Bitcoin For Dummies | What Is Bitcoin?

BITCOIN FOR DUMMIES: EVERYTHING YOU NEED TO KNOW EXPLAINED

Do you have questions about Bitcoin? What is Bitcoin and how does it work for dummies? Bitcoin for dummies is explained here!

BITCOIN FOR DUMMIES: WHAT IS CRYPTOCURRENCY?

Currency refers to money currently in use. In today’s age, we predominantly use government-issued tender as currency. In the recent decade, there has been a development in another type of currency called cryptocurrency. 

Cryptocurrency is a currency in digital form, backed by the technology of cryptography. Among other things, it allows users to transact without a central authority, but also maintain the integrity of the transactions.

We do not create cryptocurrencies out of thin air. Instead, miners typically consume large amounts of electricity to “mine” cryptocurrency.

BITCOIN FOR DUMMIES EXPLAINED: WHAT IS BITCOIN?

Bitcoin explained for idiots: Bitcoin was the first cryptocurrency. In 2009, someone by the name of Satoshi Nakamoto created Bitcoin by issuing a 9-page whitepaper. The funny part is that no one actually knows who Satoshi is and whether it is a person, a group of people, or an organization.

How does bitcoin work for dummies? The purpose behind Bitcoin is to allow one person to directly send money to another without the help of a trusted third party, like a bank, to process the transaction. This is a peer-to-peer transaction.

Peer-to-peer transactions are highly efficient and there are only 21 million Bitcoins that will ever exist out of which about 18.5 million are in circulation right now. The rest are still slowly being created. Whatever people are willing to pay for a Bitcoin determines its value, similar to the stock market. Today, the bitcoin price in AUD is $22,500 but that fluctuates daily.

With bitcoin, there are no bills to print or coins to mint. It’s decentralised, meaning that no government, institution, or other authority can control it. Bitcoin owners are anonymous. Instead of using names, tax IDs, or social security numbers, Bitcoin connects buyers and sellers through encryption keys.

BITCOIN FOR DUMMIES: HOW IS BITCOIN USED?

RECORD KEEPING

How does bitcoin work for dummies? When someone sends a bitcoin to another, the network records that transaction, and all others made over a certain period of time in a “block.” These blocks together make up “blockchain” — an openly accessible record of all the transactions ever made.

There are over 7,000 people using their computers to simultaneously keep identical records to reduce the risk of any single person or group manipulating and falsifying the data. This provides transparency, security, and ensures Bitcoin transactions are permanent.

MINING

Mining is the computer process of recording and verifying information on the digital record known as the blockchain. There are many different ways to mine but Bitcoin mining also requires computers to solve complex mathematical problems.

Because mining requires computer power, people do this work in return for money. The network pays miners in transaction fees, which is a small amount of Bitcoin paid by people when they send Bitcoin. Another incentive to mine is that the first computer to solve the maths problem will earn a certain amount of coins as ‘block reward’. These coins are “uncirculated” Bitcoin that no one has ever used before. Miners essentially make a profit if the price of a Bitcoin is more than the cost to mine.

USING BITCOIN

There are an increasing number of digital currency exchanges where you can sell, store, and buy Bitcoin. Using these platforms, individuals can make a deposit into a virtual wallet. Once the account has money in it, which can be instant or takes up to a few days, users can exchange traditional currency for Bitcoin. You can also hold on to it as an investment or you can sell Bitcoin for a profit.

LEARN MORE ABOUT CRYPTOCURRENCY

Bitcoin explained for idiots: Now that you have read this Bitcoin for dummies guide, it is time to learn more about the other types of cryptocurrencies. There are over 1000 with more sprouting up daily. If you still can’t able to understand this simple explanation then you can also talk to a Bitcoin broker. Find out what the best cryptocurrency is for you.

Learn more about Ethereum

Learn more about Ripple