Frequently Asked Questions (FAQ's)

a collection of the things we get asked alot!

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FAQ's

Is was the first example of what we today call cryptocurrencies, a growing asset class that shares some characteristics of traditional currencies, with verification based on cryptography. Bitcoin is a new kind of money that can be sent from one person to another without the need for a trusted third party such as a bank or other financial institution; it is the first global, decentralized currency.

A pseudonymous software developer going by the name of Satoshi Nakamoto proposed bitcoin in 2008, as an electronic payment system based on mathematical proof. The idea was to produce a means of exchange, independent of any central authority, that could be transferred electronically in a secure, verifiable and immutable way.

The system enables payments to be sent between users without passing through a central authority, such as a bank or payment gateway. It is created and held electronically. Bitcoins aren't printed, like dollars or euros - they're produced by computers all around the world, using free software.

One can use bitcoins to purchase goods on the internet and in stores. The following are some unique properties of Bitcoin:

  • Bitcoin is global:  Bitcoins can be sent to someone across the world as easily as one can pass cash across the counter. Bitcoin isn't closed on weekends and doesn't  impose any arbitrary limits.

  • Bitcoin is irreversible: Bitcoin is like cash in that transactions cannot be reversed by the sender. In comparison, credit card, popular online payment systems, and banking transactions can be reversed after the payment has been made - sometimes months after the initial transaction.

  • Bitcoin fees are cheap: Bitcoin transaction fees are usually negligible. Currently, they range from half of a cent USD to 5 cents USD, for a bitcoin transaction of any size. This is significant to merchants, who are used to paying ~2-3% with credit cards (and passing these fees on to their customers), and great for everybody who is accustomed to paying $2 - $5 to withdraw cash from an ATM.

  • Bitcoin is private: When paying with bitcoins, there are no bank statements, and one need not provide unnecessary personal information to the merchant. Bitcoin transactions do not contain any identifying information other than the bitcoin addresses and amounts involved.

  • Bitcoin is secure: Due to the cryptographic nature of the Bitcoin network, Bitcoin payments are fundamentally more secure than standard debit/credit card transactions. When making a Bitcoin payment, no sensitive information is required to be sent over the internet. There is very low risk of your financial information being compromised, or having your identity stolen.

  • Bitcoin is open: Every transaction on the Bitcoin network is published publicly, without exception. This means there's no room for manipulation of transactions, changing the money supply, or adjusting the rules mid-game. The software that constitutes the core of Bitcoin is free and open-source so anyone can review the code.

Litecoin (LTC or Ł) is a peer-to-peer cryptocurrency and open source software project released under the MIT/X11 license. Creation and transfer of coins is based on an open source cryptographic protocol and is not managed by any central authority.The coin was inspired by, and in technical details is nearly identical to, Bitcoin (BTC).

While the identity of the Bitcoin creator Satoshi Nakamoto is shrouded in mystery, Litecoin’s creator Charlie Lee is very active on social media and his blog. Charlie Lee is an ex-Google employee who had the vision to create a lighter version of Bitcoin.

While Bitcoin was seen as “gold” and a store of value for long-term purposes, Litecoin was seen as the “silver” and a means of a transaction for cheaper and everyday purposes. So, on October 7 2011, litecoin was released via an open-source client on GitHub. The Litecoin Network went live on October 13 2011. It is basically a fork of the Bitcoin Core client. Litecoin is the second oldest blockchain currency after Bitcoin and shares many characteristic but is noted for this faster translation times and resistance to ASIC mining systems.

Differences form Bitcoin 

Litecoin is different in some ways from Bitcoin.

  • The Litecoin Network aims to process a block every 2.5 minutes, rather than Bitcoin's 10 minutes. The developers claim that this allows Litecoin to have faster transaction confirmation.

  • Litecoin uses scrypt in its proof-of-work algorithm, a sequential memory-hard function requiring asymptotically more memory than an algorithm which is not memory-hard.

Due to Litecoin's use of the scrypt algorithm, FPGA and ASIC devices made for mining Litecoin are more complicated to create and more expensive to produce than they are for Bitcoin, which uses SHA-256.

Ethereum is a decentralized blockchain platform founded in 2014 by Vitalik Buterin. Like Bitcoin, Ethereum is an open-source project that is not owned or operated by a single individual. This means that anyone, anywhere can download the software and begin interacting with the network.

Differences form Bitcoin & Litecoin

Unlike the Bitcoin or Litecoin network, the primary purpose of Ethereum is not to act as a form of currency, but to allow those interacting with the Ethereum Network to make and operate 'smart contracts' without having to trust each other or use a middleman. Smart contracts are applications that run exactly as programmed without any possibility of downtime, censorship, fraud, or third party interference - a smart contract will work exactly the same every time it is used.

Ethereum uses a ‘virtual machine’ to achieve all this, which is like a giant, global computer made up of many individual computers running the Ethereum software. The virtual currency unit that allows this system to work is called ether. People interact with the Etherum network by using ‘Ether’ to pay the network to execute smart contracts. Ethereum aims to take the decentralization, security, and openness afforded by blockchains and extend those to virtually anything that can be computed.

Smart contract is just a phrase used to describe computer code that can facilitate the exchange of money, content, property, shares, or anything of value. When running on the blockchain a smart contract becomes like a self-operating computer program that automatically executes when specific conditions are met. Because smart contracts run on the blockchain, they run exactly as programmed without any possibility of censorship, downtime, fraud or third party interference.

A proof-of-work (PoW) system (or protocol, or function) is an economic measure to deter denial of service attacks and other service abuses such as spam on a network by requiring some work from the service requester, usually meaning processing time by a computer. The concept was invented by Cynthia Dwork and Moni Naor as presented in a 1993 journal article. The term "Proof of Work" or PoW was first coined and formalized in a 1999 paper by Markus Jakobsson and Ari Juels.

Bitcoin-type proof-of-work

In 2009, the Bitcoin network went online, Bitcoin is a proof-of-work cryptocurrency that, is also based on the Hashcash POW. But in Bitcoin double-spend protection is provided by a decentralized P2P protocol for tracking transfers of coins, rather than trusted hardware compe function. Bitcoin has better trustworthiness because it is protected by computation. Bitcoins are "mined" using the Hashcash proof-of-work function by individual miners and verified by the decentralized nodes in the P2P bitcoin network. The difficulty in the network is periodically adjusted to keep the block time around a target time of about 10 minutes.

The blockchain is a distributed, public ledger that contains the history of every bitcoin transaction. Anyone can download a copy of the blockchain, and it can be inspected to trace the path of bitcoins from one bitcoin transaction to another. It should be noted that while there is a record of every bitcoin transaction ever made, these transactions are not inherently linked to real life identities. For this reason, Bitcoin is considered pseudonymous.

Bitcoins themselves are not files stored on your computer’s hard drive like MP3s or PDFs. Rather “owning bitcoins”, means owning a bitcoin address, which has a balance recorded on the blockchain. What it means to own a bitcoin address is to control the associated Private Key, and therefore allow the signing of transactions.

A Block refers to a set of Bitcoin transactions from a certain time period. Blocks are “stacked” on top of each other in such a way that one block depends on the previous. In this manner, a chain of blocks is created, and thus we come to the term “blockchain”.

Finding and publishing new blocks is what Bitcoin miners do to earn bitcoins. Whenever a new block is broadcast, approximately every 10 minutes, a quantity of bitcoins is received by the miner who solved that block. Bitcoin miners keep the network secure, and this is how they are rewarded. This system ensures that all transactions are valid, and keeps the bitcoin network secure from fraud.

If you’ve ever waited for a new bitcoin transaction to be confirmed, you were waiting for a new block to published containing your transaction. When that happens, the bitcoin network has deemed your transaction valid. We currently requires 3 network confirmations before the transaction is considered finalised, however this number will vary with other Bitcoin services with some requiring up to 6 confirmations.

There are many “block explorer” services which allow you to look at what’s in the block chain. One example is https://blockchain.info/.

You can look at recent blocks here: https://blockchain.info/blocks

Similar to a traditional wallet you may carry in your pocket, a cryptocurrency wallet is used to store digital assets (coins or token). The difference is that instead of storing a collection of bills and cards, a cryptocurrency wallet stores a collection of private keys. Typically a wallet is encrypted with a password or otherwise protected from unauthorized access.

Unlike the cryptocurrency network (e.g. Bitcoin Blockchain) a cryptocurrency wallet is controlled only by its owner (it's not distributed and shared like the blockchain). It's important to keep your cryptocurrency wallet safe by either setting a strong password or otherwise keeping it out of reach of malicious individuals.

Types of Wallets

There are many different cryptocurrency wallets to choose from, each providing different features. All cryptocurrency wallets must conform to the established protocol of the relevant cryptocurrency so they can be used to send and receive funds for the appropriate currency. Regardless of their specific implementation or development. This is similar to email where you have many choices of email providers but they all "speak the same language" and are able to send messages to each other.

There are several main categories of cryptocurrency wallets:

Web Wallets

Web wallets allow you to send, receive, and store cryptocurrency all through your web browser. They are typically hosted by a provider that manages the security of the private keys associated with your account, although some types of web wallets provide ways for you to remain in control your private keys. Web wallets are generally more convenient than other types of wallets since you don't have to worry about accidentally deleting a wallet from your computer (and losing your cryptocurrency).

The main criticism of most web wallets is that you relinquish some control since web wallets usually manage private keys on your behalf. This means that security must be taken very seriously by the wallet provider. Like any other online account, it's also important for customers to take some security precautions.

Desktop Wallets

It's also possible to install wallet software directly on your computer. This allows an individual to have full control (and responsibility) over their wallet.

In a desktop wallet, the private keys are stored on a hard drive so it's only possible to access the funds using the computer the wallet is installed on. If the wallet file were to become corrupted with no backup available, the cryptocurrency stored in that wallet would be lost forever. For this reason it's extremely important that strong passwords are used and reliable backups are made of any desktop wallet. It's equally important that the wallet and any backups are kept safely out of reach of malicious individuals.

Desktop wallets fall into two main categories known as "full nodes" or "light" clients. Full nodes host a full copy of the blockchain (e.g. the Bitcoin Blockchain as of December 2017 was 149Gb) while light clients provide only cryptocurrency storage capabilities while depending on an external source to read the blockchain.

Mobile Wallets

Mobile wallets are simply cryptocurrency wallets designed for a mobile device. This means they can easily scan QR codes, are easy to navigate with a touch screen, and are accessible while on the move. Mobile wallets are almost always "light" clients in that they do not store a full copy of the blockchain.

Hardware Wallet

A hardware wallet is a specialized type of device designed specifically to store crypto currencies. The advantage is that hardware wallets are much more difficult for a malicious user to compromise when compared to a desktop or mobile wallet since they use the bare minimum amount of software required to safely store crypto currencies.

Paper Wallets

Paper wallets are a way to embody crypto currencies in a physical medium such as paper or metal. Like a printed bank note, if a paper wallet is lost or destroyed, then the cryptocurrency stored on it are gone forever.

Brain Wallets

A brain wallet is a cryptocurrency wallet that is generated from a passphrase. It’s similar to a paper wallet in that if the passphrase is lost, so are the crypto currencies stored in that persons brain (memory)! While it may be appealing to store cryptocurrency entirely within your memory, it should be cautioned against due to the challenge of using a sufficiently secure passphrase.

If you're just getting started with cryptocurrency, you may be asking yourself what the benefits really are. Here are the most popular reasons people choose to use crypto currencies:

Peer to Peer

When you send crypto currencies to someone else, there is no required involvement from a payment processor. This means the fee for each transaction is very small to negligible.

Being peer to peer also means that there's no central entity controlling the network. There's no need to trust or receive permission from any specific person or organization to participate in the cryptocurrency network. For this reason, major crypto currencies are global and resilient to problems that have plagued traditional medhods.

Effortless online payments

In many cases, using cryptocurrency is the easiest and quickest way to make a payment on the internet. When making a donation, or buying a digital item that doesn't require shipping, cryptocurrency doesn't require any personal information. The merchant doesn't need any information, because they aren't charging you (like a credit card), rather you are sending them the payment, just like traditional like cash.

Reduced risk for merchants

Accepting traditional credit card payments is not only expensive for merchants, it also leaves them open to fraudulent payment reversals and chargebacks. Since cryptocurrency payments are not reversible, once a merchant has received payment, they can be sure that the payment will not be cancelled fraudulently. If a merchant doesn't have access to traditional credit card or payment networks, cryptocurrency enables them access to the global economy instantly, and with negligible fees.

Complete control over your money

cryptocurrency enables the freedom to store and control your money in an unprecedented manner. Free from restrictions, penalties and fees commonly imposed by banks, you are empowered to make decisions about your finances that were previously the domain of financial institutions and governments.

cryptocurrency enables you to take personal responsibility for your savings. Money without the need to trust a third party is something cryptocurrency enables that has never existed before. Trusting third parties isn't necessarily bad, but having the option is important.

As an investment

Note: KripterPay does not provide financial advice. Whether or not to invest in cryptocurrency is something everyone must decide for themselves. Common advice is not to invest more than you can afford to lose.

In its short life and as of this writing, the value of a cryptocurrency has been measured at everything from less than one penny, to over a thousand US Dollars. It is clearly a risky investment, with the possibility of significant financial gain for some, but not all.

Many compare the cryptocurrency network at its current stage of development to the internet 20 years ago. There are still many questions about how it will be used, and about the scale of its impact as the network matures. cryptocurrency is considered a store of value like gold, but it can also serve as a method of transferring funds internationally. The future value of a cryptocurrency will depend on what roles the emerging cryptocurrency networks assume over time within the global economy.
 

Cryptocurrency is exciting and our users are interesting people! Whether you want to use crypto currencies to buy something online, accept cryptocurrency payments for your business, or even develop your own software on top of the cryptocurrency network, there's a vibrant community of motivated people around the world that love to help and of course the team here ate KripterPay is on hand to help.

This is a glossary of terms related to Crypto Currencies on KripterPay.

  • Address: A string of letters and numbers to which a corresponding Cryptocurrency can be sent to and from, e.g. a bitcoin address can be shared publicly, and like sending a message to an email address, a bitcoin address can be provided to others that wish to send you bitcoin.

  • Attack Surface: In computer security, an attack surface refers to the number of places where a malicious user may be able to gain access to a system. In general, a computer running more complex software has a higher attack surface than one running simpler software.

  • Bitcoin: The first global, decentralized currency.

  • Bits: A sub-unit of one bitcoin. There are 1,000,000 bits in one bitcoin.

  • Block: A collection of Bitcoin transactions that have occurred during a period of time (typically about 10 minutes). If the blockchain is thought of as a ledger book, a block is like one page from the book.

  • Blockchain: The authoritative record of every Bitcoin transaction that has ever occurred.

  • BTC: An abbreviation for the bitcoin currency, some exchanges also use the abbreviation XBT.

  • Centralized: Organised such that one or more parties are expressly in control of a service.

  • Chargeback: The reversal of a bank payment or money transfer after it was authorised. Sometimes used to commit fraud.

  • Cold Storage: The storage of cryptographic private keys (associated with a type of Cryptocurrency) in any fashion that is disconnected from the internet. Typical cold storage includes USB drives, offline computers, or paper wallets.

  • Cold Wallet: A Cryptocurrency wallet that is in cold storage (not connected to the internet).

  • Confirmations: A bitcoin transaction is considered unconfirmed until it has been included in a block on the blockchain, at which point it has one confirmation. Each additional block is another confirmation.

  • Cosigner: An additional person or entity that has partial control over a Cryptocurrency wallet.

  • Cryptocurrency: A type of currency that uses cryptography instead of a central bank to provide security and verify transactions. Bitcoin is the first cryptocurrency.

  • Cryptography: In the context of Bitcoin, cryptography is the use of mathematics to secure information. Cryptography is used to create and secure wallets, sign transactions, and verify the blockchain.

  • Decentralized: Without a central authority or controlling party. Bitcoin Litecon and Ehtereum are decentralised networks since no company, government, or individual is in control of it.

  • Distributed: A distributed network is designed so that there is no central server or entity that others must connect to. Instead, network participants connect directly to each other. Bitcoin is one example of a distributed network.

  • Encryption: The use of cryptography to encode a message such that only the intended recipient(s) can decode it. Bitcoin uses encryption to protect wallets from unauthorized access.

  • Hash: 1) A unique identifier of Cryptocurrency transaction. 2) A mathematical function that Cryptocurrency miners perform on blocks to make the network secure.

  • Hot Wallet: A Bitcoin wallet that resides on a device that is connected to the internet. A wallet installed on a desktop computer or smartphone is usually a hot wallet.

  • Ledger: A physical or electronic log book containing a list of transactions and balances typically involving financial accounts. The Bitcoin blockchain is the first distributed, decentralized, public ledger.

  • M of N: The number of cosigners that must provide signatures (M) out of the total number of cosigners (N) in order for a multi-signature bitcoin transaction to take place. A common M of N value is "2 of 3" meaning two of the three cosigners' signatures are required.

  • Miner: A computer or group of computers that add new transactions to blocks and verify blocks created by other miners. Miners collect transaction fees and are rewarded with new bitcoins for their services.

  • Multi-Signature: Also called multisig. A cryptocurrency transaction that requires signatures from multiple parties before it can be executed.

  • Node: A participant in an a particular network, these nodes share a copy of the blockchain and relay new transactions to other nodes on the same network.

  • Open Source: Software whose code is made publicly available and that is free to distribute. Bitcoin is an open source project and arguably the first open source cryptocurrency.

  • Paper Wallet: A type of cold storage wallet where private keys are printed on a piece of paper or other physical medium.

  • Peer to Peer: A type of network where participants communicate directly with each other rather than through a centralized server. The Bitcoin network is peer to peer network.

  • Private Key: A string of letters and numbers that can be used to spend cryptocurrency associated with a specific cryptocurrency address.

  • Proof of Work: A piece of data that requires a significant amount of computation to generate but requires a minimal amount of computation to be verified as being correct. Bitcoin and Litecoin use proof of work to generate new blocks. Ethereum also uses Proof of work but is expected to move to a Proof-of-Stake model in the not to distant future.

  • Protocol: The official rules that dictate how participants on a network must communicate. Bitcoin's protocol specifies how each node connects with the others, how many bitcoins will exist at any point in time, and defines other aspects of the network, all other types of cryptocurrencies will have their own specific rules the govern their network protocols.

  • Public Key: A string of letters and numbers that is derived from a private key. A public key allows one to receive cryptocurrencies – such address MUST be compatible with the associated currencies protocol.

  • QR Code: A digital representation of a public or private key that is easy to scan by digital cameras. QR codes are similar to barcodes found on physical products in that they are a machine-friendly way to embody a piece of data.

  • Signature: A portion of a Cryptocurrency transaction that proves that the owner of the private key has approved the transaction.

  • satoshi: The smallest divisible unit of one bitcoin. There are 100 million satoshis (8 decimal places) in one bitcoin. One satoshi = 0.0000001 bitcoins.

  • Satoshi Nakamoto: The pseudonymous inventor of Bitcoin.

  • SHA-256: The specific hash function used in the mining process to secure bitcoin transactions.

  • Transaction: An entry in the blockchain that describes a transfer of cryptocurrency from one address to another. Cryptocurrency transactions may contain several inputs and outputs.

  • Transaction Fee: Also known as a "miner's" fee, a transaction fee is an amount of reward in the respective currency included in each transaction that is collected by miners. This is to encourage miners to add the transaction to a block, e.g. a typical bitcoin fee amount is 0.0001 BTC.

  • Wallet: A collection of Cryptocurrency private keys used to send and receive cryptocurrencies.