What Is Cryptocurrency: Everything You Need to Know

But doesn't it miss something important: whence cometh the value? Why would I, or anyone, actually want to own Bitcoins?

1. Bitcoin runs on proof of work, nodes agree on solved blocks by an increasing number of zeros on a sha256 hash of the block header. This is a mechanism to keep the supply roughly constant despite increases or decreases in total network capacity so that the rate of increase in the money supply is consistent. Difficulty is adjusted every 2 weeks, or 2016 blocks, so that we have 10 minute block times.

2. You can fork bitcoin, but manipulating the blockchain would break consensus. If I have a custom client that changes the rules concerning how much bitcoin I made or whatever, that will not affect other people because their clients will disagree.

3. This depends on what Bitcoin becomes, it could go either way, remember the upper bound is separate from divisibility. So right now its divisible to 8 decimal places, but could be more if needed later. If bitcoin is a store of value then this is probably a reasonable design decision, if it becomes a generic transport of value then we may have to investigate other options.

4.The verification time is a function of the capacity limits of the network, tests have shown that we can handle many more transactions than are currently being verified, but the block size limits the number to 1mb worth of tx data every ten minutes, which equates to roughly 3 or 4 verified transactions per second on average. There are also numerous ways this is being addresses, but its a very contentious and on going subject.

5. The spat is about the block size. Should it be increased, or should alternatives be developed. The heart of this is whether you think bitcoin is a store of value network or a transaction network. The current core developers work at Blockstream and have developed SegWit as an intermediate step since it allows for decreasing the space that each transaction takes up, and has other benefits with regard to support for more sophisticates smart contracts and side chains. Blockstream has a monetary incentive to see side chains succeed versus strictly on chain scaling. That conflict of interest and the direction bitcoin has taken has been highly contentious within the community, and has created some fractures.

6. Bitcoin does have a scripting language, it is at the heart of how bitcoin works, but for various security reasons it has been substantially curtailed. Right now its being used for multi signature support, normal payment, time locked payments, and for adding additional meta data. Ethereum has a "turing complete" implementation, it has some serious limitations, but promises to do more. So far that promise has been tempered by numerous serious security problems in various smart contract platforms using Ethereum like the DAO. Its an interesting experiment, and the lessons learned are going to help us develop other systems as time goes on.

7. The mining farms haven't changed the rate of supply, but they have shifted the "control" of the network, mostly to China which has subsidizes or near free electricity in several regions. Coupled with close access to asic development and delivery it has become a prime location to build server farms. This gives them the ability to hurt the network in various ways.

8. Nasdaq and other financial firms are experimenting with it for low volume transactions as a sort of distributed shared database. R3 is building a consortium backed digital currency again for settlement. There are lots and lots of interesting potential applications, but we haven't seen a killer application beyond bitcoin itself which is pretty amazing when you think about it.

9. Most governments have taken a hands off approach, with the exception of New York state which is actively regulating entities as part of their Bitlicense legislation. There are also various overlaps with traditional money transfer that makes licensing complicated in the United States, and gives first mover advantage to other countries that are more permissive.