As part of a college project for introductory computer science students, I created a small FAQ for Bitcoin and cryptocurrencies which was well recieved by other students - many of whom had never heard of Bitcoin before or were only vaguely familiar with it.
I'm not an expert so it's possible that some of the information might be slightly incorrect or could be better worded but most of it should be fine. I'm publishing it into public domain for others to use to increase awareness of Bitcoin. Feel free to modify and republish it in any way you want.
What is Bitcoin?Bitcoin is digital money that is not under the control of any one country or centralized entity. It was launched in 2009 by an anonymous developer who went by the name of Satoshi Nakamoto. Like cash, bitcoins can be bought, sold, and traded for goods and services.
With Bitcoin, you can send money to someone halfway across the world in mere minutes, at the cost of just a few cents, and without having to deal with banks, governments, or third parties.
How does Bitcoin work?The Bitcoin network is a decentralized peer-to-peer network where each node maintains an identical copy of all the transactions made in the network all the way to the point when the network was first created. This record of transactions is called the blockchain. New transactions are added onto the blockchain by "miners". Miners use their computing power to solve a cryptographic puzzle every ~10 minutes and the miner who solves it gets a small reward in the form of newly minted bitcoins. The transactions that were made in the network during that time are then added to the next block in the blockchain. The more powerful your hardware is, the more chances you have of "solving" the next block and the more bitcoins you will generate.
The Bitcoin network is designed so that as long as no one entity controls 51% of the computing power, nobody can double-spend their bitcoins. The fact that data can be copied and infinitely recopied many times stumped those who had previously tried to create a form of digital money. With Bitcoin, this problem has now been solved.
Where can I buy bitcoins?Bitcoins can be purchased from online Bitcoin exchanges or traded in-person via websites like LocalBitcoins.com. In some countries, bitcoins may also be purchased from special Bitcoin ATMs.
To store bitcoins, you will need a Bitcoin wallet. The official Bitcoin wallet software can be downloaded from Bitcoin.org.
Where can I spend my bitcoins?For many years, the Bitcoin community has maintained a small cottage industry where goods and services of all sorts could be traded using bitcoins. While Bitcoin has previously had a reputation for being used for gambling and to buy drugs and weapons in dark markets, major businesses such as Overstock are now also starting to accept payments in Bitcoin. As public awareness of Bitcoin grows, it is likely that this trend will continue into the future.
Can I get rich if I mine bitcoins?Back in the day it was possible to mine lots of bitcoins using a home computer. You could mine hundreds or even thousands of bitcoins everyday because the difficulty was low and prices were cheap. But as Bitcoin became more popular, more people started mining and so you needed expensive graphics cards to compete.
Nowadays people mine using specialized equipment called ASICs. These are specialized computers that are only useful for mining bitcoins. Mining using ASICs can be profitable but only if you have access to very cheap electricity. Most people don't have access to such cheap electricity so they can't compete. So no, you will most likely not get rich by mining bitcoins.
What is a cryptocurrency?Cryptocurrencies are digital currencies that use cryptographic principles to regulate generation of coins and verify transactions.
Bitcoin was the first successful cryptocurrency. Because of this, it is the largest and most well known. However, a number of other cryptocurrencies have also been created in recent years. Nearly all of these alternative cryptocurrencies are modeled on Bitcoin's design with few changes. These include Namecoin, Litecoin, Peercoin, Primecoin, Dogecoin, and many others. Some of these offer features not found in Bitcoin such as faster transaction times or changes to their algorithm which makes it easier to mine using home computers.
