Part 3, Frequently asked questions
Why won't something else replace Bitcoin?
In order for something to replace Bitcoin as a savings mechanism, it would need to provide similar and even better properties. While some
"cryptos" appear to be scarce and easy to transport, none of them have the level of decentralisation of Bitcoin, and that means their rules
could change when under pressure. A focus on decentralisation requires sacrifices in other aspects of the system, and other projects are
not willing to make these sacrifices.
The decentralisation of Bitcoin goes beyond the mere technical and organisational. There is also a culture of decentralisation, which acts
against attempts to centralise. There could be something else in the future which is better than Bitcoin, but as time goes on it is less
and less likely. It is less likely now than it was five years ago, for example.
If Bitcoin is so secure, why are there so many reports about people losing their money?
In order to benefit from Bitcoin's security, you need to follow the five principles of Bitcoin mentioned in an earlier video. Usually, when
you hear about Bitcoins being stolen, the people involved violated principle number two: not your keys, not your coins. They entrusted
their keys to someone who doesn't know what they are doing, they left it in an unsecured computer, or their keys got damaged beyond repair.
It's similar to someone putting a massive lock on their house door, but then leaving the lock open when leaving the house.
If Bitcoin consumes a lot of electricity, do I have to worry about my electricity bill?
When Bitcoin was originally launched in early 2009, there was only one software doing all the work. Gradually, specialised software
developed for the individual activities involved in the network. The, nodes, verify the ledger and enforce the rules. The, wallets, keep
your private keys secure and initiate transfers on your behalf. And finally, miners, which consume elecricity and provide security for
Bitcoin. In the meantime, mining is a business like any other. Miners run in data centers and in special containers which can move to
wherever cheap energy is available.
What is Blockchain?
Blockchain is a special type of database for decentralised systems. Parts of a blockchain can be operated by different organisations, and
don't need a hierarchy of permissions. Bitcoin is a first practical example of a blockchain, and some would argue the only one actually
delivering on its promises. While important for Bitcoin, it is not the only component necessary to achieve decentralisation in practice.
The use of a blockchain in systems which do not need both high security and high decentralisation is of a dubious utility. Traditional
databases or distributed data stores may be a better fit for such projects. Compared to them, a blockchain is slow and expensive.
Why do I have to wait for an hour for a transaction?
Once you send or receive a bitcoin transaction, usually you have to wait for about an hour for the transaction to "confirm". For the
blockchain to do its thing, about an hour needs to pass to ensure there is nothing fishy going on. This is one tradeoff Bitcoin uses for
its high security. So how can you then use Bitcoin for all kinds of payments if you have to wait for an hour? The solution Bitcoin offers
is scaling in layers. You can think of these layers as different forms of Bitcoin. The first layer, which is what we have been talking
about so far, can be thought of as a settlement layer. On top of it, other layers with different features are being built. One of the most
popular ones is the lightning network, which allows small instant payments.