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Bitcoin 101



What is Bitcoin?


The simplest answer is digital money, but let’s back up. People have been trying to create digital money since the Internet was invented, but there was little success until 2008. Right as we were going through the worst financial crisis in 70 years (Housing Crisis, etc.), Bitcoin was launched. Coincidence? You be the judge...




Bitcoin was created by a person--or group of people?--using the pen-name Satoshi Nakamoto. We still don’t know who they are, and maybe never will. Their identity is a mystery.


But that’s okay, maybe even a good thing, because there is no CEO of Bitcoin–it’s not a corporation, it’s a community. Any potential changes are decided on by the people who actually use it. It’s run by the people, for the people... inside the people-- okay maybe not the last one.



 

Why Bitcoin is so revolutionary?

Wait, wait, wait. What's so useful about Bitcoin? We already have credit cards...what does Bitcoin do that they can’t? It turns out, quite a few things:

Bitcoin is a truly global monetary system. Sending bitcoins to your neighbor is no different from sending bitcoins to your aunt in New Zealand, or to an astronaut on the ISS. If you have an Internet connection, you can use it. Period.


It’s cheap to use. Bitcoin transactions cost only a few cents, no matter how much you’re sending.

It’s fast. Bitcoin transactions take minutes or less to process, making them quicker than any kind of bank or wire transfer.

It’s scarce. Only 21 million Bitcoins will ever exist, giving them durable value.


It’s safe. Cutting edge cryptography shields Bitcoin transactions from tampering, making it hacker-proof.

Finally, Bitcoin is peer-to-peer. Transactions don’t go through a third party, like a bank. Instead they go directly between individual people. No bank or government can freeze your funds or deduct from your account.


These factors combine to create a new form of entirely digital money, run by a global collection of people, that is inexpensive and quick to use and safe from fraud. Does this sound too good to be true? Does it sound like Magic Internet Money™?


 

How it works



In order to function, Bitcoin is backed up by a trifecta of high-level mathematics, cryptography, and computer science. As Shakespeare once wrote, “buckle thine seatbelts.”


For any payment system to work, we need to keep track of transactions and account balances. Transactions are usually recorded in something called a Ledger. Today, banks and companies like PayPal keep private, internal ledgers detailing the account holdings of each customer. This paints a huge target on these ledgers for hackers, making them potentially unsafe. Banks lose money, but they also lose your personal information (remember Equifax?).

Bitcoin's ledger is the exact opposite.

Instead of having one top secret copy that only a few people can see, the Bitcoin ledger is maintained by people all around the world who use computers to check it for fraudulent activity. These people are called miners.



Now, how you do let thousands of strangers monitor all these transactions (including yours) without the risk of identity theft? Good question! In order to keep your info private, no names are used in the Bitcoin ledger. Instead, your account is identified only by a long, random string of numbers and letters. There’s a lot more going on under the hood, but using Bitcoin is quick and easy, and we’ll show you how! For more information about the internal mechanisms of Bitcoin, check out the in-depth sections on Mining and Cryptography.

So that’s how Bitcoin works. What can you do with it?


 

Where you can use it?



We’re rapidly approaching a time when you can buy just about anything with bitcoin. You can buy houses, cars, pay in restaurants, or anything on Amazon using Purse.io (no, we aren’t sponsored!). The bitcoin marketplace is growing rapidly. As awareness grows, more and more retail stores are opting to accept it.



Besides use as a method of payment for goods, Bitcoin is popularly used as a payment mechanism between people. Whether for paying a debt, paying your rent, or sending remittances to your family, Bitcoin is an easy choice. We threw a lot of stuff at you, so let’s recap:

Bitcoin is:

  • The world's first global money

  • Entirely digital

  • Limited in supply

  • Safe to use

  • And peer-to-peer, meaning not controlled by any bank or government




We’d also like to point out that Bitcoin is still evolving. Developers are working every day to make things faster and easier to use for everyone. There are still many barriers to overcome before Bitcoin becomes a seamless global payment system.

But the fact that Bitcoin is still evolving is part of the reason why it's so exciting.


Bitcoin has already inspired the creation of thousands of other digital currencies, known as cryptocurrencies (also called Cryptos) that can be used for a slew of applications. There are thousands of brilliant minds working to improve these currencies every day, and they’re all competing to try and create a new and improved monetary system–for all of us.




 


TLDR

What is Bitcoin?

  • In short, decentralized digital money

  • Bitcoin is controlled by the community of people that use it

Why is Bitcoin so revolutionary?

  • It’s cheap to use, and works globally

  • It’s fast, and safe to use

  • There’s a limited supply of Bitcoin, and bitcoins are sent directly peer-to-peer rather than through centralized middlemen

How does Bitcoin work?

  • Using complicated mathematics, cryptography, and computer science, Bitcoin uses a worldwide network of individuals called miners to maintain and secure the system

  • All accounts are identified only by random strings of numbers and letters

How can Bitcoin be used?

  • Bitcoin can be used to pay for a number of goods and servicers; anything on Amazon can be bought with bitcoins, and many stores are starting to accept it

  • It’s often used as a payment system between individuals. Bitcoin is a very popular currency for remittances, for instance.


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