CBP Bitcoin Commerce and Ecosystem 3 — Questions and Answers
Question 1: What is a Bitcoin ATM (BTM) and what function does it serve?
- A machine that prints paper Bitcoin certificates
- A kiosk that allows users to buy or sell Bitcoin using cash or card (Correct answer)
- A device that mines Bitcoin using solar energy
- A terminal for accessing Bitcoin cold storage
Correct answer: A kiosk that allows users to buy or sell Bitcoin using cash or card
Bitcoin ATMs are physical kiosks that let users purchase Bitcoin with cash (and sometimes sell Bitcoin for cash), bridging the gap between fiat and crypto.
Question 2: What is the Lightning Network's primary benefit for Bitcoin commerce?
- It increases Bitcoin's block size
- It enables near-instant, low-fee Bitcoin micropayments off-chain (Correct answer)
- It replaces the need for Bitcoin miners
- It allows merchants to issue their own tokens
Correct answer: It enables near-instant, low-fee Bitcoin micropayments off-chain
The Lightning Network creates off-chain payment channels that allow fast, cheap micropayments, making Bitcoin practical for everyday retail transactions.
Question 3: Which scenario best describes a Bitcoin escrow service?
- A third party holds Bitcoin until agreed conditions between buyer and seller are met (Correct answer)
- A service that stores Bitcoin in cold wallets for safekeeping
- A platform that automatically mines Bitcoin for users
- An exchange that converts Bitcoin to gold
Correct answer: A third party holds Bitcoin until agreed conditions between buyer and seller are met
Bitcoin escrow services hold funds in a multi-sig address until both parties fulfill contractual obligations, reducing counterparty risk.
Question 4: What does KYC (Know Your Customer) require Bitcoin businesses to do?
- Mine Bitcoin on behalf of customers
- Verify the identity of their users to comply with anti-money laundering laws (Correct answer)
- Offer customer loyalty rewards in Bitcoin
- Provide customers with hardware wallets
Correct answer: Verify the identity of their users to comply with anti-money laundering laws
KYC regulations require Bitcoin exchanges and businesses to collect and verify customer identity documents to prevent money laundering and fraud.
Question 5: A user wants to pay for coffee using Bitcoin without waiting for block confirmation. Which solution is most appropriate?
- On-chain Bitcoin transaction with 1 confirmation
- Lightning Network payment channel (Correct answer)
- Bitcoin paper wallet transfer
- Multi-signature Bitcoin transaction
Correct answer: Lightning Network payment channel
Lightning Network payments settle instantly off-chain, making them ideal for small, time-sensitive purchases like coffee.
Question 6: What is a Bitcoin custody service?
- A legal service for Bitcoin-related disputes
- A professional service that securely holds Bitcoin private keys on behalf of clients (Correct answer)
- A mining pool that manages hash rate
- A tax reporting tool for Bitcoin transactions
Correct answer: A professional service that securely holds Bitcoin private keys on behalf of clients
Bitcoin custody services (like those offered by banks or specialized firms) securely manage private keys for institutional clients who cannot self-custody.
Question 7: What is the significance of Bitcoin's fixed supply of 21 million coins for commerce?
- It means Bitcoin will become worthless once all coins are mined
- It creates a deflationary monetary property that can't be inflated by any issuer (Correct answer)
- It limits Bitcoin to 21 million transactions per day
- It means only 21 million merchants can accept Bitcoin
Correct answer: It creates a deflationary monetary property that can't be inflated by any issuer
Bitcoin's hard cap of 21 million ensures no central authority can inflate the supply, making it a scarce store of value unlike fiat currencies.
CBP Bitcoin Commerce and Ecosystem 3
What is a Bitcoin ATM (BTM) and what function does it serve?