Some FUNDAMENTAL questions about Bitcoin

[rohan.sampayo]

Hello Bitcoin gurus, I need to know some basic fundamentals of Bitcoin.  I did read and watch Youtube videos, but none answered my fundamental questions.

A bitcoin now is USD3800.

My fundamental questions:

(1.) Everybody on Youtube says that Bitcoin is Internet 'magic' currency and that anybody can get and send money just using the mobile phone.

My problem is this,  If I want to send some money (Say 3800 USD) to someone to buy something and I want to pay using bitcoin, FIRST I have to BUY Bitcoins (in this case 1 Bitcoin) by giving REAL MONEY to a bitcoin exchange. Is this correct?

So, it's not 'MAGIC' currency out of nowhere is it??

(2.) So, I pay 3800 USD to a bitcoin exchange and buy 1 Bitcoin. This 1 Bitcoin is my virtual Internet currency which is in my bitcoin wallet in the Internet.  So, NOW I can use that 1 Bitcoin to pay the other person USD 3800 equivalent using my mobile phone. Is this correct?

So, the only advantage is that there is no middle man (bank) involved. I don't have to pay service charges, be monitored or barred from bank or government authority. Is this true?

(3.) Now, I step up my BitCoin game and create a Bitcoin mining rig.  I run the mining software and I Make 1 bitcoin at the end of 1 year. The exchange rate for bitcoins now has gone up to 4000 USD per 1 Bitcoin. Now, if I want to ENCASH this bitcoin and get 4000 USD cash, can I do it? 

If I get cash of 4000 USD from a bitcoin exchange then where does the bitcoin exchange get the 4000 USD to pay me. Because bitcoin exchanges cannot 'make' money, that is real-money out of nothing can it?

Or is it the case where I CANNOT encash it.  I can only keep it in my virtual bitcoin wallet and pay it to someone who accepts bitcoins to buy stuff?

(4.) Who runs the bitcoin exchanges?? Who creates the software, the web-sites and monitors and managers it?

Because if Bitcoin is real peer-to-peer money and exchange, then surely there cannot be 3rd parties like bitcoin exchanges can it?

(5.) Can I pay by hard-cash in a bitcoin exchange or ATM. If so who counts the cash?? It has to be real-people right?

Your replies will be greatly appreciate.

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[Herbert2020]

stop watching youtube videos. 90% of them are pure bullshit published by people who have little to no understanding of bitcoin and how it works. it will only waste your time and mislead you. the only videos worth watching on youtube in my opinion belong to Andreas Antonopoulos

(1.) Everybody on Youtube says that Bitcoin is Internet 'magic' currency and that anybody can get and send money just using the mobile phone.

My problem is this,  If I want to send some money (Say 3800 USD) to someone to buy something and I want to pay using bitcoin, FIRST I have to BUY Bitcoins (in this case 1 Bitcoin) by giving REAL MONEY to a bitcoin exchange. Is this correct?

So, it's not 'MAGIC' currency out of nowhere is it??

bitcoin is different and being different doesn't make it "magic money". it only seems like magic money to the 90 year old grandmas who think the only "real" money is when you cut down trees and write a number on the piece of paper you make out of them.

you don't have to buy it, like any other currency in the world you either exchange your one currency to another or you earn that currency like when you get paid every month for your job!

(2.) So, I pay 3800 USD to a bitcoin exchange and buy 1 Bitcoin. This 1 Bitcoin is my virtual Internet currency which is in my bitcoin wallet in the Internet.  So, NOW I can use that 1 Bitcoin to pay the other person USD 3800 equivalent using my mobile phone. Is this correct?

So, the only advantage is that there is no middle man (bank) involved. I don't have to pay service charges, be monitored or barred from bank or government authority. Is this true?

after you "obtain" bitcoin (through buying or earning like earning fiat) you can then spend it any way you like.
when you obtain 1 bitcoin you will own 1 bitcoin the USD value may go up or down because bitcoin is still young and volatile.
there is no middle man
there is only network fees and no other additional charges
there is no centralized authority to prevent you from using your own money
but they can monitor your transactions since bitcoin is not anonymous.

(3.) Now, I step up my BitCoin game and create a Bitcoin mining rig.  I run the mining software and I Make 1 bitcoin at the end of 1 year. The exchange rate for bitcoins now has gone up to 4000 USD per 1 Bitcoin. Now, if I want to ENCASH this bitcoin and get 4000 USD cash, can I do it? 

If I get cash of 4000 USD from a bitcoin exchange then where does the bitcoin exchange get the 4000 USD to pay me. Because bitcoin exchanges cannot 'make' money, that is real-money out of nothing can it?

Or is it the case where I CANNOT encash it.  I can only keep it in my virtual bitcoin wallet and pay it to someone who accepts bitcoins to buy stuff?

it is the same as how exchanging your fiat would work when you want to go abroad. you go on some exchange site, give your fiat and receive other currency in return. it can be a place where they buy it from you and then sell it to someone else who comes along the next day or it can be a live market where people meet and buy/sell from/to each other. bitcoin exchanges are the later, you sell to someone else who is present on that platform and has placed his "bid" there.

(4.) Who runs the bitcoin exchanges?? Who creates the software, the web-sites and monitors and managers it?

Because if Bitcoin is real peer-to-peer money and exchange, then surely there cannot be 3rd parties like bitcoin exchanges can it?

usually it is some company somewhere that have invested some time and money into developing the platform. you can search for bitcoin exchanges then visit their websites and read their "about" page. like coinbase.com

it can and there are third party exchanges and it has nothing to do with bitcoin being peer to peer. it is as the name suggests a third party service!

(5.) Can I pay by hard-cash in a bitcoin exchange or ATM. If so who counts the cash?? It has to be real-people right?

ATM is just a machine that digitally verifies the cash you feed it and then spits out bitcoin in return

[rohan.sampayo]

Thanks for your quick reply which was informative.

What do you mean when you say "there is only network fees and no other additional charges".

When you mean network fees, do you mean the normal Internet charges I have to pay to my Internet service provider?

[mk4]

Thanks for your quick reply which was informative.

What do you mean when you say "there is only network fees and no other additional charges".

When you mean network fees, do you mean the normal Internet charges I have to pay to my Internet service provider?

Transaction fees. For every transaction you make, you pay a certain fee(depending on what amount of fees you chose; the higher, the faster) to the miners.

If you want to dig a bit deeper: https://coinsutra.com/bitcoin-transaction-fees/

[mu_enrico]

As the first step, you don't have to think too deeply about bitcoin. Imagine bitcoin as digital money on the internet that you can use without a 3rd party and "uncensorable."

You don't have to buy a whole bitcoin (1BTC = 100,000,000 Satoshi). If you have $100, then you can buy $100 worth of bitcoin in the crypto exchange. Just like any exchange, there is a small exchange fee for buying/selling bitcoin.

Moreover, bitcoin has a transaction fee for each transaction you send to the network (similar to bank transaction fee). The transaction fee is relatively cheap. Thus, bitcoin is very convenient for international transfer.

[davis196]

It's not mandatory to buy bitcoin from a cryptocurrency exchange.You could buy bitcoin from a crypto trader at localbitcoins.com.
I can't answer your question #4.You just trust a cryptocurrency exchange or you don't.Trust is determined by many factors.
Exchanges are a middle man,but sooner or later they have to fade away,so the real p2p transactions between users remain.

[dewildance]

I don't think it's different from the USD when thinking about Bitcoin. Both means of payment. We have to deal once. Then we should consider the differences between Bitcoin and USD. While the number of Bitcoins cannot be changed, the USD's supply varies by FED. No need for an agent for bitcoin. But for the USD, a "usually" tool is used (for your own good). While transactions in Bitcoin are transparent, movements for USD can be monitored.

You can easily compare all these and more features.

[BuyBuyBitcoin]

(1.) Everybody on Youtube says that Bitcoin is Internet 'magic' currency and that anybody can get and send money just using the mobile phone.

My problem is this,  If I want to send some money (Say 3800 USD) to someone to buy something and I want to pay using bitcoin, FIRST I have to BUY Bitcoins (in this case 1 Bitcoin) by giving REAL MONEY to a bitcoin exchange. Is this correct?

So, it's not 'MAGIC' currency out of nowhere is it??

You JOIN the bitcoin ecosystem (yes its a cult) and you come in kicking and screaming like all of us did one time

You can buy it or earn it. It is "created" through mining, which makes bitcoin harder to create than many national currencies.

(2.) So, I pay 3800 USD to a bitcoin exchange and buy 1 Bitcoin. This 1 Bitcoin is my virtual Internet currency which is in my bitcoin wallet in the Internet.  So, NOW I can use that 1 Bitcoin to pay the other person USD 3800 equivalent using my mobile phone. Is this correct?

So, the only advantage is that there is no middle man (bank) involved. I don't have to pay service charges, be monitored or barred from bank or government authority. Is this true?

You have zero assets currently that can't be seized by a government....

Your property, bank accounts, stocks can be seized by 3rd parties that sue you or governments claiming you owe them something... not likely but could happen to some people.

You also can't sell and move those things easily... what if you wanted to... whats the cost and time involved in that compared to say "storing digital gold and traveling wherever you want"

You don't need to sell or use the digital gold but you CAN anywhere you want at any time.

(3.) Now, I step up my BitCoin game and create a Bitcoin mining rig.  I run the mining software and I Make 1 bitcoin at the end of 1 year. The exchange rate for bitcoins now has gone up to 4000 USD per 1 Bitcoin. Now, if I want to ENCASH this bitcoin and get 4000 USD cash, can I do it? 

If I get cash of 4000 USD from a bitcoin exchange then where does the bitcoin exchange get the 4000 USD to pay me. Because bitcoin exchanges cannot 'make' money, that is real-money out of nothing can it?

Or is it the case where I CANNOT encash it.  I can only keep it in my virtual bitcoin wallet and pay it to someone who accepts bitcoins to buy stuff?

You can't mine cheap or easy. You have to want to get into that business or have it as a hobby at best...

Bitcoin exchanges will sell your bitcoin to someone else. Heck they could sell to another exchange at a lower fee... its all "new" and tons of ways for people to move coins and money that are being sorted out.

(4.) Who runs the bitcoin exchanges?? Who creates the software, the web-sites and monitors and managers it?

Because if Bitcoin is real peer-to-peer money and exchange, then surely there cannot be 3rd parties like bitcoin exchanges can it?

It depends what the exchange is. We cover all of the ones that are 90% certain to not rip anyone off....we just removed Cubits though because they became insolvent.

The decentralized exchange bisq is one we like HOWEVER there is not a lot of volume currently so that either increases or it doesn't down the road.

There WILL be other decentralized exchange options down the road for sure...how popular they are is anyones guess.

(5.) Can I pay by hard-cash in a bitcoin exchange or ATM. If so who counts the cash?? It has to be real-people right?

The fee's are always quite high. People "invest" in different ones and place them in different places around the world... rarely have we seen attractive fee's.

[Kakmakr]

The thing is, Bitcoin is only "Magic Money" when you use it in the way that it was meant to be used. It was not designed to be used via intermediary exchange services <3rd party services> It was created as a P2P payment network, where two people make transactions directly with each other, without any third parties.

The exchanges and wallet providers came into the scene, because they wanted to make things easier to use for mass adoption to happen. <I think, they only followed the money and just wanted to profit from this>

So when people follow the Satoshi Whitepaper and only use Bitcoin as a P2P payment network, then the true "Magic Money" will be revealed to them. <No more Banks / PayPal and third parties, forcing you to do what they want> True financial freedom!!!!