A Basic Explanation of Bitcoin

Explaining Bitcoin to an … ‘it’s an illusion — it’s not real — it’s of no interest to me’ … type of Sceptic. By using something they already use and understand.  

I’m sure you have email ? … so lets look at Gmail, or Hotmail, or whatever service you use . You don't know, or need to know, computer code to write and send an email. But you did in the early days of the internet. The internet then was only for “Geeks” and the majority of the population initially believed that it would never ‘catch on’ and would be of no real use.

But today, most people happily use email regularly. You understand it’s not ‘real’ ( like paper and pens, sent in an envelope ) but its there, on your screen when you type it – and it disappears when you press ‘send’ .. is that an illusion ? No, but you have to accept and trust that somehow the internet knows what to do with your message when you click it away, and deliver it to the person you want to receive it, and it does that by coding and protocols. Protocols are the vehicles by which the internet transports information around the World Wide Web. Different protocols handle different types of information — emails, photographs, music etc.

Coming back to your email. Imagine If Hotmail disappeared tomorrow – would that end your ability to send emails ? No of course not – because Hotmail is just a client service that sits on a Protocol transport mechanism. If Hotmail closed down tomorrow you’d just use another email service. Hotmail closing ( or failing ) doesn't affect the ability of the internet to send emails. Because all email ‘service clients’ use the basic protocol of SMTP ( and POP and IMAP ) to move your typed message around the internet – in the coding language that makes that possible ( because your typed words don't move from you to the receiver — parcels of code do )

So you need to think of “Bitcoin” in a similar way ( not the ‘money value’ that people put on it) Because Bitcoin itself isn't the protocol ( the underlying coding ) Bitcoin just happens to be what people call the ‘micro-bits of unique information’ that are processed on the blockchain protocol and move around attached to specific transactions. ie , even if Bitcoin was to fail at one Exchange, the ability of the Blockchain Protocol to transport Bitcoin, or any other similar digital currencies that use this Protocol, would not be affected.

Why then is Bitcoin so important, and why it will revolutionise the future ? The real unique property of a “Bitcoin’ is that it can never be duplicated or counterfeited ( unlike a bank note – which can be copied and used without trace – the Bank of England for, instance removes over £13m of counterfeit notes from circulation each year, but there are many many more that remain undiscovered each and every year)

This is not the time to explain fully this ‘impossibility of double spend’ — ie you can never duplicate a Bitcoin transaction — Please research this yourself and you will see why this is achieved.

At the moment, Bitcoin transactions are concerned with the movement of money value, ( international funds transfer etc ) but applications are being designed every day that will enable you to use Bitcoins to verify things as diverse as contracts, ownership – of companies and their shares — insurances, voting, proof of ownership of artwork, wills or anything that needs to be “proved genuine” and not a duplicate. And you wont need a third party to show it is genuine — because the record will always be there — fixed forever within the blockchain. In effect it will do away with the need for “middle men” — brokers, agents, and anyone who just claims fees for verifying or passing on a contract, will be made redundant — and your costs will reduce significantly because of this.

One further point that needs to be emphasised. The blockchain doesn't just sit on one computer, but is continually moving around the internet between thousand and thousands of separate independent computers. No computer can alter your transaction because it needs to be confirmed to each and every following computer as the same code. This is the same mechanism that ensures your email reaches the person you want it to. Passing through numerous servers and nodes. You don't ever stop to worry about how it works — you just know it does.

Bitcoin is still in the early days of its development. Security of the “digital wallets” need making simpler, and on-line storage aspects need strengthening ( although they are already far more secure that your credit card or on-line bank accounts )

So please try and forget about whatever ‘money value’ people may be putting on Bitcoins today, or tomorrow, or next year, it is not going away !! because it is actually the newest, and most revolutionary protocol that the internet has yet seen and is going to significantly change the way the internet works in the next decade. Bitcoin is going to affect everybody, just as email has done to written communications.

Keep an open-mind, research all you can , and welcome to the future !