What is a good layman's explanation of bitcoin?Harold
Want to know all there is to know about Bitcoin? Here at 99Bitcoins, we translate Bitcoin into plain English so even if you have no technical background you’ll be able to understand everything! In today’s post, I’m going to give you a simple, plain English explanation about what Bitcoin is and why it’s so revolutionary.
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What is Bitcoin Summary
Bitcoin is the first decentralized digital currency. All Bitcoin transactions are documented on a virtual ledger called the blockchain, which is accessible for everyone to see. Bitcoin gives you complete control over your money, unlike other assets you own which are regulated by banks and governments. As bitcoin gains more popularity, more and more places accept it as a payment method.
If you want a more detailed explanation about Bitcoin keeps on reading, here’s what I’ll cover:
1. What is Money?
Before we talk about Bitcoin I need to take a moment and talk about money. What is money exactly?
At its core, money represents value. If I do some work for you, you give me money in exchange for the value I gave you. I can then use that money to get something of value from someone else in the future.
Throughout history, value has taken many forms and people used a lot of different materials to represent money. Salt, wheat, shells, and of course gold have all been used as a medium of exchange.
However, in order for something to represent value, people have to trust that it is indeed valuable and will stay valuable long enough for them to redeem that value in the future.
2. Transitioning to Digital Money
Once fiat money was in place, the move to digital money was pretty simple. We already have a central authority that issues money, so why not make money mostly digital and let that authority keep track of who owns what.
Today we mainly use credit cards, wire transfers, Paypal, and other forms of digital money. The amount of physical money in the world is almost negligible and is getting smaller with each year that passes.
So if money today is digital, how does that even work? I mean, if I have a file that represents a dollar, what’s to stop me from copying it a million times and having a million dollars? This is called the “double-spend problem”.
The solution that banks use today is a “centralized” solution – they keep a ledger on their computer which keeps track of who owns what. Everyone has an account and this ledger keeps a tally for each account. We all trust the bank and the bank trusts their computer, and so the solution is centralized on this ledger on this computer.
You may not know this, but there were many attempts to create alternative forms of digital currencies, however, none were successful in solving the double-spend problem without a central authority.
3. Centralized Money
Whenever you give anyone control over the money supply you’re giving them enormous power and this creates three major issues:
power corrupts, and absolute power corrupts absolutely. When banks have a mandate to create money, or value, they basically control the flow of value in the world, which gives them almost unlimited power.
A small example of how power corrupts can be seen in Wells Fargo’s scandal where employees secretly created millions of unauthorized bank and credit card accounts in order to inflate the bank’s revenue stream, without their customers knowing about it for years.