detailed bitcoin FAQ

Detailed Bitcoin FAQ

What is bitcoin?

Bitcoin is a “peer to peer electronic cash system” per Satoshi’s original white paper and is called a cryptocurrency. Cryptocurrencies are a subset of distributed ledger technologies (“DLT’s”), and DLT’s are applications utilizing the blockchain. Lot of technical words there, so feel free to read it twice without embarrassment.

Bitcoin’s hallmarks include decentralized, censorless, trustless and disintermediated money. Translated to plainspeak, this currency is NOT issued or controlled by a central authority, anybody can use the system without permission, transactions are securely confirmed cryptographically by diverse miners and you do not need to use or trust a 3rd party for storage, processing or clearing of your funds. Financial sovereignty at last!

Put simply, cryptocurrency is emerging as the most integral, secure and frictionless way to pay directly for something either on the web or in person.

How do I store and use cryptocurrency?

Users of bitcoin store and use this cryptocurrency on an electronic or paper “wallet”. A wallet consists of a public key for deposits and verifying balances, and a private key for spending only which should be kept confidential to you at all times. These keys are in alphanumeric format which is also often displayed as a scannable QR code. A paper wallet has the same two “sides” but is only well suited to storing money, not spending it, as the entire balance must be “swept” as a paper wallet cannot divide a transaction into spent money as well as unspent transaction output (“UTXO”). No matter what type of wallet you use, the general operating principle is a two sided wallet with both a public key (deposit) and a private key (spend).

Wallet Applications for Smartphones

After testing and research, we recommend the following wallet applications for Android and iOS smartphones: CoPay, Coinomi or Edge Wallet. They are “zero knowledge” wallets which mean the software developer cannot ever see or access your wallet data. It’s encrypted and stored locally, only decrypting when you open and use your wallet app. These wallets also have recovery options in the form of lost password tools and/or seed phrase wallet import. Immensely useful in case you ever lose your phone and/or data!

Depositing to a Wallet

You will need to use an online or in-person cryptocurrency exchange, such as LUXOLO, to exchange US dollars for cryptocurrency. You will receive your bitcoin or litecoin as a deposit to your wallet’s public key. Once the funds are there, they are visible on the public ledger but no name is associated with the wallet, and nobody can spend your wallet without your private keys.

Spending from your Wallet

In order to spend your bitcoin or litecoin, you must instruct your wallet software to send or spend funds from your private key side of your wallet. You must also specify the recipient’s public key address and of course the amount to send. Once you hit send, the transaction will “sign”, “broadcast” to the network and soon be cryptographically confirmed by miners.

Question Bitcoin ATM Online Exchange
Do I need a bank account? No. Anyone may exchange $USD cash into a free cryptocurrency wallet, within the transaction limits. Yes. $USD funds must be deposited from your own US based bank account, and limitations apply.
Do I receive exchanged funds on a secure cryptocurrency wallet? Yes. You may load funds onto your own secure wallet or the machine can generate a new paper wallet for you. No. Your online exchange transactions are generally “off-chain” and stored in your online account. You should “withdraw” your cryptocurrency funds to a secure wallet.
Are my funds safe from cyber risks (hackers, site crash, keylogging, business closure, civil asset forfeiture, etc.)? Generally yes, provided you receive your funds on a secure wallet. No. Your cryptocurrency funds left on an exchange are subject to all of these and other risks until you withdraw them to a secure wallet.
Am I in possession/control of my wallet’s private keys? Generally yes, depending on your wallet type and configuration No. Your cryptocurrency funds left on an exchange are subject to cyber and other risks until you withdraw them to a secure wallet.
Is a live person available for Customer Support? Yes, a live LUXOLO customer support agent is available via telephone or email during business hours. No. Typically support is via a “trouble ticket” or email system, which often takes days for a response.
Are my transactions private? Somewhat. We require your mobile phone number for internal tracking, but transaction reporting to authorities is not required for amounts less than $10,000 per customer, per day. No. In order to open an online exchange account in the US, fully detailed personal information is required.
Are the cryptocurrency funds transferred to my secure wallet immediately? Yes, subject to network confirmations. No; you must complete a 2nd step of “withdrawing” funds to a secure offline wallet.
What are the transaction fees? LUXOLO currently charges an 8% ATM transaction fee, and a 6% fee for our Personalized Desk Exchange service. Online exchange transaction fees generally range from 0% to 2.5%.

What if the government bans bitcoin?

Background
The mainstream news media has willfully fomented fear, uncertainty and doubt (“FUD”) regarding bitcoin and cryptocurrencies since bitcoin’s inception in 2010. Pundits have declared the certain imminent “death of bitcoin” hundreds of times, legacy financial institutions have unsuccessfully rallied to marginalize, destroy or co-opt bitcoin, and the world government establishment has made mixed statements regarding cryptocurrencies. Despite these uncertainties, investors plowed money into cryptocurrency, causing the market capitalization to ascend from around $7B in December 2015 to over $600B in December 2017.

Current Events
Adding some notable clarity to the regulatory confusion were a few noteworthy events:

June 2018: The Commodity Futures Trading Commission (“CFTC”) Commissioner Rostin Benham said, among other comments, “Virtual currencies may – will – become part of the economic practices of any country, anywhere. Let me repeat that: these currencies are not going away and they will proliferate to every economy and every part of the planet.”

April 2018: The CFTC and Securities and Exchange Commission (“SEC”) formalized that they consider bitcoin, litecoin or bitcoin cash NOT to be securities, but rather commodities. Other tokens such as Ripple, Ether and countless others sold via ICO’s may possibly be considered securities, and are pending further analysis and consideration by regulatory bodies.

February 2018: A joint appearance of leaders from the CFTC and SEC at the U.S. Senate Banking Committee meeting. They specifically addressed cryptocurrencies and the U.S.’s role in the market’s regulation. Notably, CFTC Commissioner Giancarlo indicated a “do no harm” approach to legislation of distributed ledger technologies (“DLT’s”) including cryptocurrencies. SEC Chairperson Clayton echoed similar statements, supporting growth of DLT’s but cautioning the public about fraudulent initial coin offerings (“ICO’s”). The cryptocurrency market responded well with a rally starting that day and the week following.

What’s Ahead
Regardless of what any government, regulator, bank, company or individual tries to do, bitcoin is here to stay. The robustness of the bitcoin protocol including its completely decentralized nature, consensus requirements, diverse mining network and other factors render it almost impossible to “stop” or “shut down” bitcoin. It has been feared bitcoin may be regulated to death, but that less likely with each passing month.

Why should I trust LUXOLO?

Not a Bank
First of all, LUXOLO is not a bank and will never ask you to “deposit” or take custody of your money. The myriad problems with this 3rd party trust model are becoming apparent and problematic. The idea of placing “fiat” government money in a bank whereupon you legally surrender ownership of that money while deposited is becoming a significant, unwarranted risk factor (see how depositors were forced to surrender a portion of their savings account balances during the Bank of Cypress collapse of 2013. Note that US-based fractional reserve banks possess similar systemic risks including bail-in’s, withdrawal limits and hyperinflation).

Would you voluntarily sign up to suffer these increasingly likely draconian consequences of central fractional reserve banking? These unbacked currencies are subject to unlimited new currency emission, inevitably leading to debasement and hyperinflation. Your fiat bank account is deteriorating briskly via planned inflation, which we are instructed is healthy desirable.

Integrity
LUXOLO is owned and operated by multi-disciplinary partners embodying the utmost ethical and professional standards. We formed this firm in order to become a trusted resource and provide you with the practical tools and services you need to regain your financial sovereignty, become your own bank and manage your own funds going forward.

Core Beliefs
We believe the decentralized cryptocurrency money model has taken hold around the world, and will eventually eclipse the legacy fiat (government money) banking system.

We will never take custody of your assets. While we may offer cryptocurrency asset management advisory services in the future, among our core beliefs is to offer reliable and sophisticated asset management tools. We will help you navigate this space with confidence.

Should you decide to start using cryptocurrency, LUXOLO will provide you with powerful financial tools and rigorously support your personal and/or business transition to financial sovereignty by helping you become your own bank!

Merchants: Why accept cryptocurrency at your business?

Businesses who begin accepting cryptocurrency at point-of-sale immediately experience a three-fold value proposition:

  • Instant funds and NO MORE chargebacks! Goodbye 2-day waiting period; transactions are processed immediately and funded to your wallet. Also, say goodbye to chargebacks because transactions are permanent and refunds can only be accomplished via a second, merchant-initiated transaction.
  • Low fees. Transactions using the various cryptocurrency payment technologies generally range from 0% to 1.0%. As these applications evolve transactions will probably trend toward a few satoshis (cents) each.
  • Appreciation of capital. You’ll be accepting mainstream cryptocurrencies such as bitcoin and litecoin that have historically appreciated each year. Choose to down-convert your revenue to dollars at close-of-business or keep some or all of your revenue in crypto for upside from appreciation.

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