What is Bitcoin?

What is Bitcoin?

Bitcoin can be a difficult subject even for technically-inclined individuals to fully wrap their minds around when first exposed to it. So I’m going to try to explain it here more simply than other explanations I’ve read online.

Bitcoin (BTC) is a currency like US Dollars (USD), Euros (EUR), Yen (JPY), etc. Unlike USD/EUR/JPY/etc however it isn’t a fiat currency, meaning it isn’t backed/issued by any government- it is a cryptocurrency or an encrypted currency and was the first cryptocurrency created. Being encrypted just means that it’s both secure and private (anonymous). It’s also purely digital, enabling payments across the globe 24/7/365, transfers completing their initial confirmation on average in about 10-15 minutes.

Although it has nothing to do with email, the simplest way to look at it is it’s almost like digital cash that can be “emailed” anonymously between people. Instead of an email account or a bank account doing the sending and receiving you have a Bitcoin wallet that stores, sends and receives payments. You can install a Bitcoin wallet on your home computer or smartphone.

Another important aspect of Bitcoin is that it is entirely decentralized, so there’s no single organization or individual that controls or supports it. One benefit to decentralization is that there’s no single point of failure, there’s no single server-farm or geographic point out there that if a sinkhole were to open up and swallow that would hurt this currency. One detriment to decentralization is that there is no customer service or support, so if by accident you sent, say, $1 million USD worth of Bitcoin to the wrong address you’d have no recourse to undo that transaction. You’d be screwed. Also, if you aren’t careful with your Bitcoin wallet details you run the risk of someone else gaining access to your Bitcoin wallet. If this occurs it’s a pretty safe bet that they’re going to dump your entire balance into their own wallet. Again, you’ll be screwed in this scenario.

Sending Bitcoin to a wrong address or having your Bitcoin wallet compromised are both unlikely scenarios. There’s some anecdotal evidence from around the web that each of these worst-case scenarios has occurred but their occurrence is pretty rare. Just be aware and be careful.

Again, this has just been a simplified overview of Bitcoin. In later posts we’ll go more in depth on the different aspects of Bitcoin and other cryptocurrencies.

Marcus
Marcus has worked for the better part of the past two decades as an IT Systems Administrator. Throughout his life he's been fascinated by finance and hopes the creation of cryptocurrency heralds a new era where banks, governments and centralized institutions lose their strangle-hold upon the citizenry's financial health and welfare.

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