Bitcoin for the Bar: 5 Facts About Bitcoin You Can Share With a Friend Over a Beer
I’m a big believer that nearly everything — no matter how complicated — should be able to be summarized in the time it takes two friends to have a beer. Bitcoin, while certainly complex, is no different. However, trying to explain Bitcoin without losing your audience over terms like cryptography, hash rates, or Satoshis can be challenging.
While this is slowly changing as more and more people learn about the technology and get “Bitcoin-savvy”, I think the Bitcoin community can do a better job explaining the technology and its core benefits in plain and understandable language.
So in an attempt to spread the word about Bitcoin and its potential, here are five things you can tell your Bitcoin-curious friends that shouldn’t take longer than the first to last sip of your favorite IPA, lager or stout.
1. Bitcoin is a new way for people to exchange value.
What do squirrel pelts, sea shells and dollars have in common? At some point humans have used each of these to exchange value with one another. Currency has taken various forms over time and simply put, Bitcoin is our most modern version of value exchange. Instead of catching squirrels, picking shells off the beach or cutting down trees, this new form of currency is created leveraging technology instead of natural resources.
Bitcoin — first described in a white paper released anonymously in 2008 — establishes a set of rules for how value can be transferred from person to person electronically and securely. It uses a set of rules based on computer science to validate transactions between two parties. Bitcoin (big “B” for the set of rules, small “b” for the currency or token of value) allows for the exchange of value between two parties regardless of geographic borders. And this can be done for a fraction of the cost of using traditional means to send money or purchase goods and services.
2. Bitcoin is a decentralized system.
No individual, government, or business runs the Bitcoin network. All transactions from one party to another are processed and verified by a geographically disperse network of computers. Decentralized networks like this are nothing new. The rules around how email servers communicate — allowing me to seamlessly send an email from my Gmail account to someone in Australia with a Yahoo account — are established as part of a decentralized system. And because the Bitcoin network is completely decentralized, changes to its transaction validation procedures must be agreed to by the network, not just one central authority or intermediary (e.g., a government or bank). This decentralized structure makes it extremely difficult for one person or group of people to gain control of the system to their benefit (i.e., steal bitcoin).
3. Bitcoin is not unregulated.
Many people believe that because Bitcoin is so new, policymakers haven’t yet been able to figure out a way to regulate the digital currency. They assume this must mean that users of bitcoin are transacting in some type of netherworld outside of governmental laws. The reality is that while there have been limited attempts to create new rules specifically for Bitcoin (which is probably a good thing since the technology and its ecosystem are still developing), users transacting on its network are subject to the same rules as they would be when making other types of currency transactions.
While it will take time for governments to determine if additional rules are needed for Bitcoin, regulators (most notably in the U.S.) have in the interim issued guidance for both users of bitcoin and businesses to ensure that they are in compliance with applicable laws.
4. The technology behind Bitcoin has applications that go far beyond value exchange.
Powering the ability of Bitcoin to allow for person-to-person value transfer is its underlying “blockchain” technology. How does it work? In a nutshell, bitcoin transactions are verified by the network in groups (aka, blocks). Once verified, these blocks are added to Bitcoin’s blockchain, which serves as an irrefutable, publicly available confirmation of transactions in the order in which they occurred. So if I send one bitcoin to my friend in Toyko, the network will be able to always see that I owned the bitcoin I sent to him and now he is the owner. This is all done via the math-based rules set forth in the Bitcoin protocol.
While Bitcoin was set up to be an electronic cash system, the blockchain technology can be used to verify all sorts of non-financial transactions. What the blockchain allows for is verification, without the need for a trusted third party to confirm that a transaction took place. Businesses and innovators are exploring how this technology can help manage the ownership of land rights, intellectual property, and medical records to cite a few examples.
5. Bitcoin is here to stay.
Bitcoin has only been around since 2008, and its application and potential use cases have really just started to materialize in the last few years. As with any nascent technology, there will be bugs, hiccups, and other growing pains. No one can guarantee that its adoption rate will increase dramatically or that everyone will one day possess a bitcoin wallet on their phone. But what’s important to remember is that Bitcoin has already changed the way we view money and will continue to do so. It has opened a door to a future where individuals and businesses can transact with each other in a more cost effective and direct way, regardless of their geographic location or their access to banks or other financial intermediaries.
So there you have it, five reasons why Bitcoin matters, all in under the time it takes you and a friend to polish off a couple beers. Hopefully this is useful enough to get them to buy the next round!
Gerry O’Shea is a Bitcoin enthusiast and believes the technology has the potential to create a more peaceful and prosperous world. Gerry can be reached at email@example.com and @osheagt.