What is Bitcoin? A Guide for New Kids on the Block
Bitcoin is A Digital Currency
There are over 180 currencies in the world. Everything from the CAD dollar in Canada, US dollar in America, the Euro in Europe to the Tajikistani somoni in Tajikistan… 🤨
Bitcoin is another currency that doesn’t belong to any country. It’s a digital currency that works on the Internet, anywhere in the world.
You can use $BTC to pay for things, send to other people, or hodl in savings account, all without requiring a bank to hold it for you. Just use your phone or computer!
If you’re reading this, you’ve probably seen some of the excitement online about Bitcoin. What’s with all this excitement? Why are people so obsessed with this internet currency?
The answer lay, in part, in Bitcoin’s fundamental design. First, Bitcoin leverages something called a blockchain.
Bitcoin uses Blockchain Technology
Blockchains are a hyper-secure record of transactions that get updated as we send and receive from our digital wallets. It removes the need for a 3rd party to play referee, like PayPal or Bank of Monreal, making it much easier to send $BTC as a form of payment to people anywhere in the world.
Are you curious to learn more about Blockchain technology? The following is one of the best Blockchain explainer videos by Bettina Warburg.
Bitcoin is Forever 21
There will only ever be 21 million Bitcoins.
Bitcoin currency has a hard cap on the number of $BTC that will ever exist, and that number is built right into the code in a way that can’t change. It’s immutable.
Bitcoin’s design is unique in its limited supply, which inherently creates scarcity and potential value. There are more than 21 million millionaires in the world. If every millionaire wanted 1 $BTC, they couldn’t. Let that sink in for a moment…
Bitcoin Resembles Digital Gold
The result of this hard cap on the supply of $BTC is a currency that resembles digital gold.
Like gold, there’s a limited supply of it. Finite supply, coupled with increased demand, means the more people that want it, the more valuable that asset becomes. It follows the basic principle of economics.
Don’t just take it from me. Some analysts believe Bitcoin will take market share away from gold as digital assets become more widely adopted.
How Can this Digital Gold be Used as a Currency if Each One Costs *****?
Like how you can break a dollar into 100 cents, 1 Bitcoin can be broken into 100,000,000 ‘bits’….! These little bits are the currency and can be used to exchange goods and services.
Don’t be fooled into thinking you need to buy 1 $BTC. You can become a Bitcoiner, Bit by Bit, by buying a fraction of a Bitcoin called Satoshis or SATs.
If You Want to Buy Bitcoin, Who Sells it to You?
The answer is mostly currency exchanges and other people! Have you ever seen a currency exchange in the mall or airport?
There are lots of online exchanges that do the same thing but deal mostly in cryptocurrencies.
These ‘exchanges’ will exchange your Dollars, Euro or Yen for Bitcoin, Ethereum, or other digital currencies. But just like the exchanges in your local mall, they don’t create those Bitcoins.
Bitcoin As A Hedge Against Inflation
In your country, the Central Bank prints your local currency.
The Central Bank prints more and more of it each year as governments require more money to spend.
The continuous routine printing of money increases the circulating supply and decreases the value of the dollars in your wallet.
Suddenly, a bag of milk that used to cost our parents only 5–10 cents now costs anywhere from $5-$10 today.
The prices of goods and services rise to counterbalance the depreciation in the value of a dollar. That’s inflation.
Inflation has hit all-time highs in Canada, the United States, European Union, and Turkey in recent years. To name a few countries…
Bitcoin acts as a hedge against inflation. Unlike the soft money of your fiat currency, the value of $BTC appreciates with time.
Bitcoin is Hard Money
Bitcoin’s fundamental design works the exact opposite of fiat currency. It has a hard cap of 21 million, so people can’t just ‘print’ new ones.
This means those SATs you’re accumulating will be worth more as more countries, corporations, businesses, and individuals adopt The Bitcoin Standard.
This fundamental design makes Bitcoin an effective store of value. Why? Not only does it maintain its worth, but it appreciates over time.
In the short term, the price of $BTC may seem volatile, but zoom out, and what do you notice? This is why Bitcoin is considered one of the best savings technologies of the 21st century.
Bitcoin is Decentralized
So, if Bitcoin isn’t printed into existence, then how is it created?
Like gold, Bitcoins are “mined” into existence, not with picks and shovels but with powerful computers and complicated math.
All the Bitcoins you can or will ever own have been mined by one of these Bitcoin miners, either recently or ten years ago when the Bitcoin Network was created. These computers are part of a decentralized network.
Rather than sending the workload to verify transactions to a single server, the network distributes the workload among these computers. It's why Bitcoin is often viewed as a more democratic transaction method. Unlike a centralized network, a bank permitting a transaction, Bitcoin payment is sent to verify by the peer-to-peer (P2P) Bitcoin Network.
And that brings me to my favourite part about Bitcoin’s fundamental design: its creator.
Bitcoin’s Creator is Anonymous
Who or what created this new savings technology? The answer is, we don’t know.
Bitcoin’s creator, or creators, used an anonymous screen name called Satoshi Nakomoto. They released the original technical paperback in 2009, after the 2008 financial crisis, to prevent this event from happening again.
The creator went quiet early into 2010 once people started seeing the potential of the new invention. The reason was likely to make sure that people who were against it couldn’t attack it by attacking them while maintaining the ‘decentralized’ ethos of the project.
Bitcoin is Financial Sovereignty
Learning about Bitcoin and Blockchain technology is like learning about the Internet in the early 2000s. There’s a lot to learn. But the more you understand, the more you believe in the possibility of a future with greater financial sovereignty — a future where people feel empowered to take complete ownership and control of their money.
I hope this guide proved a helpful starting place. Check out my next bit on “Why Does Bitcoin Have Value? Future Values Perspective.”
