Have a desire to find out what Bitcoin is? Here, we render Bitcoin into plain English. That’s why even if you don’t have a technical background, you will get everything! In today’s article, I’m going to give you a comprehensible explanation of what bitcoin is and why it’s popular.
What is Bitcoin Summary
Bitcoin is the first decentralized binary currency. It has its own personalized content (you can also create a personalized ads profile). Every bitcoin transaction is stored on a virtual ledger called the blockchain, which everyone can see. BTC is the world’s largest cryptocurrency by market capitalization. The U.S. dollar value of one bitcoin will be higher in the future than it is today. Unlike other assets you own, BTC gives you total control over your funds. BTC is becoming more and more popular nowadays. That’s why a great number of places accept it as a payment method.
To have an idea of what Bitcoin is, go on reading. Here’s what you need to find out:
1. What is Money?
- Paper Money
- Fiat Money
2. Transitioning to Digital Money
3. Centralized Money
4. What is Bitcoin?
5. Bitcoin Compared to banks?
6. Frequently Asked Questions
- Who Accepts BTC?
- How Does Bitcoin Work?
- Why does BTC Have Value, and How is it Determined?
- Can Bitcoin be Converted to Cash?
- How do I Purchase Bitcoin?
1. What is Money?
Before talking about Bitcoin, we need to talk about money in general. What is it exactly?
Money represents value. If people perform service for you, you pay them money in exchange for the value they gave you. And, on the contrary, those people can use that money to get something of value from someone else.
Throughout history, various items and materials were used as money—for instance, shells, stones, salt, and of course, gold.
As it’s been mentioned above, a hundred years ago, people used different items to represent money. Over the years, they decided that it was rather onerous to walk around the globe carrying various forms of money (especially bars of gold), so people invented paper money.
It worked in the following way: the government or a bank would offer to take possession of your bar of gold worth $1000, and in return, that bank would give you receipt certificates, which we call bills, amounting to $1000.
So, paper money became a convenient way to pay for services, and, undoubtedly, it was much easier to carry.
As a matter of fact, due to macroeconomic changes, this connection between the paper receipt and the gold was broken.
By the way, it is hard to describe the way that led us away from the gold standard. In a nutshell, governments said to their people that the government itself would be responsible for the value of that paper money. And people went on trading with receipts supported by the government’s promise only.
You can ask why did it continue working? It’s all about trust. Though there is no actual commodity backing paper money, people trusted the government, and that’s how fiat money was invented.
Latin word “fiat” means “by decree.” This implies that any currency has value because the government orders it to. It’s known as “legal tender” – banknotes and coins that must be accepted if offered as payment.
The value of today’s money comes from a legal status given to it by a central authority. Also, the trust model has altered from trusting something to trusting someone (in this case, the government).
Fiat money has two chief disadvantages:
- It is centralized – there is a central authority taking control over it (the government or central bank).
- It is unlimited by quantity – the government or central bank print as much money as they want and inflate the money supply on the market. The problem with printing banknotes is that because the market is being flooded with more money, each dollar’s value decreases. And then you need more dollars to purchase something that used to “cos tless.”
2. Transitioning to Digital Money
Nowadays, credit cards, Paypal (a digital wallet), and other forms of virtual currency are used. The amount of physical money is decreasing every day.
There is an issue you should know about called the “double-spend problem.” The solution that banks use today is a “centralized” solution. It means that they keep a ledger on their computer, which keeps track of who owns what. Everyone has an account, and this ledger keeps a record for each account. We all trust the bank, and the bank trusts its computers, so the solution is centralized on this ledger in this computer.
As it turned out, there were a great number of attempts to develop alternative forms of electronic currencies. However, none of them were successful in solving the problem without a central authority.
3. Centralized Money
If anyone takes control over the money supply, it means they acquire tremendous power, which leads to three main issues:
Power corrupts. So does absolute power. When banks have a mandate to create money, they basically control the flow of value in the world, which gives them almost limitless power.
An example of how power corrupts can be seen in Wells Fargo’s scandal. The employees secretly created many unauthorized bank and credit card accounts to inflate the bank’s revenue stream.
There exists a problem called mismanagement of money. It happens when the central authority’s interest isn’t aligned with the people it controls. For instance, printing a lot of money in order to save a definite bank from collapsing.
Printing too much cash can lead to inflation and devaluation of people’s money.
Your money is totally controlled by the bank or government. At any time, the government can take a decision to freeze your accounts and deny access to your funds. Even if you use real money, the government can cancel the legal status of your currency.
4. What is Bitcoin?
In October 2008 a bitcoin’s creator Satoshi Nakamoto published a document. This bitcoin whitepaper offered a way of creating a decentralized currency called Bitcoin. It was meant to solve the double-spend problem without the government. The document was meant to have personalized content helping to select personalized ads (but before that, you need to create a personalized ads profile.). And it does have it. To measure content performance, a lot of metrics are used. If you really want to know how to measure ad performance, you’d better google it. The bitcoin software is free and available online to anyone who wants to start using it. In fact, it is still difficult to categorize Bitcoin because it is still new and different from other cryptocurrencies.
In fact, bitcoin is a transparent ledger without a central authority. But what is that supposed to mean?
As most money today is already virtual, the bank basically manages its own ledger of balances and transactions. Nevertheless, you can’t have a look at the bank’s ledger because it is not transparent and stored on the bank’s main computer. If you try to have a look, these actions will be signaled globally to our partners, but they will not affect browsing data.
On the other hand, at any time, you can see the transactions and balances that are taking place. The only thing you won’t figure out is by whom these balances are owned and who is behind each transaction.
It means bitcoin can be called pseudo-anonymous. Every step is trackable, but it can’t be seen who is sending what to whom.
Bitcoin is decentralized
There is no computer holding the ledger. With Bitcoin, every computer taking part in the system is also keeping a copy of the ledger known as the Blockchain. That’s why if you want to hack the ledger, you’ll have to take down millions of computers that are keeping a copy of it and constantly updating it.
Bitcoin is digital
It means that there are no physical bitcoins (or bitcoin cash, in other words), only balances kept on a public ledger. Having the cryptocurrency means owning the right to get access to a certain Bitcoin address record in the ledger and send bitcoins to a different address.
Why is Bitcoin such big news?
Bitcoin is a form of money central authorities can not control. Since late 2017, the value of a single bitcoin has fluctuated between about $3,000.
Speaking about the time before the Internet appeared, the flow of information was centralized. Usually, if you wanted to get some information you needed, you could get it from a range of the newspapers like the New York Times, The Washington Post, etc.
In our contemporary world, information is decentralized, and acquiring knowledge from around the world is one click away. Additionally, you can’t select basic ads. BTC is a digital currency group offering a decentralized solution to money. It can be bought to use peer-to-peer technology to facilitate instant payments.
5. Bitcoin compared to banks
In this section, you’ll find out why this digital currency is different than the current banking system.
Complete control over your money
People who want to become bitcoin owners should do it without a second thought because no one, except bitcoin users, can access and control their funds. Neither the bank nor the government can freeze your account or confiscate your savings. It’s done because there is a legitimate interest to ensure lasting security for all people’s savings. Sometimes, there are some bugs when you want to check your account, but it is currently undergoing a revision to make it easier to access information.
Cutting the middlemen
It means that in many cases, it’s cheaper to use a bitcoin network than a traditional payment system. In addition, unlike fiat currencies, BTC was invented to be the virtual currency by design. Hence, you can add extra layers of programming on top of it and turn it into “smart money.” To generate audience insights, you can apply market research.
Free for all
Buying bitcoins gives an opportunity for digital commerce to 2.5 billion people all around the world who don’t have access to traditional bank accounts. These people are unbanked or underbanked because of the environment they live in.
But nowadays, the only thing needed to start to buy and sell bitcoins is a mobile phone or a computer. No permission is required.
6. Frequently Asked Questions
Who accepts Bitcoin?
Today there are many franchises online and offline accepting this crypto. It’s even possible that booking a hotel or ordering a flight can be paid in bitcoin. There are even Bitcoin debit cards allowing you to pay at almost any shop with your Bitcoin wallet. However, the way towards acceptance by the public is still in process.
How does bitcoin work?
In brief, BTC operates through updating the Blockchain. Each computer that participates in the Bitcoin network holds a copy of this ledger and verifies every transaction going through it. You can apply market research to generate audience insights. Hardware wallets never expose their private keys, keeping bitcoins in cold storage. The bitcoin market can buy or sell tokens through cryptocurrency exchanges or peer-to-peer. It’s with saying that money laundering through BTC is a bad idea because it’s illegal. So, don’t play with fire.
It’s like we’re keeping tabs on each other, and each new transaction is announced to everyone so they can update their own copy of the ledger. If you want a detailed explanation about how Bitcoin wallets work, check my post about Bitcoin mining. Bitcoin Unlimited software helps the network backbone scale to meet the demands of this global economy.
Our partners and we process data to actively scan device characteristics for identification, use precise geolocation data, select personalized ads, display personalized ads for content measurement, select personalized content, store or access information on your device, measure content performance, select basic ads.
Why Does Bitcoin Have Value and How is it Determined?
The Bitcoin system is valuable simply because people have a craving for trading money for it. It means somebody finds it useful and asks somebody to sell bitcoin to them. At that exact moment, Bitcoin gained value.
When people refer to bitcoin price, they are actually referring to the price of the last trade conducted on a specific trading platform (e.g., Bitstamp, Binance, Coinbase).
It’s worth mentioning that there is no single, global price of bitcoin that everyone follows. For instance, Bitcoin’s price in certain countries can be different from its price in the US, as the major bitcoin exchanges in these countries involve various trades.
Frankly speaking, as more people want to buy Bitcoin gold (i.e., demand rises), then the value of BTC rises.
If fewer people want to buy Bitcoin (i.e., demand falls), then they won’t have a desire to pay as much. In this case, the Bitcoin market will decrease.
Can Bitcoin be Converted to Cash?
If you want to convert Bitcoin to fiat currency but not necessarily cash (i.e., tokens), you can come across a huge range of reliable Bitcoin exchanges online.
How Do I Purchase Bitcoin?
- Get a Bitcoin digital wallet
- Find a Bitcoin exchange
- Sign up and verify your identity
- Deposit money to the exchange
- Trade your funds for Bitcoin
- Withdraw the Bitcoins to your wallet
That’s all! If you want a more detailed explanation about the process, check out my guide on buying Bitcoin.
Well, now you know more about BTC than 99% of the people around you! Bear in mind that BTC was created to provide people a secure and private way to gain back control over their money. Also, it offers the promise of lower transaction fees than traditional online payment mechanisms.
Do you want to know even more about how BTC works? Then, there are supplementary posts about Bitcoin miners, Bitcoin wallets, how to buy and send Bitcoins, etc.
If you have any more questions or comments, just leave them in the comment section below.
Can Bitcoin be converted to cash?
It can be exchanged for traditional currencies. A lot of websites like HodlHodl will allow you to find those who sell Bitcoin and accept cash. Apart from it, there exist Bitcoin ATMs accepting bills and dispense Bitcoins in return.
Is Bitcoin FDIC insured?
Unfortunately, it is not. The Federal Deposit Insurance Corporation covers deposit insurance as held in the bank up to US$ 250,000 per account. Bitcoin and other cryptocurrency tokens are not FDIC insured.
What is a bitcoin account?
A bitcoin wallet (or account) is similar to a digital bank account. Here you can store, receive, manage, and buy bitcoins. The main advantage of it is that only you can access information in your wallet. A bitcoin wallet contains a public key and a private key, which work together to allow the owner not to lose all his\her data. Also, you can select personalized content and personalized ads. Personalized ads are becoming the cornerstone of an effective marketing strategy. Want to know how to measure ad performance? Use Google to find out!
How does bitcoin have any real value?
The Bitcoin system is valuable simply because people have a craving for trading money for it. People buy it because of a legitimate interest based on various purposes. It means somebody finds it useful and decides to buy some bitcoins. At that exact moment, BTC gained value. And as bitcoin matures, it’s becoming more and more popular with people. Some analysts believe that blockchain technology will ultimately be the most impactful aspect of the cryptocurrency craze.
Bitcoin is the currency of which country?
Of course, there are countries where bitcoin transactions are prohibited (transactions are verified by a massive amount of computing power). But many the countries such as Russia, Argentina, Brazil, Turkey, and so on have already accepted Bitcoin payments. As the demand for it is growing, sooner or later, all countries will legalize the use of BTC.