What is Bitcoin? A Plain (but thorough) Explanation

Last updated on January 2nd, 2018 at 12:00 am

Hello guys and gals, I’m Ariel from 99Bitcoins and welcome to your very very first lesson about Bitcoin!

Te today’s movie we’ll be asking the most popular question – the #Four most searched query on Google ter 2014 – “What is Bitcoin?

This sounds like a elementary question but it tends to get some complicated answers. Te this movie we’ll make sure to voorkant all the bases but also to keep it plain. If you find anything interesting that I didn’t talk about enough, there’s lots more to read about it if you search for it – I urge you.

The juist reaction is “ The very first decentralized digital currency ”, but that’s fairly a throatful. So before wij start to understand this, lets embark with a more basic question that most people usually don’t ask themselves: “what is money?”

Money, ultimately, is simply the device that wij use to exchange value. Across history we’ve used lots of things spil money, from seashells, to precious metals, to salt… The most popular money, historically, has bot gold . There’s good reason for this: gold works truly well spil money. It’s zonderling – so it’s not worthless, and it’s tangible so if you’re holding it ter your arm it’s very likely yours. Pretty plain. And this worked for thousands of years, no matter what social institutions exist around you, no matter who the king or government is at that particular time. Gold just worked.

Ener Paper Money

Then came along a fresh invention: paper money. When you think about it, for someone who uses gold their entire life, paper money is a hard sell. Trust paper instead of metal? Well, paper money actually embarked out spil just a representation of gold. For e.g. the US Dollar wasgoed originally just a “ gold certificate ” which is a lump of paper telling you own some gold that’s sitting ter a vault at the treasury. Te other words, people never trusted paper money, they trusted the government to hold the gold for them.

Time passed and the US has since abandoned the so-called “gold standard” during the 70’s and today the US Dollar is actually a “ fiat ” money. “Fiat” is a Latin word for “it shall be” which is another way of telling “forget about gold, let’s all just agree that this paper is worth something, ok?” And that evidently works, because we’re all using fiat money thesis days and wij don’t have to have “hard currency” or “tangible money”. Paper money has some advantages and disadvantages. The fattest disadvantage is that paper is effortless to counterfeit, something that’s practically unlikely with gold. Almost anyone can simply print paper at huis. But there vereiste be advantages that make it worth this trouble, right? Fiat money is actually a form of digitization – that is, we’re dealing with numbers, not metals. This makes money much lighter to count, manage and budge. Te fact, the vast majority of money thesis days are actually just numbers te computers, believe it or not.

The age of digital money

Wait a minute, so if money today is digital, how does that even work? I mean, if I have a opstopping that represents a dollar, what’s to zekering mij from copying it a million times and having a million dollars? This is called the “ dual spend problem ”. The solution that banks use today is a “centralized” solution – they keep a ledger on their pc which keeps track of who possesses what. Everyone has an account and this ledger keeps a tally for each account. Wij all trust the handelsbank and the handelsbank trusts their pc, and so the solution is centralized on this ledger te this pc. Pc scientists however, weren’t pleased.

Bitcoin te invented

Decades straks ter 2008, an anonymous researcher publishes a paper describing how to solve this problem without a centralized solution – that is, without a bankgebouw. He called it “Bitcoin” and went on to describe how you can make a ledger that doesn’t rely on a single particular handelsbank – this is, a decentralized solution . This may sound confusing, or at best like science fiction. How does something work if it’s decentralized? You actually already know the reaction to this, you’re using a decentralized solution right now to witness this movie: the internet.

Think about it: nobody wields the internet. It’s the most vast and powerful network that humans have everzwijn created – but there is no “Internet, inc.” – so it’s decentralized. Lots of individuals and private companies all build the infrastructure of the internet, across companies and border and even ideologies, and it works – much thanks to profit motives and economic interests. So if the internet decentralizes information technology, how does Bitcoin decentralize money?

Bitcoin is just a distributed ledger system

At this point many movies would begin getting technical and complicated, but wij want to keep it ordinary. Te Bitcoin, the coins (or rather the transactions) are all recorded ter a ledger. So far, nothing fresh. The big overeenkomst with Bitcoin is that this ledger is public and collective. Not only, it’s also maintained by the public. Thousands of people have a copy of this ledger around the world, and anyone can download and verify this ledger. Ter Bitcoin, instead of accounts, money is moved inbetween addresses – kleuter of like email.

Usually people get worried when they hear about this ledger being public. Isn’t this a privacy problem? Like most privacy issues, it’s complicated. Whatever you may have heard about Bitcoin – it’s not truly inherently anonymous or identifiable. Wij will touch on this te a straks movie.

OK, maybe it’s not anonymous or something, but isn’t this a security problem? Well, if you think about it, it’s not a security problem. If you think that this public ledger is effortless to hack, attempt to imagine hacking the English language – you can most likely hack into Oxford Dictionary computers and switch some definitions, but that wouldn’t be a big problem. There are lots of copies of dictionaries all overheen the world – you can’t idiot everyone by hacking only some of the copies. Te Bitcoin, the dictionary that helps everyone stay on the same pagina is the ledger, and this ledger is called the “ Blockchain ”.

So now that wij understand how Bitcoin is digital, and how Bitcoin is decentralized, wij can response the question “What is Bitcoin?” It’s the very first decentralized digital currency.

What does Bitcoin mean for the world?

But what does this all matter? Is Bitcoin going to switch the world? That’s a question we’d all like to know, eh? Well, let’s embark by considering that Bitcoin is non-geographic. If economies fall or governments switch, Bitcoin won’t be affected like fiat currencies. It is also much more internet friendly, which means online commerce can improve. But the fattest winners here are most likely the billions of people across Asia and Africa and other places that have an internet connection but have horrible banks.

I mean, with my bankgebouw I can shop online and send money across the world even tho’ it’s indeed slow and fairly expensive. But te Kenya, they use cell phone minutes spil money, they buy groceries with air time. Te Argentina people are exchanging money ter the black market because of inflation that makes it unlikely to save money for a rainy day or for retirement. Non-geographic, global money is exactly what thesis people need – it works even if your government or banks don’t work.

Of course, Bitcoin isn’t only suggesting an economic alternative, but also a technological alternative. After all, Dollars today are numbers on a pc which represent numbers on a paper which used to represent hard metals, according to laws written hundreds of years ago. Bitcoin wasgoed born te the 21st century, which is why it is able to do lots of things that make people call it “smart-money”. For the same reason phones today are called “smartphones”, because they have more features than cellphones from a decade ago. Wij won’t get into details, but Bitcoin has some advanced features that you don’t get with the old money that wij have today (things like colored coins, wise contracts and multisig).

Who accepts Bitcoin?

Of course, businesses have began accepting it all around the world, some big names include Microsoft and TigerDirect and a entire bunch of airlines. There are websites to help you find Bitcoin-accepting businesses. Te fact, I got my paycheck ter Bitcoin for overheen a year – and there are lots of people suggesting professional services ter exchange for Bitcoin.

The implications for Bitcoin are obviously hard to measure. Ter reality there is a entire industry, fields of research, and grassroots movements growing – much like there wasgoed when executives from AOL and youthful students were all attempting to explain to people what is this “internet thing” back ter the ‘90s.

So I hope you’ve liked our very very first edition of BWBT and I can’t wait to see you ter our next movie. If you still have any questions or comments on the movie feel free to leave them te the comment section below. Bye for now!

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