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Common questions beginners have about Bitcoin & cryptocurrencies

Cryptos can be very confusing so here we gather all the questions we wished that we had the answers to when we started our journey in cryptocurrencies along with any questions that you, our readers, might have.  If you have a question just drop us a comment and we’ll answer it as soon as possible. 👍

Questions

What is backing bitcoins value?

Instead of with the case of traditional currencies where the trust to the government or central bank backs the value of the currency, bitcoins value comes from the math, cryptography, and security in the distributed network that is upheld by an enormous amount of computer power many hundred times more powerful than the worlds top 500 super-computers combined! That this network will be able to maintain the security and authenticity of the ledger is therefor what backs bitcoins value.

Is Bitcoin anonymous?

Nah, it’s what you call pseudo-anonymous. This is because all the transactions that ever happened are stored publicly on the blockchain where anyone can see from what address a bitcoin is sent from and where it ends up.  However, because there is no way you directly can find out what identity is behind a certain address and every user in the network can create an infinite amount of addresses, one can choose to be more anonymous if they would like to.

How many different crypto-currencies are there?

At the moment there is around 900 different currencies listed on CoinMarketCap , where you can see the current prices of the most popular coins.  The fact that anyone can create a new coin for whatever purpose makes the majority of the coins totally irrelevant. Worth mentioning though is that a most of the coins in the top 100 are so-called tokens created and running on the Ethereum blockchain.

Is Bitcoin a pyramid-scheme?

Nope. Pyramid-schemes and other so-called Ponzi-schemes are based on a promise to their investors of a guaranteed return no matter how the market acts. This is then maintained simply by everything that’s being paid out to investors is coming directly from the inflow of new investors money therefor the whole scheme collapses as soon as the rate of new people coming in slows down.  Bitcoin doesn’t have any person or company behind the currency since it’s a decentralized currency where the price is completely decided by supply and demand. This on the other side means that the more people that find out and hear about bitcoin and the larger the network get the higher the price gets but this, of course, doesn’t make Bitcoin a pyramid-scheme.

What’s an ICO?

ICO stands for Initial Coin Offering and it’s safe to say it absolutely exploded the last year. Since blockchains like Ethereum makes it possible and relatively easy for anyone to create their own currency in the form of a token,  this is something companies and projects has started doing to get pull in investors in an early stage. Very similar to Kickstarter,  but for cryptocurrencies. The newly created token can, for example, be used in a future application that the company is developing and that is why people choose to buy in at an early stage with the hope of that the value of the token will increase if the application is successful.

How many is using cryptocurrencies?

This is an impossible question to answer since you can only look at the amount of addresses that holds, for example, bitcoin and since every person in the network can create as many addresses they like this number doesn’t really say anything about the total amount of people.  However, studies show that around 0,1-0,5% of USA:s population own bitcoin and this number is probably bigger in countries such as South Korea and Japan where cryptocurrencies is extremely popular. But it’s safe to say that a huge majority of the worlds population don’t own or even know much about bitcoin yet and that we’re still at a really early stage on the so-called “Diffusion of Innovation”-scale.

Undersökningar som gjorts visar på att ca 0,1-0,5% av USA:s befolkning äger bitcoin och denna siffra kan tänkas vara högre i länder som Sydkorea och Japan där kryptovalutor är extremt populärt. Men man kan med all säkerhet säga att en enorm majoriteten av världens befolkning varken äger eller vet mycket om bitcoin än och att vi befinner oss väldigt tidigt på den så kallade “Diffusion of Innovation”-skalan.

Diffusion of Innovation-scale
Diffusion of Innovation-scale

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