What Exactly is Bitcoin?
The world was hit by the famous crash of 2008 and soon a whitepaper was circulating authored by Satoshi Nakamoto explaining a peer-to-peer currency based on the blockchain network in a truly decentralized form known as The Bitcoin!
Before jumping to Bitcoin, let’s first understand a bit about what is money?
In the early days, humans did not have paper currency to buy goods and services. A barter system was used at that time. If I had wood and you had food, we could exchange it if we both agreed. But the problem with the Barter system was that you would exchange food with wood only if you needed wood. Fast forward a bit and we entered the gold standard. People started using gold to buy goods and services. But buying something of extremely less value and carrying gold around the world was a task in itself. So then, the govt. started printing paper bills which were backed by an equal amount of gold. But now the governments are just printing money and instead of paper currency being backed by gold, it is backed by the trust of govt. now. Do you trust your govt.?
This unlimited printing of money leads to inflation and the notion to just print money whenever you require something just does not fit well. I sometimes ask myself, are we in some kind of a bubble that is going to burst and take away all our money?
Let's now understand how money works?
Trust me, you should understand this boring stuff in order to understand what Bitcoin is. When I transfer money to my friend through Google Pay, my buddy receives the money within seconds. But in reality, he is not getting the money. The money is circulation within the bank from one account to another and these accounts merely contain my and my buddy’s names, but in reality, controlled by the banks themselves. Ask yourselves, if it is truly your account can you claim your money if one day the bank decides to run away or the govt. decides to freeze our account. Will you have control over your money then? No, because the money today is centralized and controlled by govt. and the banks, not you!
The true people’s money- Bitcoin
Bitcoin is termed as people’s money because it is really controlled by who owns it and no one else including the government. We use cash in our daily lives right, consider bitcoin as a digital form of cash that is stored in digital wallets rather than bank accounts. Whoever has the key to the wallet controls the wallet and no one else. Now, whenever I send a Bitcoin from my wallet to my friend’s wallet, a group of people notes down the transaction on a ledger. This ledger is called the blockchain and the copy of this ledger is with thousands of people who validate the transaction and ensure that no fraud is being committed. These validators are called miners who will receive a small portion of Bitcoin as their reward for supporting the Bitcoin network and validating the transaction.
A group of nodes (computers) runs the Bitcoin network. Anyone, sitting anywhere in the world can take part in it due to its decentralized nature. If someone does a Bitcoin transaction, the miners validate the transaction and the new transaction is made in the ledger whose copy is with each and every node in the network. Now imagine you want to hack the ledger and put a fraudulent transaction that you have received thousands of Bitcoin. Well, doing this is practically next to impossible because you will have to change the transaction in the ledger in each and every node all around the world. This makes Bitcoin kind of hackproof!
Also, Bitcoin is limited in supply, only 21 million Bitcoins can be mined that too till 2100. Further, due to its decentralized nature, it cannot be controlled by a single authority hence no government or bank could control it. In order to control it, you need to control more than 50% of the Bitcoin network but that is only possible in theory because every day more and more individual people are joining the network due to its decentralized nature. How many people could you control?
In Layman’s terms, Bitcoin is a digital currency that is not stored in Banks rather in spaces over the internet and whosoever has the key to this space will control the Bitcoin in that particular space and no one else!
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