition). These properties are based on math, not on the physical properties (like gold or silver) or the credibility of the central authority (like fiatnyh currencies). In short, Bitcoin is based on mathematics. Given this, all that is required in order to maintain their value bitcoins - that trust and prevalence.

For Bitcoin, it can be measured by the growing user base, entrepreneurs and start-ups. As with all other currencies, the value of bitcoins is determined only by people who are ready to accept them as payment.

Price bitcoins is determined by supply and demand. When the demand for bitcoins increases, the price, and when demand falls, so does the price. In circulation there are a limited number of bitcoins, and new bitcoins are created with predictable and constantly decreasing rate, which means that demand should follow this inflation, the price to be stable. Since Bitcoin is still a relatively small market in comparison to what it could be, it does not require significant amounts of money to move the price in the market up or down, and therefore the price of bitcoins is still very volatile.

The rapid growth of prices does not necessarily mean a bubble. Bubble - is artificially inflated prices, which eventually leads to a downward correction. The cause that price fluctuations bitcoins is the sum of individual actions of hundreds of thousands of market participants, the oscillations that occur until the market is looking for the true value. The reason for price changes may be losing confidence in the bitcoin, a large gap between the fundamental value of performance-based bitcoin economy and its current price, increasing media coverage, which stimulates the speculative component, fear of the unknown, and the age-old irrational swings between fear and greed.

Some people say, that Bitcoin is pyramid or Ponzi scheme, which is not correct. Ponzi scheme or pyramid, it is a fraudulent investment-operation that pays income to its investors from their own money or money from subsequent investors rather than from profit earned by people leading the business. Ponzi schemes are designed to fall at the last payments to investors when there is no new entering. Bitcoin is on the other side, it is an open source project, without a central authority. Therefore, no one has the power to make fraudulent statements of income from investments. As in other major currencies such as US dollar, euro, yen, gold, etc., there is no guarantee preservation of purchasing power and exchange rates move freely. This leads to the volatility of the price at which bitcoins owners can buy and unpredictable, and lose money. Apart from speculation, Bitcoin is also the payment system, with useful and competitive properties, which are used by thousands of users and companies.

You should not expect to get rich using Bitcoin or any other new technology. It is always important to be on guard when something sounds too good to be true, or is contrary to fundamental economic principles.

Bitcoin - a growing ecosystem of innovation, and business opportunities that nonetheless entails and risks. There is no guarantee that Bitcoin will continue to grow, even if so far it has developed very rapidly. Investing time and resources into something associated with Bitcoin requires entrepreneurship. There are different ways to make money on Bitcoin, such as mining, speculation or launch new business projects. All of these methods are highly competitive and with no guarantee of income. Proper assessment of the costs and the risks that accompany such projects lies entirely on the entrepreneur.

Deflationary spiral theory says that if everyone expects that prices will fall, people will postpone their purchases in the future to benefit from lower prices. This drop in demand, in turn, will lead to the fact that employers will cut prices to try to stimulate demand, thus worsening the situation leading to economic depression. Although this theory is a popular way of justification of inflation among central banks, it is only an unproven theory that is controversial among economists. Household Appliances - one example of such a market, where prices are constantly falling, but that does not lead to depression of the market. Similarly, the price of bitcoins rise over time and at the same time the volume of bitcoin economy and constantly growing along with it. So as the value of the currency and the value of the market has started from scratch in 2009, Bitcoin - a counterexample to this theory, showing that it can be wrong.

That said, Bitcoin is not designed to be a deflationary currency. To be more precise, it is expected that in the early stages of Bitcoin waiting for inflation, and stability can be achieved only after many years. The only reason that the number of bitcoins in circulation may eventually fall into it when people inadvertently lose their wallets are not doing well or not doing the backup. With the stable monetary framework and a stable economy, the value of the currency should remain unchanged.

In order to stabilize the price of bitcoins, the economy needs a large-scale cooperation with a large number of companies and users. To develop the economy to a large-scale entrepreneurs, and users will be looking for price stability. Fortunately, price fluctuations do not affect the main advantages of Bitcoin as a payment system designed for the transfer of money from point A to point B. There is an opportunity for companies to instantly translate Bitcoin payments in their local currency, allowing them to profit from the advantages of Bitcoin, but without being the effects of price fluctuations. Until then, until Bitcoin provides many useful and unique features and functions, many users will choose it consciously. With these solutions and incentives, it is possible that Bitcoin will mature over time to such an extent that the price fluctuations will be limited.

Only part of the currently issued bitcoins exhibit on exchanges and exchange offices for sale. Bitcoin-markets are very competitive, which means that the price of Bitcoin will rise or fall depending on demand and supply. In addition, new bitcoins will continue to be produced in the coming decades. Therefore, even the most determined buyer can not buy up all existing bitcoins. This situation does not mean, however, that markets are not vulnerable to the manipulation of the price; It requires still not such a large sum of money in order to shift the market value up or down, so Bitcoin remains an asset to the fluctuating value.

Law & Security

As far as we know, Bitcoin is not illegal in terms of the current legislation in most jurisdictions. However, in some jurisdictions (such as Argentina and Russia) legislatively introduced strict restrictions or bans on the use of foreign currencies. Other jurisdictions (eg Thailand) may require licensing of certain subjects, such as bitcoin exchangers. Regulators in different jurisdictions have taken steps to establish rules for individuals and legal entities aimed at, in order to integrate this new technology into the existing financial system. For example, the American network to combat financial crime (FinCEN), a division of the Ministry of Finance of the United States, released an optional guidance on how it describes some of the activities, including the virtual currency.

Bitcoin is money and money is always used for both legal and illegal purposes. Cash, credit cards and modern banking system is much superior Bitcoin in respect of their use to finance crimes. Bitcoin can bring significant innovations in payment systems and the benefits of these innovations is generally considered far exceed their potential drawbacks. Bitcoin is designed so that it is a major step forward in terms of safety of funds. It can also be used as a substantial protection from many forms of financial crimes. For example, bitcoins is absolutely impossible to forge. Customers completely control their payments and can not receive unconfirmed accounts, such as in credit card fraud. Bitcoin transactions are irreversible and are not at risk of fraudulent refunds. Bitcoin is able to protect the money from theft and loss with the help of powerful and useful mechanisms such as the preservation of backup, encryption, and multiple signatures. Expressed some concern that Bitcoin could be more attractive to criminals because it is characterized by confidential and irreversible transfers. However, similar features already have cash and wire transfers, which are used more widely and universally. Using Bitcoin no doubt be subjected to the same regulation that already exists in the current financial systems, Bitcoin and hardly prevent conduct criminal investigations. In general, it is common for revolutionary ideas in any field, be perceived as something controversial, before its advantages become all too clear. A good example among many which illustrate this - the emergence of the Internet.

Technology Bitcoin - the protocol and cryptography is a time-tested high level of security and Bitcoin network is probably the world's largest distributed computing project. The biggest vulnerability in Bitcoin - a fault of the users. Bitcoin wallet files that store the necessary private keys may be accidentally deleted, lost or stolen. This is very reminiscent of the physical cash stored in electronic form. Fortunately, users can use the best security practices to protect their money or use services provided by a good level of protection and insurance against theft and loss.

Terms and cryptography protocol used in the bitcoin, still work fine, years after the creation of a network that is a good indication that the system is properly designed. However, a variety of security issues and fixes were previously in different implementations's software. As with any other software, Bitcoin security depends on the speed with which these problems are found and solved. The more of these problems will be found, the more mature will be Bitcoin. Often there is confusion about the thefts and security problems that occur in the different exchangers and bitcoin businesses. Although such problems arise, they are not related to the burglary of Bitcoin, or Bitcoin involve birth defects; as well as robbing a bank does not mean that the dollar is compromised. However, it should be recognized that the users need to provide a set of best practices and simple security solutions to better protect their money, and to reduce the overall risk of theft and loss. Over the past few years, we have developed security features such as encryption wallets, purses offline, storage devices bitcoins, and transactions requiring multiple signatures.

There's no need and it is wrong to simply change the bitcoin protocol. Any client program that does not conform to generally accepted rules, will not be able to impose its own rules of others. According to the current specification, double spending possible in one and the same chain of blocks, as well as waste bitcoins without correct signature. Therefore, it is impossible to create an uncontrolled number of bitcoins from the air, to spend money other users, damage the network or something like that. However, the majority of miners may in principle arbitrarily block or reverse the recent transaction. Most users can also insist on making some changes. As Bitcoin works correctly only about the full agreement between all users, a change in protocol may be very complex and will require changes in the overwhelming majority of users, so that the rest of the users will have no choice but to follow them. In general, it is difficult to imagine why Bitcoin users are willing to accept the changes that may compromise their own money.

It's worth to keep in mind, that most of the systems, based on cryptography, are vulnerable in general, including the traditional banking system. However, quantum computers are still not there, and probably will not in the near future. By the time quantum computers will pose a direct threat to Bitcoin protocol can be improved for the post-quantum algorithms. Given the importance of such improvements, we can expect that it will be thoroughly examined by developers and accepted by all users of Bitcoin.

Transactions

Bitcoin payments can be made instantly. However, there is about a 10-minute delay before the network begins to confirm your transaction, including the unit and before you can spend bitcoins you received. Confirmation means that the network established consensus that bitcoins you received were not already sent to someone else and are considered to be your property in the future. Once your transaction will be included in one block, it will continue to receive confirmation from each subsequent unit that will testify to the strengthening of the consensus and reduce the risk of cancellation of the transaction. Each user is free to choose, at any stage considered the transaction confirmed, but the 6 evidence generally recognized as safe, as well as 6 months deadline for the credit card transaction.

Most transactions can be made without commissions, but users are willing to pay a small voluntary committee for faster confirmation of their transaction and reward those who produced bitcoins. When the Commission is required, it is usually no more than a few pennies of the cost. Your bitcoin client will usually choose the appropriate commission, as it is required. Commission on transactions used to protect users from making transactions in order to overload the network. More precise purpose of the commissions, is still being developed and will change over time. Since the Commission is not tied to the number of sent bitcoins, it may seem incredibly small (0.0005 BTC transfer 1.000 BTC) or vice versa unreasonably high (0.004 BTC for the payment of 0.02 BTC). The Commission is determined by the parameters such as the data sent from the transaction and repeatability of the transaction. For example, if you receive a large number of small amounts, then commission will send more. Such payments are comparable for paying the bill in a restaurant coins. Spending a small part of your bitcoins fast, may also require the Commission. If your operation uses a transaction in a traditional style, the commission will be very small.

Don't worry, if you get bitcoins when your computer is off. Everything will be alright. You will see Bitcoins the next time you run your program-budget. In fact, bitcoins are not available in the program on your computer, and added to the public record, which is on all devices within the network. If you send bitcoins, when your program-purse is not running and you start it later, it will load the blocks and see all the transactions are not yet known, and bitcoins eventually appear as if they have just been received. Your wallet should always be started only when you need to spend bitcoins.

There is a long synchronization, though, that is required only for full-fledged network nodes, such as Bitcoin Core. From a technical standpoint, synchronization - is the process of loading and inspection of all previous transactions in the bitcoin network. Some bitcoin client to calculate the final balance of your wallet, and make new transactions required to be aware of all the previous transactions. Synchronization can require a lot of computer resources, the proper speed Internet channel and sufficient disk space to accommodate the full amount of the chain block. In order to stay safe Bitcoin, enough people should use the full bitcoin nodes because they perform the task of checking and retransmission transaction.