Both understanding and being able to explain bitcoin and the blockchain in a simple clear way is important for its growth
This was my goal when I originally wrote this piece in 2017 and is still my goal now as the world of crypto continues to grow.
This post is the first in a series that will discuss the basics of bitcoin (and other cryptos) so that we can clearly explain it to the average joe who is skeptical of it all.
In this post we will…
- Learn what bitcoin is and how it came to be
Bitcoin is a new form of currency – a digital currency. It was created in 2009 by a developer(s) Satoshi Nakamato. The goal of this new currency and technology is to decentralize the power of money.
Currently the world’s money is controlled by the central banks of the issuing Country. This became ever present during the financial collapse in 2008. Central banks implemented quantitative easing and created bail outs for the large financial institutions integral to the financial crisis.
The same big banks that we use to hold our money and process our financial transactions. It is this centralized system that bitcoin and more so the blockchain are designed to make obsolete.
Decentralization is done by using a peer-to-peer network. Rather than relying on a central bank, middleman or government, bitcoin is empowered by everyone that makes up the peer-to-peer network.
Each individual that owns or uses bitcoin is part of the network that enables bitcoin to function. There is no central hub or center of control.
The strength and convenience of bitcoin grows as more and more people make use of it. Anyone in the world can send or accept bitcoin payments from others anywhere in the world, nearly instantaneous without paying large transactions fees.
This is what makes it revolutionary. You do not need a middle man to transact with people. Granted, there are exchanges you can buy, sell and hold bitcoin, but they are an optional as opposed to being mandatory.
Free Market at Work
Unlike fiat currency which has its value manipulated by central banks, bitcoin as a currency has its value dictated by the free market principle of supply and demand.
As for the supply side, that amount is limited to 21 million bitcoins. Nobody knows exactly why it’s 21 million, though there are many theories. Once all the coins are mined, that’s it.
The thing it does do is create a finite supply. This means more won’t be printed per se , which we know manipulates value as seen by the practices of banks with fiat currency.
Bitcoin as a Currency
Now that we have discussed the currency aspect of bitcoin and that it can be used to buy and sell things with any other person or business that accepts it we can move to the next step.