Welcome to our Bitcoin for Dummies edition! You already know that Bitcoin and cryptocurrencies, in general, are nothing short of an enigma.
Once upon a time, the world did not know what cryptocurrencies were slated to do – 13 years ago, Bitcoin came out of literally nowhere. And cut to thirteen years later – it’s worth millions of dollars, even though only a handful of people understand how these actually work.
As a former Bitcoin dummy, I can safely vouch for this cheat sheet dummies-turned-crazy-investors made it for dummies-in-waiting. It will not just clear all the mystery around Bitcoin and help you deal with confusion so that you can start your Bitcoin journey with much confidence.
So, without wasting time, let’s get started!
Bitcoin For Dummies: What Is Bitcoin And How Does It Work?
BTC or Bitcoin is a kind of digital money that exists on its own independent network. The network is known for facilitating online transactions safely and directly between accounts without needing an intermediary. An intermediary mediates and validates transactions. It could be a credit card company or a bank.
This indicates that two individuals can send Bitcoin to each other from literally anywhere in the whole world. And that too at any time of the day without consulting any money transfer service or bank.
It’s a revolutionary digital asset that was first launched by a pseudonymous individual or a person known as Satoshi Nakamoto in 2009. The release of Bitcoin started a movement in the world of blockchain technology and cryptocurrencies. If you value market capitalization, you will find out that BTC remains the biggest cryptocurrency in the world.
BTC is a currency that is native to the internet. It comes with a whole variety of characteristics that differentiate it from non-digital money. More importantly, Bitcoin happens to be decentralized in terms of design. This means it is not controlled or owned by anyone. It is public, open, and absolutely functionally uncensorable.
Plus, anyone can utilize BTC and then contribute to its software’s collaborative development. More than 10K machines across the globe, known as nodes, are responsible for running the BTC software. This software gives the network its vital functions.
Since BTC operates across a huge vase, it’s geographically decentralized. In fact, this particular quality makes it extremely difficult for any organization or individual to shut down Bitcoin.
What Is Bitcoin Used For?
In this Bitcoin for Dummies blog, there is no way we are not touching upon the basics. So, now that you have a fair idea of what BTC is and how it works let’s talk about its usage.
People utilize BTC for multiple reasons. For many, BTC’s value is similar to digital gold since its fixed amount of supply makes it very scarce. For many others, Bitcoin is a cheap and easy way to easily transfer value because of its digital nature as well as cheap transaction fees.
Then, there are some individuals who use BTC since they are intrigued by its sheer potential and simply enjoy experimenting with the latest technologies. Finding out more about Bitcoin and subsequently investing in the same gives an excellent opportunity to enter the exciting world of Web3, decentralized technology, blockchain, and crypto.
What’s So Great About Bitcoin?
Unlike other fiat currencies and the U.S. dollar, BTC isn’t backed by any government. There’s no organization or entity that guarantees its value beyond the consensus of the public on its value. BTC’s market price indicates this at any given point in time.
Some individuals believe that BTC is valuable, particularly because it isn’t controlled by any government. Then, there are others who are attracted to BTC’s fixed supply. Some are in love with Bitcoin’s automated and highly transparent monetary policy mechanisms.
Typically driven by political issues, government-issued currencies can be launched indefinitely. This can easily cause problems such as declining buying power and inflation. Contrastedly, there won’t be over 21 million Bitcoins. Moreover, BTC’s inflation schedule has already been coded since its launch into the network.
In addition, the BTC network is immutable and auditable. Every individual transaction is absolutely available to view. Once a transaction gets executed, it is impossible functionally to undo it. That is because every individual confirmed Bitcoin transaction happens to be added to the ‘shared public ledger,’ known as blockchain, which in turn is maintained by miners.
In crypto parlance, miners are individuals who utilize powerful computers for helping to make sure that the transactions are valid, ordering them chronologically. The valid transactions are the ones bundled into different blocks for confirming strict rules depending on cryptography.
These blocks are all linked in a single chain and can’t be modified once they are added. The advantage here is that you will have a public, ownerless, and shared record of every single BTC transaction ever implemented.
This indicates that you check whether or not every BTC is always working as it should be without trusting other parties in any transactions to make sure that it goes through.
Wrapping Up: Do You Understand Money?
When you actually think about money, you will obviously think about coins and paper bills. However, the major currencies in the world don’t have any bills and coins for all the money that is currently in circulation.
In fact, nearly 90% of major currencies have no physical representation. It is just “nothing more than entries on a computer server.”
Money is nothing but a concept. It’s a way for people to store value so that they can exchange this value for real products and services in the future. Money can have multiple forms of physical representation. Large stone disks, coins, barley, salt, gold, banknotes, and polished shells can all represent money. It can be multiple things.
Now, there’s one more thing. Not everything cannot represent money. If shells represent money, you cannot just pick some from the beach and call it money. According to history, past cultures using shells as money actually used a specific kind of shell. These shells were not very easily available. This shows there is not much scope in terms of flooding the market with new money.
So, of course, Bitcoin can also act as a type of money. You could also call it a ‘store of value.’ Plus, it is in limited supply, considering a fixed but diminishing supply of BTC is mined every other day.
And that’s a wrap on the Bitcoin for Dummies blog – feel free to share your thoughts, experiences, and opinions about BTC in the comments below.