No one link I found was enough. There is so much information out there. I found I had to do a lot of reading to wrap my head around the whole Bitcoin concept. I put this together this morning to try and explain Bitcoin to someone brand new to it. Hope it helps.
Bitcoin Simplified...
A currency is a medium of exchange that has an accepted value by those using it, and throughout history currencies have taken on many forms. Perhaps the one we are most familiar with is our country’s official currency. In the US, it is the Dollar; in the UK, the Pound; in Japan, the Yen, and so on. We exchange our country’s currency for goods and services. However, there have always existed unofficial currencies or mediums of exchange. We have all heard stories of days gone by when someone would pay the doctor with a chicken or some eggs, or even today when you might chop a cord of wood for a neighbor in exchange for piano lessons for your child. We call that bartering, and bartering is an unofficial currency because the items or services are a medium of exchange that in themselves have value.
There was a time when the major official world currencies were backed by gold. You could take your form of currency (a paper note) and exchange it for gold, something of real value in the world. Those days are long gone. Now, all the major world currencies are known as fiat currencies. A fiat currency is a medium of exchange not backed by a physical commodity or something of real value, but accepted as a medium of exchange that has value. This is exactly what Bitcoin is.
What stymies most people is that Bitcoin is not something you can’t see or hold in your hand like paper money or a basket of eggs, so they may be unsure about it, think it cannot be of value, is a scam or evil enterprise. Others think it is the future of currency. Bitcoin is a digital cryptocurrency. But, what is a cryptocurrency?
Digital is the language of computers. When we use a computer, we see words and images on our monitor and hear sounds on our speakers, but a computer doesn’t. A computer “sees” and “hears” everything as a digit, a number, specifically a string of 0’s and 1’s. It stores everything as digits and the world wide web transmits these digits to other computers who “translate” them as words, images and sounds on other monitors and speakers.
Cryptography is the art and science of uniquely scrambling or encrypting information to keep it secret so only the originator and intended recipient know the true meaning of the information being sent.
So, a cryptocurrency is an encoded string of digits used as a medium of exchange that has an accepted value and is transmitted by a computer from one person to another. Bitcoin, whether it be one Bitcoin, many Bitcoins, or a fraction of a Bitcoin, every time it is bought, sold or exchanged creates one of these uniquely encoded digital strings, commonly called a digital signature. This digital signature is transmitted from originator to recipient where it is uniquely re-encoded. This re-encoded digital signature is now “owned” by the recipient.
So, what gives Bitcoin its value? Here are some factors:
-Like a precious metal, there is a limited supply of Bitcoin and the more in demand it is, the more it’s value increases. That’s called supply and demand.
-More entities are accepting Bitcoin in exchange for goods and services.
-It is extremely secure, much safer than a bank account, check, credit card, pocket book or wallet.
-You can instantly send it around the world without the need for a third party, i.e. bank.
-It is much easier to store and readily available from your “digital wallet”.
-It is innovative and lends itself to the digital world. If you are a betting person, you would bet this is how we will handle “money” in the future.
No doubt, there are many people who will be very slow to embrace Bitcoin, or any cryptocurrency. Like most innovations, most people are slow to accept. However, if you agree that the digital world is here to stay, then you must believe that cryptocurrency is the logical next step in currency. There was a time people did not trust and would not use banks, credit cards, PayPal, etc. Now, they are common-place; so too will be cryptocurrency as the future unfolds.
Like any currency, Bitcoin, or any cryptocurrency, is subject to increases and decreases in value. Will Bitcoin be the cryptocurrency of choice 10 years from now? Who knows. The only thing for certain is that cryptocurrency is here to stay, and Bitcoin is king for the foreseeable future. Could it collapse and be completely devalued? Yup, just like the Dollar, the Pound and the Yen. It’ your call.
