Bitcoin Forum

Posted this on our blog so that others can refer people to it - it's another "overview" of what Bitcoin is, but formatted as "The First Five Questions" everyone is bound to have. This is particularly useful for any journalists who are starting to research Bitcoin.

Not super useful to pros on this forum, but please feel free to use any of it for any purpose. Copy, paste, edit, and redistribute at will.

http://blog.bitinstant.com/blog/2012/9/26/bitcoin-the-first-five-questions.html (http://blog.bitinstant.com/blog/2012/9/26/bitcoin-the-first-five-questions.html)

Great post. Anything that helps explain bitcoins easier is good for the community.

Good and simple explanation of bitcoin.

Very good. Would you give me permission to translate it to Swedish and publish it on bitcoin.se? Obviously with proper attribution and a link back to your original blog post.

Absolutely!

Again, no permissions needed on this, but thanks for asking. Use as you see fit.

Oh, I guess I didn't read the part about "Copy, paste, edit, and redistribute at will.", I just clicked the link. :) Well, I'll certainly link back to your post anyway.

lol @ zero transfer fees and instant transactions

+++
Very usefull info and a great help for my sceptic friends... :P
 ;)

Well that's almost correct. Fees are near to zero. While transaction speed... well you don't really send anything at all with bitcoin.

It's also not correct. Zero != not zero. And fees are only really low because of the mining subsidy. But evoorhees bending the truth whenever it suits him is nothing new or surprising. And sure whatever you say bro on the last sentence.

http://www.operatorchan.org/w/src/134419241120.jpg
It's not for sure that fees will be "huge" in future, for whatever reason. And fees are less, than a penny now. ;D
Actually, don't mind me, just send me tangible bitcoins please. :P

Very good post.  A couple of points though...

In the answer to question 1, subsection 2, you refer to "normal government currency".  In my view, there is nothing "normal" about government currency.  I would try to rephrase that so that it isn't an endorsement of fiat.

In the answer to question 2, your first two bullet points are sorta wrong.  Transactions are sometimes free, maybe even usually, but not always.  But the fee goes to the operators of the network that secures the system.  And transfers aren't really instant either, which ties into point 7.  I'm not sure how far you want to open that can of worms in an introductory piece.  But I think people would be disappointed if they read this, and then started using the system and got surprised.

Also, point 5 seems like investment advice, which I would be very hesitant to give.

In question 4, you use the phrase "illegal transactions", which I really don't like.  I would say something closer to "can be used to pay for products and services which may not be legal in various places."

These kinds of writings are important because of the learning curve that you mention in the article. The more "Bitcoin for the Newbie" type of posts that are floating around on the net, the better chance of increasing the user base. It also serves to counteract the propaganda onslaught that Bitcoin will experience when it really takes root.

Excellent work, btw. You should think about doing marketing for a living. ;)

I didn't say they'd be huge, but they certainly won't be free. "Very low transaction fees" is all you have to say to not make a bald-faced lie.

Another great article. Keep up the good work!

Very good explaination of bitcoins.


Compared to normal wire trasfers where you wait days, the ten minutes for bitcoin is pretty instant. And the transaction is instantly spread thorugh the network so you don't even have to wait the ten minutes to see the transaction.

Sigh.  Come on Erik.  Most of the article is pretty good, but a few key bullet points are quite misleading.


This is untrue, especially if they follow your lead with...


which will require a fee, because microtransactions of low value will not otherwise be relayed.

Why?  Satoshi pointed this out in his original paper, that bitcoin is not so great for microtransactions.

+1

A forced transaction fee of 50.000 satoshi (one twentieth of a cent) is hardly onerous and is normally no skin off my nose, but occasionally I as a b1tc01n n00b have already been dissuaded from sending one or two frivolous microtransactions due to this fee. I'm sure others have similar stories.

In addition to all of the above discussion on transaction fees, instant != pretty instant.

In fact I'm not sure that phrase even makes sense at all.

Actually maybe a company rename is in order, to something like bitquitefastindeed.com.

Bitcoin as a "currency of crime"? What a bizarre notion. In truth, Bitcoin is a hugely important and powerful tool for crime prevention. In recent years, billions of people have been victims of theft on a scale that is absolutely mind-boggling. (I'm referring of course to inflation and taxation.) Bitcoin can help put a stop to this plunder.  And if you're someone who happens to buy or sell certain politically-disfavored intoxicants, Bitcoin can also reduce the risk that armed thugs will invade your home, shoot your dog, terrorize your family, steal your stuff, kidnap you, and lock you in a cage. Call me crazy, but I see the above as a feature.

Why the hell ppl continue to spread disinformation? Does Bitcoin need dirty tricks to get world-wide adoption? Everyone who states that Bitcoin has zero fee and instant deserves a scammer tag.

Erik is correct (kudos to Erik for his excellent post once again): bitcoin enables zero transaction fees because any fee applied by a bitcoin service provider must be backed by a real service not by regulatory capture.
For instance, we can propose zero fee transactions to merchants using bitcoin as a metacurrency while we can make a profit on exchange (buying low selling slightly higher, thanks to a growing bitcoin economy). By doing so we isolate the merchant from exchange rate volatility in a win-win deal.

Transactions are instantaneous for all practical purposes because a transaction message takes only a couple of seconds to reach its destination. Confirmations have nothing to do with transaction speed but relates to reversibility. A bitcoin transaction becomes pratically irreversible after an hour while a credit card transaction can be reversed  months after the facts.

No, it is simply factually incorrect.

To send bitcoins on the bitcoin network in small amounts, a fee is required.  Requires non-zero fee is precisely the opposite of "zero fees."

Do not set up new bitcoin users to be disappointed, by selling them "zero fees!!" then letting them discover on their own that reality does not match hype.

Well, very factually, I can send a zero fee transaction on the bitcoin network because I don't care if it's processed in three days. if I want priority service, I will add a small fee. Hence, the statement "bitcoin enables zero fee transactions" is factually correct albeit somewhat atypical.

More importantly, service providers whose business model is based on exchange (processing transactions denominated in fiat via the bitcoin network and offering conversion rate hedging for risk averse merchants) will propose not only zero fee transactions to those merchants but even possibly negative commission rate i.e direct incentives for the merchants to get paid via the bitcoin network.

No, it doesn't simply wait a long time, it simply does not get relayed.

Further, you cannot add anything once the transaction has been sent.


Negative rate?  You are describing a hypothetical service layer on top of the bitcoin network that does not exist.

What is with the disconnect? How do you see "1. Zero fee to transfer money" and read "bitcoin enables zero fee transactions"? And the underlying system of bitcoin most certainly does not rely on zero fee transactions. Remember when "paypal will always be free"? Cognitive dissonance much?

Isn't that's more of a current implementation detail than a fundemental limitation?

Is there anything in the protocol that would stop someone from starting a mining pool that only processed zero-fee transactions and allowed users who wished to perform them to directly connect to the pool instead of broadcasting on the network?

Any miner may choose to include any valid transaction within a block.  Zero-fee and non-standard transactions are valid transactions.

What is relevant, though, is what this Five Questions blog post is telling users does not match with common user experience.  Expectations must be set properly.

"0.001% of the fee of any modern USD payment processor" would get the point across without misleading.

This bit confused me, and will probably confuse a newcomer too:


You seem to be giving two contradictory values for the same thing.  Is it several million or half a million per day?

Maybe you're saying the half million number is the amount traded on exchanges, whereas the bigger numbers is on the blockchain.  If so, the "Since ..." bit could stand clarification.  Maybe give the two numbers as "bitcoins transferred" and "bitcoins exchanged for government currencies" per day.

Finished reading it now.  Thanks for posting it - it's a great introduction.

One final comment: you seem to be inconsistent with your capitalisation of 'bitcoin'.  There's a post here:
  http://meta.bitcoin.stackexchange.com/a/22/659
which proposes one consistent way of capitalising.


Here's an example of the problem from the post - there are lots more:

how about

• negligible transaction fees
• near-instant transactions

?

Those were points 1 and 2:


Oh, but you mean they're not actually zero or instant...  Well, you can chose to pay zero fees if you like.  It just might take a very long time for your transaction to get into a block.