What Is Bitcoin? How It Works And How To Get Them
I hear my friends continuously ask “What is Bitcoin? Hell, what even is a digital currency?”
In this article we’re going to look at exactly what Bitcoin and other digital currencies (otherwise known as cryptocurrencies) are, how they work and how to get some of your own.
What is Bitcoin?
Basically, Bitcoin is just like any traditional currency you hold in your wallet or on a card. It was created by an unknown individual or group known under the name Satoshi Nakamoto and released as an open-source software in early January 2009.
Even though Bitcoin is similar to traditional currencies, there is one fundamental difference between any cryptocurrency and any traditional currency. Cryptocurrencies are completely decentralised.
What is Currency Decentralisation?
Currency decentralisation simply means nothing is controlled or managed by one location.
Unlike traditional currencies, transactions, management or any repository of information is not stored under a single ledger system but under a system called ‘Blockchain’.
Think of it this way,
Traditional currencies use a central ledger system which all data around each individual coin must go through before any money is exchanged.
The difference when using Bitcoin however, is that instead of being processed by a central system, coins will go straight to the individual or business you’re trying to give money to.
Why Do We Need A Decentralised Currency System?
There are a multitude of perks when using digital currencies.
The first I would like to mention is the reduced time needed to transfer money to another account due to the lack of centralised processing. A concequense of this causes fewer fees for both the business and consumer allowing an increase of profits for the company and a larger disposable income for the consumer.
Other benefits include being able to use the currency anywhere in the world. This is of significant importance if you travel a lot or do any online shopping as exchange rates and fees can quickly kill your bank account.
Last but not least, your account cannot be frozen by any government agency, business or individual. In fact, this is one of the main reasons digital currencies have historically been so popular with underground markets.
How Can Bitcoin Exist?
This might blow you mind but, currency is imaginary.
Yup, you read that correctly.
Now, before you click away from this article calling me crazy, listen to my reasoning.
If you take a dollar bill out of your wallet you’re able to touch it, feel it, you know it’s a dollar because it has George Washington’s face on it if you’re American.
But answer me this, if the currency is real therefore exists in nature, how can it have the ability to rise and decline in value?
The reason this is able to occur is due to mass society putting trust into the singular currency and stating that this the accepted tool we will use to exchange for goods and services.
That’s why Bitcoin can be a thing. It’s not real, it’s not tangible, but it’s there and you can even curently buy things with it.
So, if it’s not real how can you buy things with it?
Because society has put their faith into it and stated that this is an acceptable form of payment for goods and services.
How Bitcoin Works
How Bitcoin works is a little more complex than how Bitcoin can exist, but it will mess with your sense of reality a little less. I mean, I don’t want to Matrix you too much.
As we’ve discovered, Bitcoin is a cryptocurrency. This means it’s encoded in such a way that it’s impossible for any single coin to be duplicated. This rule was put in place as if any coin could be, people would print as many Bitcoins as possible causing the currency to be less trustworthy and as a consequence the value would collapse.
As we discussed regarding the central ledger system and how Bitcoin does not use the same method, this is where their system of ‘Blockchains’ comes into affect.
These Blockchains act like an individual ledger for each coin. This is essentual for any currency or else you’d be capable of using the same coin multiple times before it being recieved by the intended original recipient, which would be a pretty serious problem.
How To Get Bitcoins
Bitcoin is a wonderful currency everyone should invest in, so how do you get them?
Well, there are multiple ways to receive Bitcoins.
The first way is to simply exchange your traditional currency such as the USD or GPB for Bitcoins.
As of the 12th of May 2017 when I’m writing this article, 1 Bitcoin is worth $1850 USD. However you are not required to purchase an entire Bitcoin and may purcahse as many or as few as you desire.
The other way to generate Bitcoins is to mine them. Now, when I say mining I’m sure you picture people loading their horses with equipment, traveling thousands of miles on foot and hit rocks until gold magically fell out.
Well actually, Bitcoin mining is kind of similar. However, instead of waving a pickaxe around your room hoping to rip a hole where the wifi is so Bitcoins will fall out you use special software that uses your computers hardware to solve extreamly complex math problems to essentually earn Bitcoins for the value you provide the Blockchain ledger system.
But that’s a little complex for this introductory Article, I’ll be sure to go into the details of mining in a future post.
And the last way to receive Bitcoins is to sell products or services and accept Bitcoin.
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