What is Bitcoin? Bitcoin Explained Plain and Simple

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4 years ago

What is Bitcoin? Bitcoin Explained Plain and Simple. thinkmaverick There’s no better time than right NOW to learn more about Bitcoin.

Undeniably, Bitcoin is confusing and hard to understand, as it’s a complicated subject. But you don’t need to be a programmer, mathematician or cryptographer to understand it.

By writing this in plain and simple language, I hope that I can help you understand the basic concepts and see the potential of Bitcoin.

It can completely change someone’s life in the coming years: more equality, more wealth, more choice, more efficient and more freedom.

Bitcoin explained in the simplest way

Let’s say I have an ebook and I want to give it to you. I attach a file to an email, hit send and you’ll receive it in your inbox shortly.

Now the ebook is yours! You can download and read the book, delete it or give it to your friend if you like and then that friend can give it to his/her friend, and so on.

But remember I still have a copy of that book.

This is how we transfer information over the web, right?

We don’t really transfer content, we copy it.

Any form of digital objects can be copied from friend to to friend, transmitted between mobile devices, pasted into a mailing list.

While it may not be fair, legal or ethical, some famous authors like Paul Coelho, Tim Ferris, Seth Godin are actually allowing piracy deliberately in order to promote book sales.

For example, Tim Ferris uploaded a section of his book, The 4-Hour Chef on BitTorrent to help driving sales back to Amazon.

The thing is… whether I’m giving you a book, movie or song, it’s unlikely to devastate the economy.

Imagine what it would be like sending digital money.

As the world is becoming increasingly digital, using digital money for transactions may seem attractive. But sending money over the Internet will only duplicate them.

If I send you a dollar, it’s important that I’m honest with the funds, and not making extra copies for myself or spending the same dollar more than once. It’s called the double-spending problem.

Now, look at how our digital payment works today. Of course, all payments will be digital. To prevent duplication, we’re giving away trust to third parties like Visa, Master, Paypal, Venom and banks to verify the integrity of payments and oversee our accounts.

The entire system is controlled by a central authority who has complete control over our money. They could freeze your transactions, confiscate your funds and even spy on you.

Central banks can inflate the money supply, which then causing prices to rise and reduces the value of your savings over time.

What if there’s a better way to do it?

What if there’s a solution that allowed for digital payments without having to rely on a third -party intermediary?

What if, we can transfer value instantly with anyone, anywhere, anytime in the world without asking for permission from a gatekeeper?

What if our money has value, not because we trust the power of a government to back it, but because we trust the power of science, mathematics and cryptography?

What if we could have a mathematically scarce digital currency produced with pure energy instead of using a currency that can easily printed by the politician/cartel in power, restricted by borders drawn from war?

Here comes the solution- Bitcoin.

What is Bitcoin
Created by Satoshi Nakamoto in 2009, Bitcoin is the first and only decentralized peer-to-peer cryptocurrency that aims to solve problems with today’s monetary system.

Nakamoto solved the double spending problem and implemented blockchain partly to create an open, immutable, decentralized, neutral, borderless and censorship-resistant, mathematically scarce, cryptographically secured, permissionless and open-source digital currency that you can store in your head.

It’s immune to manipulation, hacking, and double-spending.

It’s permissionless. You can send obscene amounts of money across the planet without asking anyone’s permission.

It’s borderless. You can use it anywhere in the world as long as you’ve access to it.

It’s mathematically scarce. Bitcoin is programmable money with a finite and limited supply of 21,000,000 coins. No one can keep on creating bitcoin, after reaching this 21million cap.

It’s open, public and neutral– just like the open internet. You can’t cheat it. Anyone can see its code and see exactly what it does.

But Bitcoin is not totally anonymous, rather it’s pseudonymous. While everyone can see transactions on Bitcoin blockchain, no one know who’s sending or receiving money. What you’ll see is a long strings of numbers and letters, represents a wallet ID of receiver (also known as public address).

All transactions that happened on the Bitcoin network are permanently recorded in a public ledger called blockchain.

Because of Bitcoin, we don’t need any middle man to transact. It removes the need for trust.

For example, I send $1 in Bitcoin to you. Once the coins left my wallet, the $1 bitcoin is now completely yours. This transaction will be automatically updated, recorded and verified by the blockchain. Remember it’s a public ledger? This means that I don’t need any third-party or payment processor to make sure I don’t keep a copy or spend the same money twice.

It isn’t controlled or owned by any central authority. It’s a decentralized, non-trust-based system. Anyone, anywhere can send any amount of money, big and small, without needing to ask permission.

No one can cheat or alter the ledger. Everyone can verify this change of ownership of coin from sender to recipient on the public ledger. It lives in everybody’s computers.

Is Bitcoin Real Money?

Just because Bitcoin doesn’t exist in any tangible form, doesn’t mean that it isn’t real money.

To answer this question, let’s take a closer look at what’s considered real money in our physical world.

At one time, everyone was mining for gold. Then the United States government issued paper-money backed by gold. Instead of carrying gold around, people can use dollars that can be redeemed in gold bullion.

This means that the government had to hold in reserve an equivalent amount of gold for all their currency in circulation.

But not anymore.

Now, U.S. dollars are not backed by anything other than the full faith and taxing authority of the US government.

The United States can print however many dollars as they deem appropriate.

On the other hand, the quantity of bitcoins created is preprogrammed. There will only ever be 21 million Bitcoin in existence.

New bitcoins will be released into the circulation a fixed rate through a process called mining.

Similar to gold mining, except that it’s all done digitally. Instead of using picks and shovels, we use computer and special hardware to mine Bitcoin.

Here’s how it works: Miners use special hardware to add blocks to the blockchain and it creates new bitcoin.

To add a new block of transactions to the Bitcoin network, miners are competing to solve complicated mathematical problems that are very hard to solve. The miner who solves the problem correctly first will receive a block reward. That’s how brand-new bitcoins are entered into circulation via mining.

Conclusion- The Future of Money

Bitcoin is a decentralized currency, not generated or regulated by any government, corporation or financial institution.

Bitcoin is a revolutionary way to spend, store or transfer value from one to another, globally, instantly, and freely.

The Internet did this for the transfer of information ~20 years ago, and today Bitcoin is doing this by giving us a a currency that’s protected from unexpected inflation without relying on third parties. The Internet of money.

The future of money will lie in the hands of the people, and not in the powers of central authority.

Over to You

What’s your opinion on Bitcoin?

If you have any questions about Bitcoin and its technology, feel free to comment below. I will do my best to help.

If you’re getting started with Bitcoin, your very first investment shouldn’t in buying bitcoins, but in time spent educating yourself.

Check out this series on how to buy, store and keep Bitcoin safely:

I live and breathe making an income online.

I’ll be sharing more ideas and guides soon. Stay tuned.

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P.S: This Bitcoin resource is One of – if not the most – comprehensive resources for learning about Bitcoin with over 20 categories ranging from history to buying BTC, setting up a wallet, technical information, mining, security, and trading. Enjoy!