Last month we had conducted a webinar on ‘Introduction to Bitcoin’ and were extremely pleased with the overwhelming response. While I did manage to answer some of your questions, due to the shortage of time, some questions remained unanswered. With the help of KC, I have put together the answers to most of your questions here.
1. What’s the functionality of bitcoin exchange to look for and should we keep our own bitcoin in a Bitcoin wallet?
A Bitcoin exchange is a software platform that makes it convenient for you to buy or sell Bitcoin. It is a marketplace that connects buyers and sellers. You can store your Bitcoin in a paper wallet, hardware wallet or a online Bitcoin wallet(like Luno). Storing it in an online wallet service like Luno is more convenient but 2 Factor Authentication must be enabled for better security.
2. Do Bitcoin have any fundamental or intrinsic value?
This is a very common question with respect to Bitcoin- people wonder that if there is no physical entity, how could it have value.
A key thing to recognise is that the value of anything in the world actually depends on supply and demand rather than an established intrinsic value. This is also why a metal like gold might have more value than a metal like iron which has far more uses. Everything, ranging from the price of fruits you buy to the salary you earn, to the currency you use, all actually depend on supply and demand. Similarly, Bitcoin’s price varies depending on supply and demand.
An alternate line of thought says that the intrinsic value of Bitcoin is perhaps the IP value of the technology as well the value of processing power that is used by nodes and miners for maintaing the Bitcoin network. Do note, that even if this theory is applied, the intrinsic value of Bitcoin keeps increasing with time as the technology is constantly being improved upon and the processing power used for the network is also increasing.
3. Is Luno safe and secure to store Bitcoin
At Luno, we have the best standards in place for security and compliance to ensure your Bitcoins are safe with us. For greater security, one must enable 2 Factor Authentication on our platform.
4. In Malaysia, where can we spend our bitcoin?
Online stores and restaurants where you can spend Bitcoin in Malaysia include Viv’s Boutique Cafe and Restaurant, Jeq in the House, Ipmart and Overstock. For a comprehensive list of places, refer to our blog post: https://www.luno.com/blog/en/post/spend-bitcoin-in-malaysia
You said bitcoin is limited in supply to ~21mm. Is there a limit on the Blockchain? Also, if the record of transactions is stored in computers, will it not become infeasible to store such a huge ledger if the complete record is stored on nodes?
Yes- Bitcoin is limited in supply, the mining reward halves every four years and the total amount of available Bitcoin will be capped at ~21 mm. All Bitcoin transactions are recorded on the Blockchain and even after Bitcoin generation reaches a limit there would still be more transaction on the Bitcoin blockchain so it will continue to propogate.
With respect to storage, technological advancement with respect to storage space is happening at a very rapid speed. 10 years ago, storage of 1 GB on a cell phone would be a luxury whereas now we can easily store upwards of 500 GB on a device like a cell phone. Hence, on account of that, when the record of Bitcoin transactions i.e the Bitcoin blockchain becomes very huge, it still would not be too much for the storage capability that we will advance to.
5. Will we lose our Bitcoins if Luno’s exchange gets hacked?
If your Luno account gets hacked, your private key will be stolen, and the attacker may have access to your funds. However, most cases of hacking are due to user clicking on a phising link or not enabling 2FA on his account.
If someone breaks into an unlocked house, takes the car keys from the kitchen counter and drives off with the stolen car, you surely can’t blame the car company for having a weak security system! The car owner has a weak security system. Hence, it is necessary that you take necessary precautions to ensure that you do not get hacked like ensuring you enable 2FA authentication for your account, and also do not click on phising links or visit malicious sites.You can read about it more here : https://www.luno.com/blog/en/post/prevent-bitcoin-hacked
6. If I buy bitcoin with Ringgit, can I later sell my bitcoin to get back Ringgit when its value appreciates?
Yes – using Luno, you can sell your Bitcoin and withdraw the money to your registered bank account
7. Why is bitcoin so volatile recently?
Bitcoin is an evolving technology and its price currently depends on supply and demand. Recently, Bitcoin has gained mainstream recognition and there have been a spate of ICOs(Initial Coin Offerings) by companies which raised money from people in cryptocurrencies. Due to this, there have also been several public statements by governments on how they intend to deal with cryptocurrencies in the future.
Due to this, the price of Bitcoin has been volatile in the recent past- it has shown both strong growth when mainstream media as well as the public recognised its groundbreaking technology and has shown dips when the Chinese government commented on Bitcoin exchanges as well as ICOs.
Also, while it may be true that Bitcoin is volatile, its volatility has reduced substantially over the last 3-4 years and is expected to reduce further in the future.
8. Is 99% of Bitcoin is owned by 1% of the people. If that is so, can it be easily manipulated?
While that may have been the case few years ago, as Bitcoin becomes more mainstream, the distribution is moving towards becoming more uniform. Also, the current market capitalisation of Bitcoin is over $60 billion due to which manipulating its prices is not going to be very easy.
9. Are there any practical uses of Bitcoin in our daily life? Is the main use case purely that of an alternative investment for now?
In the recent past, with Bitcoin gaining more popularity, an increasingly large number of services have started accepting Bitcoin for payments. While alternative investment still seems to be the largest use case, it has been gaining enormous popularity for usage for niche ecommerce, cross-border transactions and gaming.
Like with most groundbreaking technologies that are used all over the world, Bitcoin was initially used for niche cases like alternative investment, gaming and nice e-commerce and now is gaining mainstream attention from the likes of Rakuten, Amazon and Airbnb.
10. How does one become a miner?
Bitcoin mining is a complex and tedious process where the probability of rewards is fairly low currently. You start with getting decent Bitcoin hardware for yourself (there are special purpose devices called ASICS for Bitcoin mining) and then you have to download a special software for the purpose of Bitcoin mining to get started.
Most miners would join a Bitcoin mining pool, which is a group of miners who come together to mine and then share their rewards, this generally ensures better results than mining alone.
You can read more about it here.
11. Do Luno support other cryptocurrencies? How do we cash out some bitcoin ? Is it in RM or USD?
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.
You can sell your Bitcoin using Luno for RM, then you withdraw this to your bank account to cash out.
12. What are some of the mobile wallets you would recommend to keep bitcoin secure?
The key priority for Luno’s Bitcoin wallet is security due to which we are one of the most secure wallets in Asia and Africa. To ensure that your wallet is kept safe, do remember to activate 2 Factor Authentication.
13. What is dynamic fees?
On the Luno exchange, we follow a maker-taker fee policy which also depends on your 30 Day trade volume. The fee can change varying on your 30 Day trade volume, also whether the fee is charged depends on whether you’re a market maker or a market taker.
You can read about it in detail here.
15. I hear the Bitcoin price mentioned in US Dollar very often. Does this mean that the Bitcoin price is pegged to US dollar?
The Bitcoin price is mentioned in USD often because that is a global standard. This does not mean that the Bitcoin price is directly pegged to the US Dollar. As mentioned earlier, the price of Bitcoin is determined separately depending on the buyers and sellers on each individual exchanges. This is similar to how the price of oranges would be different in different markets.
16. Does Luno support Bitcoin Cash? What will Luno do if there is another fork in November?
Wallet users who had stored their Bitcoin with Luno, received an equivalent amount of Bitcoin Cash in a separate Bitcoin Cash wallet.
With respect to the November fork, we shall wait to see how events unfold. Rest assured, we shall convey our stance to users much before the November fork so that they can deal with the Bitcoin they have stored in the Luno wallet accordingly.