Today I'm going to explain to you as simply as possible, "What is a bitcoin and how does it work?"
Bitcoin was launched as a video game currency in 2009 and within a couple of years, it became a massively successful form of digital currency, also known as cryptocurrency in the industry.
Cryptocurrency provides an encrypted and secure network which any amount of money can be transferred from one person to another, globally and for free, using digital wallets.
Cryptocurrency makes expensive bank wires obsolete. You have the power to be your own bank.
Bitcoin is the first ever cryptocurrency, ever invented, back in 2009. It is the pioneer of the industry and from then until now, the Bitcoin Network has accumulated over 500,000 merchants and growing online and in brick and mortar stores that accept bitcoin. Pretty amazing success wouldn't you say?
Bitcoin is also known for the financial technology that's behind it, that makes it run, that's called the blockchain.
And so the question that we have here today "What is a bitcoin and how does it work?" this is being asked more and more every single day as that the awareness of financial technology grows because of two reasons.
One, the blockchain and bitcoin have received a lot of attention over the past few years from financial institutions and corporations in the world who have been investing in blockchain technology for implementation.
Industry has spoken, they are looking to cut their costs by using financial technology, cryptocurrency and the blockchain. So this shows you there is a major opportunity if you are going to be involved with cryptocurrency, alright.
Cryptocurrency, bitcoin specifically, has already created a new generation of wealth with new multi-millionaires around the globe, people who were lucky enough to have taken action with bitcoin when it first launched, when it was worth just a fraction of a cent per coin.
Many of you may have heard of the interesting story of Kristoffer Koch, the man from Norway who bought $26 worth of bitcoin for a research project on encryption in college and forgot he even had and woke up in 2013 when the price of bitcoin soared and found he was just about a millionaire with the amount of bitcoin he had acquired.
It totally changed his life. As you can see bitcoin first came out in 2009 worth cents per coin, today as of the writing of this blog post, it's worth $890 per coin, buy-able and sell-able on Coinbase, one of the world's largest bitcoin Cryptocurrency exchanges where you can buy and sell bitcoin and also is a wallet that you can use to send and receive bitcoin. And it's based out of the US and serves 33 countries.
Now even famous investors and entrepreneurs are promoting bitcoin or standing behind bitcoin as a solution for now and into the future, including Billionaire investment advisor Bill Gross, who has been explaining in multiple articles recently online that bitcoin is the way to go and not central banks for storing your money.
Bitcoin has risks but so does the central banking system and how they operate as a system. Risk of banks being insolvent and locking your money up in their bank so you can't use it when they run out of funds, like has happened in several countries in the world in the past.
Since 2007-08, the recent banking crisis of the United States, where the US was lucky enough that the US government had the money in it's tax coffers in order to become stakeholders of the banks and save them, now we recently have the German bank, Deutsche Bank, their central bank which has failed and their government has publicly stated that they are not going to become a stakeholder and fund it so they can keep functioning.
So I'm assuming there is probably going to be something happening with the money in that bank or for those German bank holders who have to be worried about it, I actually know a lot of Germans who are investing in bitcoin right now.
And so Bill Gross is just saying that bitcoin is actually a lot safer to have your value stored in long term right now than banks. And of course considering the interest rates that you get at banks being so piddly and in some banks around the world being negative interest rates, there is no opportunity for growth of your money in a savings account.
Bitcoin s an amazing solution for cutting costs financially and enabling the unbanked people of the world to be able to get access to financial services. Like people in Africa who don't have access to good banks and global commerce.
Richard Branson has been a big proponent of bitcoin and he talks about it in many of his interviews.
So I'll go over some of the advantages of bitcoin real quick and then the flaws. And then I'll show you where you can set up your first bitcoin wallet and go over the basics of how you can use it.
The benefits and advantages of using bitcoin.
You can transfer money from person to person using the internet without having to go through a bank. meaning fees are much lower [think fraction of a cent per transaction].
Bitcoin is accepted in every country that you go to and everywhere thanks to the internet.
Your bitcoin wallet can't be frozen by a financial institution or government.
There are no arbitrary limits on the movement of money.
The exchanges exist online that allow to buy and sell bitcoin for dollars, euros and more.
Bitcoins are stored a digital wallet that can be installed on your desktop computer and your mobile device.
You can take it anywhere that you go.
Sending bitcoins for payments is as simple as sending an email, you can purchase anything, all bitcoin transactions that ever happen have been recorded on a public verifiable bitcoin blockchain, which is an immutable ledger, which basically safeguards the bitcoin money system from ever being a victim of manipulation and it's also impossible to print more bitcoin and expand the bitcoin money supply because it's all constrained and limited by a code.
Inflation can't run off and get all crazy like the Federal Reserve either and start printing more money supply which in effect decreases the value of the all the existing money supply which is exactly what is happening to the US dollar and why it has been going down in value over the years as you can see in the buying power at the grocery store, getting less and less in the grocery cart for the same amount of money over the years. That's called inflation.
Bitcoin is also good against inflation because it actually grows rather than decreases it's kind of deflationary.
As a trust technology, bitcoin will always execute as expected to verify and conduct transactions globally and securely. It replaces the function of central banks with this role.
Bitcoin is also completely open source, anyone can view the code, nobody owns bitcoin the blockchain or the concept. However, there are a growing number of people around the world who have adopted the currency and own bitcoin.
With bitcoin and cryptocurrency you can be your own bank.
Wow, that is a lot of advantages. It's kinda incredible and makes you wonder what are the its flaws.
Okay I'm going to explain. Bitcoin is slow. It can take up to 45 minutes for the bitcoin network to confirm a transaction.
Since there is no way to instantly convert bitcoin to fiat currency [cash] via a transaction, merchants must speculate holding the bitcoin until it arrives in the wallet and they can move it to the exchange and liquidate it.
The transactions on the bitcoin network are confirmed by miners who run server farms around the world. These miners earn bitcoin for the transactions they verify on the network. This is something that the average person can't do.
So that's its flaws.
Due to the logistics of bitcoin miners that require large amounts of processing power, it also consumes a lot of electricity to run the bitcoin network, currently $400 million a year, this is not really a green solution.
Therefore, it's not completely sustainable into the infinite future per say.
New technologies called 'altcoins' (alternative cryptocurrencies to bitcoin) have been developed over the past few years that are quicker and faster than bitcoin. They also improved massively upon the transaction verification process and do not require millions of dollars of energy annually to run the network.
Transactions are much faster and also they are very, very low in value like bitcoin was, back in Bitcoin's days. So there is a whole lot of opportunity in this industry.
Bitcoin has passed as a ripe financial opportunity for investment and leverage, as it's at $890 per coin as of this post. To have true leverage for financial growth, where you are going to put your money to work to grow the way the wealthy do it, you got to start with something that is very low in value.
To learn more about Bitcoin, watch this video.
LATEST: Why Bitcoin is Hottest 2017! Experts, Investors and Traders Review Bitcoin
Related Posts
Banking On Bitcoin Film Hits Mainstream Theaters January 6Th 2017 --- by @luzcypher
8 Myths About Bitcoin That Are Actually True --- by @luzcypher
The Future Of Bitcoin Looks Promising As A Financial Tool And Investment --- by @luzcypher
It was never to do with video games.
Not really true, there were efforts before it that included cryptography. But Bitcoin put different puzzle pieces together in a novel way and became the first successful decentralized cryptocurrency. Technically it was invented in 2008, and first released in early January, 2009.
This post doesn't quite answer how it works. If readers would like to know more, Coursera offers a class on bitcoin and cryptocurrencies and if you'd just like to read the textbook, this is a free draft of it from earlier last year: https://d28rh4a8wq0iu5.cloudfront.net/bitcointech/readings/princeton_bitcoin_book.pdf
Thanks for the interesting info.
I've been reading this book.
https://www.amazon.com/Virtual-Billions-Genius-League-Bitcoin/dp/163388144X
This tells an interested story of money, bitcoin and what bitcoin has enabled.
I've read until about the drug store portion but it's bit of story telling way of getting the message across is quite fun.
wow
This post was written 5 months ago and now the price is $2,700!
I think Bitcoin will see it's next 'Frenzy" Phase this year. I get paid a portion of my income in Bitcoin. I also know, Steemit will leave the 'Beta' stage this year, so there's that. New monies for a new era. Eh?
Thank you for the clarification!
Thanks for info. upvoted, resteemed
This post has been ranked within the top 10 most undervalued posts in the first half of Jan 19. We estimate that this post is undervalued by $11.88 as compared to a scenario in which every voter had an equal say.
See the full rankings and details in The Daily Tribune: Jan 19 - Part I. You can also read about some of our methodology, data analysis and technical details in our initial post.
If you are the author and would prefer not to receive these comments, simply reply "Stop" to this comment.
Good points in this post. I was about to post a similair thread. It's surprising how much uneducated investors the crypto space has. You still see people invest in this shady and scammy coins. I was researching a way to find more info about the current cryptocoins on the market. This is quite an interesting website I found: https://www.coincheckup.com Supposingly they researched every crypto coin in the scene based on: the team, the product, advisors, community, the business and the business model. They even score the coins stengths. Go to: https://www.coincheckup.com/coins/Bitcoin#analysis For a complete Bitcoin Indepth analysis.