We’ll go through a wide range of subjects, including Bitcoin mining, Bitcoin wallets, trading Bitcoin, and much more. The third most popular search on Google right now is “what is Bitcoin,” thus we’re going to answer that question from scratch. We translate Bitcoin into plain English so that even if you have no technical experience, you will be able to comprehend everything. If you’re concerned that we’ll get too technical and use a lot of complicated terminologies, don’t be. You will know more about Bitcoin and how it functions by the conclusion of this Topic than 95% of people.
I want to explain about money before we discuss Bitcoin.
What is Money?
Money is fundamentally a symbol of worth. You pay me money in exchange for the value I provide you when I work for you. In the future, I can use that money to purchase something valuable from someone else. Value has taken many different shapes throughout history, and various materials have been employed to symbolize money. As a means of exchange, people had previously utilized gold, salt, wheat, and shells. But for something to symbolize worth, people need to believe that it is valuable and will remain valued for a long enough time that they can use it to their advantage in the future.
Up until about a century ago, we always relied on something to stand in for money. We used to believe in something, but something happened along the way that caused us to shift to believing in people.
I’ll explain. Paper money was created as a result of individuals finding it too hard to travel the world carrying gold bars or other types of currency. Here’s how it worked: A bank or government would offer to take custody of your gold bar, say one worth $10, in exchange for receipt certificates—what we now refer to as bills—amounting to $10 from the bank. These bits of paper were not only much lighter to carry, but a dollar bought a cup of coffee and you won’t need to chop your gold bar into a million pieces. And whenever you required, you could simply take $10 in bills back to the bank to exchange them for the real money, in this case, the gold bar. As a result, paper started to be used as money as a practical and convenient tool. This link between the paper receipt and the gold it represents was, however, severed through time and as a result of macroeconomic developments. The path that took us away from the gold standard is incredibly difficult to explain but suffice it to say that governments assured their citizens that they would be responsible for the value of the paper money they issued. We all agreed to “forget about gold and trade paper instead,” to put it briefly. As a result, trade was still conducted using receipts that were nothing more than promises from the government. And why did that keep working? Well, because we have faith. Fiat money was developed because people trusted the government, despite the fact that there is no physical good to support paper money.Fiat is a Latin word that means “by decree” In other words, the government tells you that the dollars, euros, or any other currency have worth. Coins or banknotes that are referred to as “legal tender” must be accepted if provided as payment. Therefore, the legal status that a central authority, in this case, the government, granted to today’s currency is what gives it its value. In this situation, the government’s fiat currency has two major downsides since the trust model has moved from believing in something to believing in someone.
The issue with printing money is that it devalues each dollar since you’re flooding the market with more of it, making your own money less valuable. When you notice prices increasing over time, it’s not necessary because prices are going up as much as it’s because your money’s purchasing power is declining. To purchase something that once “cost less,” you now require more money. The transition to digital currency was rather easy after fiat money was established. Why not make money primarily digital and allow that authority to keep track of who owns what because we already have a central authority that issues money? Today, the most common kinds of digital currency are credit cards, wire transfers, PayPal, and others. The amount of actual money in circulation is essentially nonexistent and is declining every year. So how exactly does that operate if today’s money is digital? What’s to stop me from copying a file that represents $1 a million times and having a million dollars? This refers to the “double spending problem”. Banks currently utilize a “centralized” method; they maintain a computerized ledger that keeps track of who owns what. Each person has an account, and this ledger records a running total for all of them. As a result of our collective trust in the bank and their confidence in their computer, the problem is centered on this ledger in this computer. You might not be aware of this, but numerous attempts to develop substitute digital currencies failed to address the issue of double-spending.
Without a single point of control. Giving someone control over the money supply gives them a great deal of power, which leads to three serious problems:
Power corruption: Banks effectively control the flow of value around the globe since they are required to create money or value, which gives them nearly limitless power. The “Wells Fargo’s scandal,” in which staff surreptitiously opened millions of unlawful bank and credit card accounts to boost the bank’s revenue stream without their consumers being aware for years, serves as a little illustration of how power corrupts.
Centralized system mismanagement: Money may be mismanaged if the interests of the central authority and the individuals it governs are not compatible. For instance, printing a lot of money to prevent a specific bank or organization from failing, as occurred in 2008. The issue with printing too much money is that it leads to inflation and essentially devalues the money that ordinary people use. Venezuela serves as an extreme illustration of this, where individuals no longer count money but rather weigh it since the government has printed so much of it and its value has fallen so precipitously.
Control: In essence, you are handing the government or bank complete power over your finances. The government has the right to decide at any time to freeze your account and prevent you from accessing your money. The government can revoke the legal validity of your currency even if you solely use cash, as it did in India a few years ago.
Up until 2009, this was the situation. It appeared to be impossible to develop a replacement for the current monetary system. But then everything was different.
In October 2008 a document was published online by a guy calling himself “Satoshi Nakamoto”. The document also called a “whitepaper”, suggested a way of creating a system for a decentralized currency called Bitcoin. This system claimed to create “digital money that solves the double-spending problem without the need for a central authority”. At its core Bitcoin is a transparent ledger without a central authority.
What exactly does this unclear sentence mean?
So, contrast Bitcoin with a bank. Since the majority of money in circulation today is now digital, the bank essentially keeps track of its own balances and transactions. The bank’s main computer houses the ledger, which is not visible to the public. The bank’s ledger is completely within the bank’s control and is not accessible to the public. In contrast, Bitcoin is a “transparent ledger”. I have access to the ledger at all times and can view all current transactions and balances just to sneak a peek. You are unable to determine the owners of these amounts and the parties involved in each transaction. This means that although Bitcoin is open, transparent, and trackable, it is still impossible to determine who is transferring what to whom. Let’s use an illustration to clarify this. A few rows from the Bitcoin ledger are shown on your screen. We can see that 10,000 Bitcoins were transferred from one Bitcoin address to another Bitcoin address.
May 2010. The first Bitcoin purchase ever was this one, in which a man by the
name of Laszlo spent it on two pizzas. In a post from 2010, Laszlo requested
that someone sell him two pizzas for 10,000 bitcoins. Someone did and as a
a result, the cost of these two pizzas is now far over $200 million. Since Bitcoin is decentralized, the ledger is not stored on a single computer. Every computer involved in the Bitcoin system also maintains a copy of the ledger, often known as the Blockchain. Therefore, you’ll need to shut down thousands of computers that are continually updating and preserving a copy of the ledger if you wish to attack the system or take it offline. Bitcoin is digital, just like the majority of the money used today. This implies that there is nothing tangible in Bitcoin that you can touch. There are merely columns of transactions and balances; there are no actual coins. When you “possess” Bitcoin, you are referring to the right to access a particular Bitcoin address record in the ledger and transmit money to another address using it.What does all of this mean and Why is Bitcoin such big news?We now have an alternative to the current system for the first time since digital money first appeared. Bitcoin is a currency that neither a government nor a bank can regulate. Consider how centralized the information flow was before the Internet. In general, the New York Times, The Washington Post, and other prominent publications might provide you with the information you needed. The Internet has made information decentralized today, allowing for instant communication and access to knowledge from all over the world. With its decentralized approach to money, Bitcoin is known as the money of the internet. Compared to the present system, Bitcoin has a number of benefits. It firstly provides you total control over your finances. With Bitcoin, only you have access to your money. No bank or government agency has the authority to decide to close your account or seize your assets. Additionally, Bitcoin eliminates several third parties (middlemen) from the money transfer procedure. This means that using Bitcoin is frequently less expensive than using wire transfers or money orders. Additionally, unlike conventional currencies, Bitcoin was created to be digital by nature; as a result, it can be enhanced with extra layers of programming to become “smart money.” Finally, Bitcoin allows the 2.5 billion people who lack access to the current banking system in the globe to engage in digital trade. Because of where they come from and the environment they were born into, these people are either unbanked or underbanked. Today, they can start trading using Bitcoin without a third party’s approval with just a mobile phone and a click of a button. Many businesses, both online and offline, now accept Bitcoin. If you’d like, you can use Bitcoin to reserve a hotel room or arrange a flight. Even Bitcoin debit cards exist that let you use your bitcoin balance to make purchases at nearly any retailer. But there is still a long way to go before the mass of the public accepts bitcoin.
Learn more about Bitcoin mining, Bitcoin wallets, and how to buy Bitcoins. The revolution of money began in 2009 and these days we are seeing it change money as we know it.