What Is Bitcoin?

By Sumeet Rohra on ALTCOIN MAGAZINE

Ever heard of the Barter system?

Let’s visualize…

Imagine this, you have a broken pipe in your home and you call a plumber.

The plumber fixes the pipe asks for payment but there is no concept of money involved, how do you payback?

You pay with something you have that the plumber wants…

In this case a Gaming console.

So we can say that…

Barter is the exchange of goods and services with goods and services.

This is how people used to transact when there was no concept of money…

But this system was not scalable, as in the value of one good might not be same everywhere, i.e. if you can buy 2 apples with 4 bananas at one place, it might take you 8 bananas to buy 2 apples in another place. It lacked standardization.

Another problem was if you paid someone for any goods and services, you cannot guarantee that the other person will confirm it, i.e. the other person might call you a fraud because you have no record to prove it…

In comes a Bank…

The Bank serves as a central structure to standardize money and this system works because we trust banks.

This system worked for a while, but these central organizations have some inherent security problems:

1. With ever-increasing security risks, you have to trust your banks and card companies to keep your data safe or you might lose all your money in a matter of seconds.
2. This trust comes at some hidden costs which you have to pay to banks to continue their functioning.
3. Cross-Border payments become much slower because of the presence of these authorities as they take time to process.

Then in 2008, a solution was offered by an anonymous programmer going by the name Satoshi Nakamoto. Nakamoto proposed a cryptographic system of currency that solves all of these problems…

His proposal was, instead of a bank or card company recording your transactions in their central ledger, all of the users record all the transactions at the same time.

1. So, now the user becomes the confirming party for other transactions, i.e. if you pay 10$ to someone, you tell it to everyone around you and the person who receives it confirms as well and hence the fraudulent transactions are eliminated from the system.
2. The second major advantage is that there are no hidden costs involved as there are no central authorities involved.
3. And the biggest advantage is that cross-border payments become cheap, extremely fast and efficient since there are no regulations.

This Is Bitcoin.

But, if everyone knows my transactions, how is security maintained?

The answer is pretty simple, your transactions are visible, your Identity is not, i.e. imagine Person X gave Person Y 100$, people get the details of this transaction but they don’t know who person X or person Y is.

Another major point is, when everybody knows about all the transactions, no one can say that they have had any transaction in the past that they don’t have a record of…

There is plenty more to discover about Bitcoin on the technical side, but I’ll save it for another story…

This was my first ever story, so if you liked it, please clap and comments are welcome, Thank You.

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