Some Of The Beginner Bitcoin Questions Answered – Part 2

The Second Part Of The Discussion

A fork of Bitcoin, Bitcoin Cash is another major coin. When they run into irreconcilable differences, forks allow factions of a community to split and go their separate ways. Holders of the original coin will then own coins on both networks when there is a chain-split and one version of a coin splits into two different projects. 

When the Bitcoin community could not agree on scaling the network in 2017, the Bitcoin Cash project was born out of a chain split. Bitcoin Cash has strong philosophical reasons for existing namely to continue the Bitcoin project was originally intended as reliable peer-to-peer electronic cash with low fees as the side known as Bitcoin has the clear economic majority at least in terms of price. When too many people try to use the blockchain at the same time, by contrast, BTC has a limited capacity which results in frequent periods of congestion and high fees. 

 What Is The Best Bitcoin Wallet?

Depending on your goals and level of experience is the best as there are many options for Bitcoin wallets. This is not practical for most users nor is it necessary as the highest security and most privacy comes from running your own Bitcoin full node. 

As it allows you to have high security without downloading the blockchain or running your own node, for many users, the best is the Electrum wallet or Electron Cash for BCH. Your own private keys to your coins are never sent to servers and only sign transactions locally as a distributed set of servers handle the heaviest parts of blockchain operations. Which increases their trust, the electrum class of wallets is also open source.

The Bitcoin.com wallet is another nice option for beginners. To get started using Bitcoin, it’s a great way. It comes pretty safely and easily. 

How can I store Bitcoins safely?

Not kept on an exchange, generally, your bitcoins should be stored in your own wallet. Not your keys, not your coins go the old saying. You don’t actually own any coins as this means that technically speaking when you have your coins on an exchange. What you have is an IOU from the exchange instead. 

There are real risks of keeping your money on an exchange although this may feel like an unimportant distinction on the surface. The exchange refusing to thereby return your funds either because of malice or regulatory issues, or the exchange then getting hacked or going out of business, or else the hacker getting into your account are these risks included. Make sure to use a strong password and two-factor authentications if you must keep coins on an exchange. 

You are immune from many of the risks but your coins can still be lost if you don’t back up your wallet and your computer die or in case a hacker gets access when you have your coins in your own wallet. Here recommended is keeping your computer up-to-date with malware and antivirus protection. 

You can look into using a hardware wallet, a paper wallet, or a cold storage wallet for even better security. It's an excellent place for any aspiring Bitcoiner to start researching as we don’t have room here to do a deep dive into each of them.

If A Bitcoin Transaction Is Legitimate, How Do You Know?

How it’s possible to know if a bitcoin transaction is legit if it's just a bunch of data as beginners wonder. Is it possible that it can be faked? Usually won’t even display an invalid transaction as the short answer is that your wallet knows whether a transaction is valid. 

Bitcoin transactions must follow a very specific format and can only spend coins also sometimes called inputs where it comes valid and only if the user produces the correct digital signature as to how the wallet knows this. 

Is Bitcoin Anonymous?

The answer is both yes and no. Not all transactions have a clear identity associated with them while bitcoin transactions are not completely anonymous. 

Different from traditional finance is the privacy model for Bitcoin. For this actually, the Bitcoin whitepaper has a nice diagram: 

Transactions are shielded from public view but trusted third parties know everything as you can see in the traditional world of finance. Including banks, credit card companies, and so on are those trusted parties. 

There is no identity that is required to use the network as in the Bitcoin model, the public can see all transactions. To uncover who is behind certain transactions, in practice can analysts use heuristics and algorithms

They can in many cases. The exchange knows who you are for example, in case you withdraw Bitcoin from an exchange to your own wallet. The second transaction can also be assumed to be from the same person if you then send the coins from your wallet to someone else. 

 If you want to make your bitcoin transactions more private, there are several methods available. First exchange your coins for another coin that offers better privacy features such as Monero or Bitcoin Cash and then exchange them back to BTC, is one. 

How Are Bitcoins Taxed?

Varying widely based on jurisdiction is complicated tax law. When it comes to finances, I am not a tax professional and you should always seek professional tax advice. 

It appears taxes on bitcoin are not particularly different from other assets that said. It is generally a taxable event and taxes are owed on the profits when you sell bitcoins. For example, if you hold coins and don’t sell, unrealised profits are generally not taxed. 

Here’s Where You Can Spend Bitcoins

Anywhere they are accepted, you can spend bitcoins and other cryptocurrencies. Then retail settings, often, online shops offer more cryptocurrency adoption. map.bitcoin.com is one great place to find stores that accept crypto. 

To get a crypto-based debit card is another option. This one from Bitpay is an example. Anywhere debit card is accepted which is everywhere, this allows you to load your coins and spend them.