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Today I decided to offer my first bounty on an old question which may have an answer now since the software in question has changed several times since.

What surprised me was that the bounty was taken away from my rep immediately and therefore before anyone made any effort to give an up to date answer. My guess would be that I would award the bounty by accepting an answer at some point within the next 7 days.

Did I understand bounties wrong?

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Think of it as putting the points in an escrow account :) Once you've committed the points will probably get awarded to someone, so they're immediately removed, and then when you get an answer they will be transferred to whoever you choose.

from the faq (excuse the terrible formatting, it doesn't copy nicely):

There are a few other rules around bounties:

Questions must be at least 2 days old to be eligible for a bounty. There can only be 1 active bounty per question at any given time. Users must have at least 75 reputation to offer a bounty, and may only have a maximum of 3 active bounties at any given time. The bounty period lasts 7 days. Bounties must have a minimum duration of at least 1 day. After the bounty ends, there is a grace period of 24 hours to manually award the bounty. If you do not award your bounty within 7 days (plus the grace period), the highest voted answer created after the bounty started with at least 2 upvotes will be awarded half the bounty amount. If there's no answer meeting that criteria, the bounty is not awarded to anyone. If the bounty was started by the question owner, and the question owner accepts an answer during the bounty period, and the bounty expires without an explicit award – we assume the bounty owner liked the answer they accepted and award it the full bounty amount at the time of bounty expiration. In any case, you will always give up the amount of reputation specified in the bounty, so if you start a bounty, be sure to follow up and award your bounty to the best answer!

As an additional bonus, bounty awards are immune to the daily reputation cap and community wiki mode.

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When you start a bounty, your question is given higher visibility on the site's homepage:

featured subtab on homepage

as well as the list of active questions, and also on the question's tag pages:

featured subtab on tag page

Putting a bounty on a question is not a guarantee that you will get an answer you are happy with - there's no way that we can guarantee that. Regardless of that, your question does get that extra visibility, and that is really what you are spending the bounty on.

You can read more details about bounties in the faq and on the privileges page.

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