A couple of weeks ago, my friends at Luno helped me run an “Introduction to Bitcoin” Webinar. Check it out below, in case you haven’t seen it yet.
It wasn’t a huge crowd, but there was huge interest; and so many questions that we ran out of time. So I promised everyone that I’d compile a Q&A list, and send it out to everyone. This is that list.
Thank you to everyone who participated and if you have any further questions on Bitcoin, please post them in the comments — I’ll try to help you asap, or one of my other helpful readers will!
Recommended pre-read: My Love Affair with Bitcoin and Cryptocurrencies.
Bitcoin Basics
1. After I have bought Bitcoin, how do I take out money from it?
You sell your Bitcoin on a Bitcoin exchange (like Luno) to get the MYR in your account. After that, you have to withdraw these funds to your local bank account.
2. Which Bitcoin exchange would you recommend we use for buying other cryptocurrencies?
Poloniex or Kraken are other exchanges where you could exchange your Bitcoin for other cryptocurrencies after you’ve bought Bitcoin from Luno. Coinmarketcap.com has a list of exchanges you can choose from.
(Aaron says: Personally I’ve used Poloniex and Bittrex. I like Bittrex more.)
3. Why they are significant differences in current BTC value between different exchanges (e.g. different price shown on Blockchain.com vs Luno.com)?
There’s actually no standard or global Bitcoin price. Each exchange determines its own buy/sell price based on supply and demand (i.e the sellers and buyers on their platform). Find out more here.
4. Why is Bitcoin supply limited to 21 million only?
While no official reason was specified, one reason of keeping the supply limited could be so that Bitcoin (like gold) is deflationary. If the supply was not limited, it could lead to Bitcoin being a less efficient store of value.
5. What is a bitcoin node? Is a wallet a node or is a miner a node?
Bitcoin nodes are computers connected to the Bitcoin network that help validate transactions and blocks, and then pass the message on to other nodes.
Miners are a specific type of node (that do additional work, hence may receive bitcoins as rewards). They extend the block chain by creating new blocks with the new transactions relayed from other nodes. You can run your wallet as a full node (most secure), although many wallets allow you to choose a less resource-heavy option.
6. Any issues with Bank Negara Malaysia?
Bank Negara has said that Bitcoin isn’t viewed as a legitimate currency. This doesn’t means it’s illegal, just that it’s not viewed as a proper currency like USD or MYR, which is governed by a regulatory body. While this statement is correct, many regulators across the world are looking at how to regulate Bitcoin and Bank Negara is also doing its research on this.
(Aaron says: BNM hopes to issue guidelines on cryptocurrencies by end of 2017.)
7. If Bitcoin is maintained by the core developers, would Bitcoin die a natural death if the developers no longer exist? Or if they stop maintaining/developing/upgrading the system?
Advances and improvements in the technology of Bitcoin are spearheaded by a group of core developers. However, the mining companies of Bitcoin(~20 large corporations) also play a role in these decisions as they are the major stakeholders for Bitcoin and are responsible for the ecosystem running smoothly. As Bitcoin is decentralized, in a way, all the stakeholders can contribute to its development/improvement. However, the major stakeholders or influencers would have a greater say in this, as they can garner more support for it.
In a hypothetical situation where core developers are no longer involved, some other developers would take up this responsibility or the Bitcoin miners and progress for Bitcoin would still continue. The fact that a large number of people (including core developers and miners) own Bitcoin and have its monetary value at stake means that there would always be ample reason to work towards its improvement.
8. I came upon a website which is freebitco.in. Can you really earn free bitcoin from here?
Freebitco.in is probably a “bitcoin faucet” which gives you a chance to win very small amounts of bitcoin. While dealing with such sites, two things have to be kept in mind:
- The amounts might be too small for it to be worth your time.
- You need to ensure these sites are not ponzis or scams and also ensure that they do not compromise the security of your Bitcoin wallet.
9. What books/websites/blogs to read on Bitcoin as well as Bitcoin mining that do not take sides?
Luno has its own Learning Portal and Blog which is a good place to get started. For localized content geared towards Malaysians, you can start at mr-stingy and Ringgit Oh Ringgit.
Bitcoin.org, Blockgeeks.com are good resources as well as books and videos by Andreas Antonopoulous. Finally, Coindesk.com is a great resource to stay updated on cryptocurrency news.
Luno-Exchange Related
10. How safe is Luno from hacking and having our private keys stolen?
Luno utilizes industry-standard safety features: deep-freeze offline storage, bank vaults, and multi-signature wallets. You can also make your Luno wallet more secure by enabling 2FA. Check out more here.
11. When you said we can store our public and private keys in hardware wallets or print them out; Do the private and public keys get taken out of the Luno exchange, or will Luno forever have a record of the private and public keys? I guess what I’m asking is, if Luno ever gets hacked, will my private key be stolen forever?
Each person can have multiple public and private keys. When you store your Bitcoin in Luno’s Bitcoin wallet, Luno stores your private keys (and has access to it). A private key can be compared to the key of a locker. When you transfer your Bitcoin from Luno’s Bitcoin wallet to a hardware wallet like Trezor/Ledger, you will get a new set of private keys that only you have access to (not Luno). Transferring Bitcoin is similar to you transferring your goods from one locker to another, hence the new private key is similar to a new key.
It’s important that you take necessary precautions to ensure that you do not get hacked like ensuring you enable 2FA authentication.You can read about it more here.
12. Can I buy altcoins via Luno?
Luno currently only supports buying of Bitcoin. However, to buy other cryptocurrencies, you can buy Bitcoin on Luno and then transfer those Bitcoins to another exchange, where you can buy the cryptocurrencies using your Bitcoin.
13. When will Luno allow Ethereum (ETH) transactions / to be an exchange for other cryptocurrencies?
We, at Luno, have received several requests for Ethereum and are currently looking into it. While Luno currently only supports Bitcoin, we are constantly keeping track of the ever-evolving cryptocurrency landscape. If we feel that another cryptocurrency does become big enough we shall support that as well.
14. If we make a deposit using Cash Deposit Machine, we can’t input the reference number. What should we do about that?
Luno does not allow you to make deposits using a CDM machine as no cash deposits are allowed. For Luno, you have to make a bank transfer only from a bank account in your name.
15. You said Bitcoin is decentralized where no bank or government is needed, so why do we need Luno?
Luno provides a Bitcoin wallet and a Bitcoin exchange which matches buyers with sellers. You don’t need Luno (or any exchange) to make Bitcoin transactions. You could directly buy bitcoins from someone you know, and pay them cash. You also don’t need exchanges to generate bitcoins. As you may have already heard, bitcoins are generated from mining.
So theoretically, exchanges aren’t necessary. But it’s like trying to buy chicken. Sure, you could drive all the way to a farm and deal directly with the farmer. But it’d be much more convenient for everyone to just meet at the supermarket. Luno is that supermarket.
16. How does Luno make money?
Luno makes money on transaction fees that we charge on transactions.
17. You mentioned that Bitcoin Cash has better transaction times, does that mean we should invest more in Bitcoin Cash instead of Bitcoin? Does Luno support Bitcoin Cash?
The majority of Bitcoin-related people still view Bitcoin as the “real” Bitcoin and Bitcoin Cash as a fork. Even at Luno, we only support buying and selling of the original Bitcoin. Luno wallets store only Bitcoin Cash that was “created” during the 1st August 2017 fork i.e. only if you had Bitcoin in your Luno wallet before the fork. You can transfer out the BCH or convert it to BTC — but cannot transfer any BCH into Luno.
18. Do you mind explaining Initial Coin Offerings and how Luno ties into ICOs?
Initial Coin Offerings (ICO)s are companies selling tokens to raise funding for their blockchain-related projects. There is a lot of speculation about these ICOs these days and investors must be wary of the risks before investing. The Luno platform doesn’t support ICOs. You can however buy Bitcoin through us and you’ll have to go to the ICO websites if you’re interested.
19. What is the future of Luno in respect to Bitcoin?
Luno’s focus has been to disrupt existing financial systems using digital currencies like Bitcoin. Our vision is to empower billions of people by bringing digital currencies to everyone, everywhere; and we shall continue to strive towards that.
20. By selling Bitcoin on the Luno exchange, does Luno charge the 1% on the entire txn value?
On the Luno exchange, we follow a maker-taker fee policy which also depends on your 30 Day trade volume. You can read about it in detail here.
21. How is the Luno fee different between Instant Buy/Sell vs Buy/Sell Limit?
Instant buy/sell sets a slightly higher/lower price that almost guarantees your transaction will go through instantly. If you set your own buy/sell price (your own limit order), you’ll need to wait until someone else’s buy/sell price matches yours. Luno has a maker-taker fee structure for the exchange, you can view the details here.
Conspiracy Theories?
22. Why does the creator of Bitcoin want to be anonymous? I sense he wants to deceive us into this system and get us all trapped! And I highly doubt Satoshi is Japanese; they just used the name Satoshi to deceive us! What’s your 2 cents?
Bitcoin is a revolutionary technology that challenges the existing financial systems like banks and intermediaries and could revolutionize existing systems like regulators that govern them in every nation. Governments across the world have at various points looked upon Bitcoin with skepticism and viewed it as a challenge.
“Satoshi” would also possess a significant chunk of Bitcoin, whose market cap is currently over $60 billion. Being the founder of Bitcoin, revealing his identity could:
- Be detrimental to the decentralized development of Bitcoin
- Lead to legal troubles
- Make him targeted by criminals and paparazzi alike
Some people say that considering the revolutionary nature of Bitcoin, and for the greater good of Bitcoin as well as him/her — Satoshi chose to stay anonymous.
23. I believe “Satoshi” can hack the system! He can make the boom and bust of Bitcoin!
Bitcoin software is open source — meaning that anyone can check its code to look for “hidden vulnerabilities.” Changes also require consensus from majority of the players involved. Even if Satoshi wanted to do something now, he would still require consensus from the miners or support from core developers or major exchanges to completely alter the technology to cheat people.
Hence, it’s highly improbable, as this would be against the benefit of miners/exchanges/developers who are now major stakeholders in Bitcoin and would stand a lot to lose if Bitcoin’s image is tarnished or the technology hacked.
24. Why did Bitcoin come right after the collapse of the Lehman Brothers (bank)? I sense a connection between the 2!
The collapse of Lehman Brothers and the global financial crisis did trigger public anger towards traditional “Old Money” institutions like banks and large corporations. This definitely helped raise public support for decentralized currency like Bitcoin. This topic is touched on in the book “Digital Gold,” if you’d like to read about all the back stories behind Bitcoin.
25. Correct me if I’m wrong, but didn’t someone claiming to be Satoshi come forward last year along with a unique key of some sort?
Yes, Craig Wright came forward claiming to be Satoshi. However, this was never concluded successfully and after a while, he withdrew the claim. He had claimed he would make a transfer from one of the first few wallets but he never ended up doing that as well.
The Future
26. What are your thoughts on the potential hard fork at the end of the year ?
It’s sad to see the community split up, but in a truly decentralized system — forks are bound to happen. Bitcoin’s core technology could be developed in multiple ways, and these forks, in a way, tend to avoid conflict and allow both branches to try developing.
27. Is there any hard fork coming ahead for BTC? Also what’s SegWit2?
There might be another hard fork in November during the planned implementation of SegWit2x. Very simply, SegWit2x is a plan to implement a version of Segregated Witness (a code-modification technique) which in principle leads to the availability of Bitcoin blocks to 2MB for transactions (from the earlier 1 MB). Both are being implemented so the Bitcoin network can scale efficiently to serve more people.
28. What do you think of 2018 for Bitcoin?
2018 should be a very exciting year for Bitcoin. This year Bitcoin has gone mainstream and most people seem to be aware of it. Bitcoin volume/price has reached an all-time high and regulators and investors world-over are noticing and understanding it. Next year will be very important for Bitcoin as it will have to evolve and the true test of its scalability is soon coming up.
(Aaron’s Note: I think Bitcoin in 2018 will go boom! :))
29. What do you think about the impact of Ethereum switching from proof-of-work (POW) to proof-of-stake (POS)?
Both proof-of-work and proof-of-stake are algorithms by which cryptocurrency networks aim to achieve distributed consensus. Currently, large cryptocurrency networks, like Bitcoin and Ethereum, use proof-of-work, which is a system in which participating users are required to solve difficult mathematical problems to validate and authenticate transactions — therefore the chance that the creator of the next block is dependent on a high processing power/hashrate.
This means, that to attack the Bitcoin network, the attacker requires at least 51% of the network’s hashrate or computing power. In today’s world, although it would be difficult, it’s possible that the top 2-3 mining companies could come together to reach this hashrate — which is why some other cryptocurrency networks are experimenting with proof-of-stake.
For the proof-of-stake algorithm, the chance that the creator of the next block is chosen is based on its wealth. If the Bitcoin network was based on the proof-of-stake principle, the attacker would need to buy 51% of all the bitcoins, which costs nearly $30 billion to hack bitcoin. Moreover, since they would own over 51% of the wealth, it would be counter-intuitive to hack their own wealth.
(Aaron says: I think POS is an interesting experiment that’s gonna help save a lot of electricity ;))
30. I missed the promo code. Can I know where can I find that? 🙂
Aaron says: Thanks for asking! Use my promo code below, and if you buy more than RM 250 of bitcoin, we’ll both get RM 5!
https://www.luno.com/en/invite/CWRW6
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Pic from Pixabay.
Further reading: My Love Affair with Bitcoin and Cryptocurrencies.
