What is Bitcoin for Dummies: A Guide For Beginners

What is bitcoin? It’s digital money. It’s the new gold. It’s hot and everyone wants a part of it.

Dani Amsalem
Nov 22, 2017 · 9 min read

This article is for those who are the cryptocurrency world.

By the end of it, you’re going to either

Love Bitcoin — Stick-Figure by Decryptionary.com

Let’s start with “currency”

Currency means “money currently in use”. US dollars, European euros, Russian rubles, and the Japanese yen are all known as . “Fiat” just means an official order or authorization.

For approximately 4,000 years and across the globe,. They were beautiful, unique, and.

Later (almost 2,000 years ago), in and around Egypt, . Wheat, being a common and important part of our diet, was valuable, portable and exchangeable.

Today, governments authorize their bills as legit, and because we have faith in our governments and banks, we use their money. Ultimately, the worthless bills are just an .

What about Crypto?

Then you have . Crypto- is short for “cryptography”, a computer technology used for securing and hiding information, among other things.

Cryptocurrency is defined as electronic money made with technology to:

  • Control how it was made
  • Protect transactions
  • Hide the identities of its users.

The technology around cryptocurrencies effectively give them the

The Cycle of Money — Stick-Figure by Decryptionary.com

Cryptocurrencies are made out of thin air. Instead, people have their computers work many hours and expend massive amounts of electricity to “mine” the digital money. They solve mathematical equations. More on that later…

Enter…Bitcoin

and was created in 2009 by Satoshi Nakamoto. No one knows who Satoshi is, the developer could be a guy, gal, or a group of people. And here’s the kicker: Satoshi disappeared before bitcoin took off.

Bitcoin Versus The Dollar

Did you know that the American Bureau of Engraving and Printing (BEP) prints ? During 2016, the BEP delivered 7.6 billion notes to the Federal Reserve, that could be 1s, 5s, 10s, 20s, or even 100s totaling lots and lots of money.

Bitcoin Vs. Dollar — Stick-Figure by Decryptionary.com

While it’s true that 70%+ of the notes that the BEP delivers each year are used to replace worn out ones, that still means approximately 30%, or , were introduced that year!

Because the government creates all of our money, that means . If any country were in a severe emergency, the government could . For example, in June 2015, the Greek government froze all banks. They limited everyone to withdrawing only $67/day from their own accounts!

For Americans, this example hits closer to home: if you owe the IRS money and have not paid, they have the and 15–21 days later take your money to cover your debt.

Enough with the fear tactics, let’s dig into bitcoin.

This type of transaction is known as “peer-to-peer”.

Peer-to-Peer Transactions — Stick-Figure by Decryptionary.com

In other words, bitcoin allows Alice to pay Bob directly, whether they’re a block away or across the globe. or Paypal to process their transaction. As you can see,

And unlike US dollars, Only about 16.7 million of which are available right now. The rest are slowly being .

Right…Now I want to bake me some bitcoin

How are bitcoin created? By a little process known as (and no it doesn’t involve underground caves, flashlights and pickaxes).

I’m going to explain bitcoin mining in 3 steps (keep in mind, this is very oversimplified):

  1. There are over 7,000 people using their computers to simultaneously keep identical records of these transactions. The purpose of so many records is to r. In other words, public records provide transparency, security and ensures bitcoin transactions are .
  2. on the digital record known as the . There are many different ways to mine but bitcoin mining also requires computers to .
  3. Because mining requires computer power, Miners are paid in transaction fees, that’s a small amount of bitcoin paid by people like you and I when we send bitcoin. Another incentive to mine is that the first computer to solve the math problem will earn 12.5 new, virgin coins. (Virgin coins are “uncirculated” bitcoin. In other words, no one has ever used them.) At the time of this writing, that’s equal to .

All of this wild bitcoin technology was created by this unknown person called Satoshi. The unique advantage of that is that In other words, banks and governments cannot control bitcoin and so cannot

No Institutional Control on Bitcoin — Stick-Figure by Decryptionary.com

Okay… But what do I use bitcoin for?

What do you use bitcoin for, what are the benefits of it and why should you be interested?

First, a short disclaimer: Nothing published in this article is to be construed as financial, taxation, investment, legal or other advice. Nothing in this article constitutes investment recommendations nor should any data or content in this article be relied upon for any investment activities. Investing in bitcoin or other alternatives is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment. Disclosure: I own a variety of coins including bitcoin. Keeping that in mind, the following is what I’ve seen bitcoin used for.

Even though bitcoin was designed as electronic cash, its recent creation, lack of government control and unstable prices have caused western businesses to .

That hasn’t stopped tech-oriented businesses like Bitpay and Coingate from popping up and allowing online businesses to, as well as convert it into fiat currency.

A handful of larger companies, such as Overstock and Expedia, now accept bitcoin as valid payment. And you might have heard of , though it only seems to be the dealer in Newport Beach, CA who does so.

McClaren Dealership in Newport Beach, CA Accepts Bitcoin — Screenshot taken from http://www.rdsautomotivegroup.com/

How do you actually pay using digital currency?

The McLaren dealership is accept bitcoin through the bitcoin service provider known as .

  1. You on your phone and make sure your bitcoin is accessible on your device.
  2. Using Bitpay, McLaren Newport Beach will on it.
  3. Using the bitcoin wallet app on your phone, you will e.
  4. The wallet will ask you to of the transaction.
  5. Once confirmed, you will and become the

Lately, bitcoin has been taking the center stage in. There, bitcoin has been unofficially adopted by the Venezuelans as a currency. Where a McDonald’s Big Mac might , bitcoin has come in and provided a , since it’s not controlled by an unstable government or national bank.

While bitcoin has yet to receive widespread adoption for major transactions in North America and Europe, it has become a . Due to its unique technology and unregulated trade, investors have flooded in, . It isn’t uncommon to see the price swing up or down by more than .

Screenshot of Bitcoin Price — Screenshot taken from https://bittrex.com/

And so, as I see it, these are the :

  1. A new way to transact outside of the government.
  2. A way to gain 100% control over your money, outside the sphere of influence of any organization, government, or bank.
  3. A new, very volatile investment that has probably made as many fortunes as it has broken.

OK, how do I get me some bitcoin?

Will that be or ?

Purchase Bitcoin with Credit Cards — Stick-Figure by Decryptionary.com

Occasionally you can find a , but most people buy it using a credit card or make the transaction directly from their bank account. It’s as simple as (or Euros, Rubles, or Yen) for .

Despite bitcoin being rather expensive for a single coin, anyone can own bitcoin by simply .

The following are 3 common, simple tools you can use to :

  • Probably the simplest way to buy bitcoin is through . They may not be the very cheapest, but they are one of the easiest. After plugging in your credit card numbers and verifying your identification, you can make your first purchase.
  • is another popular way to buy bitcoin with a credit card. Their fees are much higher than Coinbase but have fewer identification requirements.
  • is a popular method to buy bitcoin in Europe. Their fees for credit cards aren’t very low either, but they are probably as easy as Coinbase.

Where do I keep them?

All three of those services have their own secure storage service, known as a . But if you wanted to, you could handle storage using any one of the other dozens of bitcoin wallets available.

All you need to know is that . You are responsible for protecting your email, phone, and computer security. And it’s your responsibility to create backups of information relating to your bitcoin.

What I’m trying to say is, .

If your bitcoin is stolen, there is , since there’s no authority or regulator over bitcoin.

If you’re a visual person and need more information on how to buy and secure bitcoins, I’ve created several detailed walkthroughs. Check out how I bought my first bitcoin.

What’s Next?

To summarize, the , known as .

Bitcoin was created as an , an alternative to fiat currency.

Bitcoin’s advantages are .

Bitcoin can be used to make big and small purchases, it is used widely as an and it provides an opportunity to of some countries.

All of this comes at a cost. You must be aware of the security risks in storing and using bitcoin. You and you alone are .

There are well over 1,000 cryptocurrencies available, and hundreds more on the horizon. If holding bitcoin isn’t your thing, you can diversify into alternative coins.

Originally Found at MRKTRS.co

This article was originally posted at MRKTRS.co. MRKTRS is an entrepreneurial and lifestyle website that is expanding their coverage into crypto and asked me to write a “Bitcoin for Dummies” article.

About Decryptionary

My mission with Decryptionary is crypto made simple.

Decryptionary is a cryptocurrency and blockchain dictionary. It contains over 250 simple definitions, and awesome 4th-grade, stick-figure images to make this complex subject easy as pie.

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It also has simple walkthroughs and word lists to make sure you really understand the basics of crypto and how to participate.

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The Simplest Cryptocurrency & Blockchain Dictionary-Featuring 250+ definitions, stick-figures, and walkthroughs, this is crypto made simple. Learn more at Decryptionary.com

Dani Amsalem

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I'll show you how to understand cryptocurrency and blockchain. Learn more at Decryptionary.com

decryptionary

The Simplest Cryptocurrency & Blockchain Dictionary-Featuring 250+ definitions, stick-figures, and walkthroughs, this is crypto made simple. Learn more at Decryptionary.com