What is Bitcoin - Bitcoin Explained for Dummies
We're starting from scratch and answering the third most searched Google word today, what's Bitcoin? If you're afraid that we'll be likely to be too complicated using complex terms, don't. Here at Bizdustry, we help each other to make money online. But even though you don't have a professional education, you'll be able to recognize it all. After this lesson, you will know more about Bitcoin and its operating than 99 percent of the population.
What is Money?
•Before I start talking about Bitcoin, I would like to go back to basics and clarify the meaning of money. So, what is money specifically?
• Money represents value. If I do a job for you, you're going to give me money in return for the value I provided to you. I can then use this to obtain value from somebody else.
•For something to show deal, customers need to trust it's valuable and stay this way for the foreseeable future.
Paper Money
In the last century, we always believe in something to mean money. Something occurred, and the trust changed from trusting something to someone. Allow me a moment to explain. Customers found it too difficult to talk around carrying bars of Gold, so this was when paper money invented itself. It would work by a government or banking institutions will offer to take your bar of Gold: let’s say, totaling 1000$, and in exchange the bank would give the customer receipt certificates which are called bills, amounting to 1000$. Not only did people find that these pieces of paper are more comfortable to carry than Gold, but you could spend two dollars on a cup of coffee, and there will be no need to cut your Gold back. If you want your Gold back? No problem. Go to the bank and take 1000$ in bills to redeem the tangible form of money, such as the gold bar. The paper started it’s a journey it’s used as money that we use for everyday purchases. As time went on, the relationship between the paper receipt and Gold started to break down. To explain in detail what led us away from using Gold is complicated. Still, to put it merely, governments informed citizens themselves is responsible for the value of that paper money. Basically, “let’s forget about Gold and use paper to trade instead. So, customers continued to deal with receipts backed by nothing of value besides the government's promise. So, it all comes down to people trusting the government, and this is how Fiat Money, as we know it today, was created.
Fiat money: What is it?
•Latin for the word Fiat means by decree. Meaning dollars, euros, pounds, or any other currency created by a government has value purely because they order it. It’s called legal tender, and you’ve probably heard this word as a customer
•Legal Tender must be accepted if offered as payment to a business, which are advertising goods & services.
•The value of the money we see today comes from the legal status given to it by a government. We now trust someone rather than something; in this case, it’s the government.
Fiat Money - drawbacks
•It is centralized. Centralized means there is a government or authority that controls, issues, and distributes it.•It is not limited by quantity – The bank or government can print money and inflate the currency supply whenever needed. Printing money may sound like a solution to countries that are in debt, but what you’re doing is flooding the market with more dollars as the value drops, so your own money is virtually worthless.
When prices rise, it’s not that prices are rising. It’s the purchasing power of your money falling. In simple terms, you require more dollars to purchase something which used to cost less.
Transitioning to Digital Money
Fiat money is now in place, so the move to digital money is simple. There is a central authority that issues money, so why not create a digital currency and let that “authority” have control. Today, we see centralized currencies through PayPal, Wire Transfers, Bank Transfers, and many more payment methods in this digital era.
Let’s say that money today was digital. If I was to have a file, and it contained one dollar, what is to stop me from duplicating it one billion times and obtaining one billion dollars? Nothing. It's what’s known in the financial industry as the double-spend issue.
Banks use what’s known as a centralized solution, where a ledger is kept on their machine that keeps track of who owns what. Every individual has an account, and this ledger is responsible for maintaining a tally of every budget. Banks rely on this technology, and most customers trust the bank with their money, so it’s centralized and controlled by authority.
You might not even realize this, but there have been numerous efforts to develop alternate digital currency types. Still, none of them have been likely to succeed in addressing the issue of double-spending without a central authority.
Centralized Money Corruption
Anytime you give someone leverage of the supply of money, you grant them tremendous influence, and this causes three significant issues:Corruption: Power corrupts, and ultimate control destroys correctly. When banking institutions have a license to produce cash or wealth, they effectively regulate financial value distribution, granting them virtually infinite leverage. A little illustration of how authority breeds corruption could be seen in the Wells Fargo case. Workers illegally generated millions of fraudulent personal banking accounts to artificially boost their income stream, without their clients realizing it for years.
Mismanagement: Centralized Money
•If a government’s purpose is not matched with the customers it controls, this is known as mismanagement of the funds. Printing many notes to rescue a financial institution from failing, as occurred in the year 2008.
•The concern with printing legal tender is that it causes inflation and essentially undermines the worth of citizens' money.
•One drastic illustration is Venezuela, where the government pumped so much money into the economy that its value has fallen so much that people no longer count but weigh it down instead.
Control Centralized Money
All control is being given to the government or bank. At any moment, the government or bank could suspend your account and block your access to your hard earned money. If you are a person who only uses cash, the government will revoke your funds' legal rights, just like India did many years ago.•Until 2009, starting an improvement over existing banking systems appeared to be a losing cause. But, then, everything has changed for the better…
What is bitcoin
•A text was written online in the year 2008 by a man calling himself Satoshi Nakamoto. The file, known more commonly as the White Paper, proposed building a decentralized currency network, which is the largest Crypto we've heard about. Bitcoin.•The scheme intended to produce electronic cash that would fix the issue of double-spend with no need for centralized power. At its heart, Bitcoin is a decentralized blockchain with no centralized government, so what does this complicated term necessarily imply?
•Bitcoin, on the other hand, is a transparent ledger. At a particular moment in time, I can glance into the database and see all the financial transactions. It's hard to distinguish who owns the Bitcoin and which person transacted.
•It indicates that Bitcoin, which is a type of cryptocurrency, is anonymous. Everything is open, accessible, and retrievable, but you still can't the person behind the transaction. Let's illustrate this with an example of this. We can see that somebody that held Bitcoin sent over 10,000 Bitcoins to an address in May 2010.
Bitcoin is decentralized
•There isn't one computer holding the ledger. With Bitcoin, any machine that takes part in the system keeps a copy of the catalog, which is more commonly known in the Crypto World as Blockchain. So if you wanted to hack "it," you'll have to plan how to take down thousands of machines that are storying a copy and continually updating it.Bitcoin is digital
This suggests there's nothing real in Bitcoin which you can physically touch. There are no actual coins or banknotes, just lines of transactions and transfers. Owning Bitcoin means that you only can access a specific address in the ledger and transfer the currency to another address or withdraw the Bitcoin to Fiat.Why is Bitcoin such big news?
Since digital money has come entered the modern era, we now improve the existing system. Bitcoin is a type of currency in which no government or bank can regulate—considering the days before the world wide web, how centralized the sharing of communication was. Essentially, if you needed knowledge, you might get it from a couple of the big companies, like BBC News. Thanking the development of the Internet, the experience is decentralized, and you can connect and absorb knowledge from around the world by clicking a button. Bitcoin is the Internet of Finance – providing a digital alternative to money.Bitcoin Compared to Banks
Complete control over your money: Using Bitcoin, you and you only can access your own money. No bank or government will freeze or confiscate any funds from your account.Free to Everybody – Bitcoin is opening up virtual finance to 2.5 billion people worldwide who do not have connections to the current economic system. These individuals are unbanked because of where they are living or their circumstances. However, nowadays, with a smartphone and a tap of the button, no permission is required to start exchanging with Bitcoin.
Frequently Asked Questions
Who accepts Bitcoin - Today, many online and offline retailers welcome Bitcoin. There are also bitcoin debit cards that enable you to pay for your bitcoin balance at almost any shop. However, the path to recognition from the rest of the population is also a long one.How does Bitcoin work? - In summary, Bitcoin functions by modifying the transaction report, also known as the Blockchain Network. Each machine that contributes to the Bitcoin blockchain keeps a copy of this ledger and confirms any transaction that goes through it.
Why Does Bitcoin Have Value and How is it Determined?
•Bitcoin has worth mainly since investors can exchange their money for it. In other words, someone finds it attractive and wishes to purchase it from somebody else. At the precise point, Bitcoin was gaining value.•Whenever individuals refer to the "price" of Bitcoin, they are essentially pointing to the previous exchange price on a particular trading site, like Coinbase, for example.
•Put simply, if more investors try to buy Bitcoin (i.e., demand is increasing), then the Crypto price is rising. If fewer customers try to buy bitcoins (i.e., order keeps falling), they won't want to spend too much on the specific coin. The value of Bitcoin will decrease.
Can Bitcoin be Converted to Cash?
Yes, bitcoin can be converted to cash in a few ways, but one that has been growing popular amongst investors is the ability to withdraw cold hard money from an ATM using a Bitcoin ATM card. If you want to convert the Crypto to Fiat, many exchange platforms can offer this service, with two of my favorites being Coinbase and Crypto.com.Conclusion
You learned more about Bitcoin than the majority of investors around you! It wasn't that hard, was it? Bitcoin is built with a straightforward goal: to let investors have a private & safe way to reclaim their money ownership. In 2009, there was a money revolution, and in today’s era, we see money changing as we know it. If you have any questions, please don't hesitate to ask below in the comments, and I'll be more than happy to help!
