What is Bitcoin? | BTC Basics Video | Advantage Blockchain
Welcome to Advantage Blockchain, the easy, affordable way to learn about blockchain and cryptocurrencies online. This lesson is about Bitcoin Basics to help you answer the question: What is Bitcoin?
Bitcoin Basics
In the video, we discuss Bitcoin and its most basic fundamentals. Bitcoin is a new decentralized payment system. Traditional payment systems like PayPal, Venmo, Visa, or Mastercard are centralized. They rely on having a business model to fund the servers which process all transactions on their networks and make payments possible. Bitcoin is the first major decentralized payment system. In a decentralized system, anyone can connect their computers to the network to transact or help process transactions. In Bitcoin’s payment system, anyone can act as a server and help complete transactions in a process called mining. The miners receive Bitcoin as reward for using their computers to process transactions on the network.
Bitcoin mining is made possible by a technology called cryptography. Cryptography is a mathematical process that allows computers to communicate with each other and make unanimous, verifiable decisions in a network. Bitcoin is referred to as a cryptocurrency because of its use of cryptography technology.
All of Bitcoin’s transactions are stored on a publicly accessible digital ledger called a blockchain. This blockchain is a decentralized database which contains information about all transactions in Bitcoin’s history. The mining process uses computing power and cryptography to self audit and cross-verify transactions with other computers on the network. This creates a secure system of constant agreement about all activities on the blockchain. This agreement is called consensus. Bitcoin’s consensus process is called proof-of-work. Proof-of-work was created by Satoshi Nakamoto in 2008 when he invented Bitcoin.
Bitcoin is the first currency based solely on rules, mathematics, and code, unlike FIAT currencies. FIAT currencies are government backed money, such as the US Dollar or Euro. FIAT currencies are based on monetary policy. Bitcoin operates between people on the internet, completely independent of the control of government authorities and central banks. Bitcoin’s integrity is secured by the constant consensus between millions of computers which are mining worldwide. Bitcoin operates as an independent store of value system, like gold, and is based on the principles of scarcity, transparency and immutability. Bitcoin transactions are publicly recorded but do not directly identify the sender and receiver: it records only a Bitcoin address. Bitcoin’s release schedule is based on a predetermined, programmed plan, designed with scarcity: the max supply is only 21,000,000 coins.
Affected Players
So who will be impacted by Bitcoin? Bitcoin was the first example of a Blockchain, which will affect many businesses such as banks, funds, payment solutions and processors, Real Estate, Insurance, logistics, and distribution. Bitcoin and Blockchain will also have major impacts on Government and citizens. Governments can find ways to be more transparent for voting and funding decisions. Blockchains can create true Democracies that can be tracked and audited. Citizens also have more financial control with Bitcoin. It allows for easier transfer of money as it’s permission-less, secure, transparent, and borderless. It also has small transfer fees, which can create less financial friction as money can be sent easily in a cheap way.
Key Value-Add Points
Now I’m going to talk about some of the key value-add points about Bitcoin. How can Bitcoin help you?
First of all is financial control. Bitcoin is the first solution that truly puts the consumer first, before third parties such as governments, banks, and companies. Bitcoin can be used by anyone worldwide, the only requirement is internet access.
Next is privacy. With Bitcoin, you can make and accept payments worldwide without giving up personal information, which is valuable when transacting online. Privacy is natively built into the Bitcoin payment system.
Bitcoin also provides transparency, because every transaction is recorded and audit-able on the blockchain. This means it is impossible to create counterfeit Bitcoins and reduces the chances for currency fraud and malpractice. Bitcoin’s inflation schedule is fixed and predetermined.
Interesting Key Points
- Bitcoin was created by a mystery figure named Satoshi Nakamoto. No one knows who it is, but a lot of people say they are him! It is estimated that Satoshi owns over a million Bitcoin.
- Bitcoin is the best performing public asset in the past 10 years
- Bitcoin will have a max supply of 21,000,000 but the actual circulating supply will be less due to lost and inaccessible coins
- The first Bitcoin transaction for a real good was to buy two pizzas. That’s right, at one point in time, 10,000 BTC were exchanged for two papa John’s pizzas. Today that 10,000 BTC would be worth ~$90,000,000.
Implications
The implications of Bitcoin and blockchain technology are astronomical. Bitcoin is the native payment system built for the internet. Bitcoin provides the technology to create the first decentralized, trust-less economy through the internet. The implications of Bitcoin could be astronomical. Some potential impacts BTC could involve the ability to create the first decentralized, trust-less economy. This is possible given Bitcoin’s fundamentals of being secure, immutable, and decentralized. Bitcoin may also lead to better access to capital, reducing the amount of predatory loans made. Having the freedom to use your own money can create more competition with loans, potentially lowering interest rates. Micropayments across borders will be much more common, given the low transaction costs, and borderless abilities.And finally, power will be taken from powerful parties that have control over capital and tell people what they can and can’t spend their money on. Banks and Governments frequently do this with unnecessary regulations.
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