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