It seems like everyone's talking about Bitcoin these days, from high-schoolers to your brother-in-law. But despite the popularity of Bitcoin, a large majority of the population want to know what it's really all about and how to use it. That's why we wrote our Bitcoin for Dummies guide.
By now, you’ve probably had that conversation with one of your grandparents after they asked you, “What’s this Bitcoin all about?” Fortunately, the Bitcoin Depot team is no stranger to family gatherings with discussions centered around cryptocurrency, so we’re going to provide you with some guidance on how to explain Bitcoin in such intuitive terms, it might make your grandma want to join in on the crypto revolution!
While understanding the technology behind Bitcoin can be a challenge, grasping the idea of it is not. Bitcoin is a cryptocurrency. It is a digital currency that has many features that set it apart from its fiat counterparts (e.g., Dollars, Pounds, Yen, etc.). One of the most appealing things about Bitcoin is its decentralized nature. This means no single entity controls it.
Because of its decentralized nature, Bitcoin is public, transparent, and available to anyone. Plus, because it’s open-source, anyone can contribute to its blockchain or software development. However, since Bitcoin is run on computers spread across the world, it is incredibly difficult to shut it down.
Lastly, Bitcoin’s network is immutable and transparent. That means every transaction that occurs on its blockchain is viewable by anyone, and once a transaction completes, it cannot be undone.
Yes! Bitcoin is unlike any type of money you have seen. The main difference between Bitcoin and other currencies is that it doesn't require a central authority such as a bank, government, or company in order to acquire or transfer it.
Thanks to the absence of these intermediaries, bitcoin transactions are fast, cheap, and free of the existing problems of traditional financial systems.
For one, Bitcoin comes with fewer restrictions. You can access your funds from virtually anywhere and transfer any amount you desire without having to wait multiple business days or jump through many bureaucratic hoops. There are also no daily withdrawal limits or fancy forms to fill out when you wish to transfer more than $10,000 worth to another person. You can even use Bitcoin ATMs at your local gas station, bank, or grocery store to buy and withdraw Bitcoin in exchange for cash!
Bitcoin works through three primary mechanisms: the Bitcoin blockchain, your private and public keys, and Bitcoin mining. A single Bitcoin represents the market value of one BTC. However, Bitcoin is divisible into smaller parts, known as Satoshis. A single Satoshi is the equivalent of one hundred millionths of a Bitcoin. Because it can be split into smaller pieces, it’s pretty common for people to hold only parts of a Bitcoin.
Let’s take a closer look at the three pieces of the Bitcoin mechanism:
The blockchain keeps a record of all bitcoins in circulation. As a result, banks aren't needed for the verification of ownership. This system utilizes the power of the people and the internet.
The miners operate in a similar manner to accountants by recording and processing transactions. However, the interesting thing about this system is that miners receive a small amount of Bitcoin as payment whenever they mine a new block, which is a type of file in which data from a Bitcoin transaction is permanently recorded in the network.
Additionally, the creation of Bitcoin depends on miners competing to create the next block. Miners mint new bitcoins roughly every ten minutes, with the total number of bitcoins capped at 21 million. This makes it a much more compelling investment, like gold, as there is not an indefinite supply that can lead to inflation.
The Bitcoin limit is expected to be reached by 2140. After that, its production will come to a halt and people will only be able to buy, sell, trade, or exchange them.
Bitcoin has had revolutionary achievements over the years and one of them involved putting an end to double-spending. Double-spending became a problem after the advent of digital money in the 90s.
In simple terms, double-spending is a situation whereby a digital currency is spent more than once. However, hackers have been making attempts to do this with bitcoin for years without success.
Through blockchain technology, all transactions and relevant accounts (excluding personal details) are available to the public. This makes it difficult for anyone to spend the same money more than once.
Now that you've made it through our Bitcoin for Dummies guide, you know that there are several ways by which Bitcoin can be beneficial to you. First, it is decentralized. This means that banks or governments aren't in control, so you will no longer have to deal with the rude bank teller who rushes you along or the customer service representative on the phone who tries to get you to shell out more monthly payments for a new type of savings account.
It’s also universal. With a smartphone and internet connection, you can send and receive Bitcoin from virtually anywhere in the world, even when your bank doesn’t have a branch at your vacation spot. Additionally, the limited supply of bitcoin and other cryptocurrencies means that you won't have to worry about inflation causing that hard-earned nest egg to become worthless in 20 years.
Bitcoin is a more secure and private way to store your money. It's the future of finance. Welcome to the world of crypto!