Explain Bitcoin In Simple Terms: Simple Guide For Beginners
Bitcoin is complicated!
And for millions of people around the world, it is still something that they do not understand.
However, everyone needs to understand this technology and lately adapt to it.
Why do we need to explain Bitcoin in simple terms?
It has been 13 years since the world saw something very unique and special about money and wealth. It was not anything related to our traditional money, wealth, store of value, and way of transferring.
In October 2008, a person or group named Satoshi Nakamoto released a white paper introducing a digital currency called bitcoin. Till that time the world was only aware of two popular types of money. The old type was coins made from gold, silver, and other materials.
The second type was the paper currency which is widely used by people nowadays and has become a tradition.
However, digital currency or bitcoin was new to the entire world including financial experts, banks, and countries around the globe. And it has been controversial not only for ordinary people but also for financial experts and scholars.
It is now 2022, and people are still trying to find a way to understand what cryptocurrency or bitcoin actually is and how it works. The name “bitcoin sounds interesting and is attractive enough for people.
Today in this article, I am going to show you what bitcoin is in a simple way so you can understand it even if you are a beginner or someone who is not in control over financial education.
Just want to show you that bitcoin is so complicated and technical but I will try to not touch on the technical aspects of bitcoin and describe it in the beginner-friendly and easiest way possible. Let’s dive in!
What Is Bitcoin For Beginners? Explain Bitcoin In Simple Terms
Bitcoin is a digital currency that does not have any physical presence. It is simply a number that you can only see in your wallet. Unlike paper currency or gold coins, you can not hold or touch them. Bitcoin works and functions independently without any central authority like banks and governments.
Instead, it is a digital peer-to-peer electronic currency ( actually a number) that you can transfer from one place to another place in seconds without any fee or involvement from banks and governments.
For example, the US dollar has been controlled by the central bank of the USA, the UAE dirham is controlled by the Central Bank of UAE. But there is no central bank or any financial institution that controls bitcoin.
Back then it was only an idea that people had no trust in it, but now, it is trading worth billions of dollars in its cryptocurrency exchanges. Just like shares are traded on normal stock markets, you can trade Bitcoin on these exchanges available on the internet.
One bitcoin has 100M satoshis just like one dollar has 100 cents. This means that you can divide 1 bitcoin into 100M satoshis.
How do Bitcoins work?
The bitcoin or cryptocurrency system is just the transfer of digital assets from one wallet to another wallet. Each Bitcoin is a digital file stored on your computer, exchange app, hardware wallet, or smartphone. People can send bitcoin or a part of bitcoin which is a digital file to your digital wallet and you can do the same by sending this file to their wallet.
But everything needs to be on record so we can see the data of our transactions. To keep all the data safe, reachable to everyone, and impossible to change, bitcoin has its blockchain which changes the way we keep our data.
Unlike banks keeping their separate records of all the transactions and who has paid what to who, with bitcoin, there is just one enormous spreadsheet or record of every transaction made using bitcoin. This spreadsheet is called the “ledger” or “blockchain.”
Blockchain is a record of people that is also controlled by those people who use it and make transactions.
Although every transaction of bitcoin is recorded on the same ledger, there are many many copies of that ledger and anyone who is part of that network has a copy of this to see what is happening with bitcoin. Which makes it impossible to spend bitcoin that you don’t own, make a copy of bitcoin, and undo transactions.
Let’s understand it with an example, if you try to hack someone’s computer on the bitcoin network or blockchain, and give yourself more bitcoin by adjusting the figures on the copy of their ledger, it is not going to go through.
The system will automatically realize that 99.9% of the copies on the ledger are saying one thing but one of them is saying something else, so it must have been tampered with. As a result, you will fail 100%.
Can Bitcoin Be Converted Into Cash?
Yes, there are several ways to convert bitcoin into cash. However, it is important to understand that Bitcoin itself has no mechanism built into it that could convert bitcoin to other currencies.
You will need a third party to get cash in return for your bitcoin. There are some of the easiest ways to do it. You can sell it to Paypal and get your cash. The second method is to use bitcoin ATMs where you can convert your bitcoin into cash by a serving rate.
Another way to convert your bitcoin into cash is to sell them to other people on exchanges for fiat currency. This method takes time and you have to take care of the entire process.
Why Was Bitcoin Created?
The purpose of and primary goal of creating bitcoin was evident from the first line of the whitepaper published by satoshi Nakamato on the internet in Oct 2008. And there is nothing better than copying it so you can understand what was the main motive for creating this revolutionary currency.
“ A version of electronic money that would allow payments to be sent directly from one party to another party without going through a financial institution”.
As Satoshi Nakamoto wants and aims for in his whitepaper, people can send payments through bitcoin from anywhere in the world without any limits in a matter of a few seconds.
Not only the first line of the whitepaper was impressive, but rather every word of that whitepaper was also a wake-call for the financial world and the traditional money that we use.
Who Invented Bitcoin?
For almost 15 years, there is a controversy about the founder of bitcoin. But this controversy is not about who invented it. Because we already know the founder of bitcoin was Satoshi Nakamoto.
The real question that the world has been looking to find the answer to is:
Who is Satoshi Nakamoto? Some people say he is a person in japan who did all this stuff.
Other are not agree and considers Satoshi, as not one but a group of people. There is also a group that believes Satoshi Nakamoto is not a Japanese man. They think there is an intelligence agency of a powerful country ho did this in 2008.
For now, it is not clear and we may have to wait to know the exact person or group who invented this revolutionary digital currency.
What Is Bitcoin Mining?
The process of creating new bitcoins is called mining. There are 21 million bitcoins. When someone mines it (brings it to the blockchain) for the first time. This process is called bitcoin mining.
Bitcoin is considered to be digital gold. That is why it’s compared to natural reserves like gold mining. Miners are rewarded with bitcoin because it is a time and energy-consuming process. You can find more detail in this article about bitcoin mining.
Bitcoin Statistics For 2023
- The maximum supply of Bitcoin is 21 million coins.
- The all-time high price is $69,044.77
- 77% of American crypto owners own Bitcoin (Statista)
- Hackers have stolen over $75 billion worth of cryptocurrency since June 2013 (Source)