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Bitcoins are viewed as an alternative to traditional banking.

  1. There isn't a peer to peer passage of bitcoins. Like the banking agency is a mediator between the two people sending and receiving money; miners are an intermediate between the sender and the receiver.

  2. Just like the banks; the miners also charge the processing fees. The lower the processing fees; the more likely are the chances for the transaction to get cancelled as miners wouldn't add that to the block.

  3. Like in an banking institution, the Central Bank controls the money supply. In bitcoin, anyone with sufficient hardware configurations can mine as many bit coins as he wants? Is it justified?

  4. Can't my real identity be traced; if I use bitcoins? Is it true or false? And how that works?

  5. If I open a bank account; I have to present my legal documents but in the case of bit coin transactions; I don't need to. Then how the Indian Government is trying to put a tax on bitcoin sale/purchase; if they can't trace the real identity? Can my IP address be tracked?
    How these points can be countered? More non-technical and explanatory answer is welcomed!

Venkatesh
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  • Welcome to the site. It is best if you ask only a single question per post; I see at least three independent questions here. Also, several of them have been asked and answered previously, e.g. https://bitcoin.stackexchange.com/questions/52/how-anonymous-are-bitcoin-transactions, so please do a search before asking. – Nate Eldredge Aug 05 '17 at 18:15

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1 and 2 are statements. One is a bit difficult to understand, cause bitcoin is a peer to peer network, where you don't have to trust middleman. Miners facilitate the transaction between two adresses, not between two person or wallets. and yes, for their work to create blocks and as such secure the blockchain they get incentivised.

  1. not really. I'd like to give a more general answer: when you do the math, one would see, that it takes an enormous amount of invest to benefit from this approach. I assume for this invest it is better to play "with" the community, as playing against the community. (oh, I haven't done the math yet ...)
  2. it depends. Assume you have only one address, and you re-use this address. Then you buy s.th. at a store (e.g. Amazon) with the same address. At this point your "real" name gets disclosed, cause Amazon needs to know, where to send the package.
  3. On IP addresses and anonymity, Nathan provided a link. And yes, Internet Service providers keep lists of connected IP addresses. It wouldn't be difficult to use sniffers to verify the traffic... Also, if you look at raw tx in some block explorers, you can see, who (which IP address) relayed the tx. Bitcoin can help you to stay anonymous, but your amount of knowledge needs to be very, very high! you don't want to try to avoid tax paying, do you? :-)
pebwindkraft
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