Bitcoin: Why is it digital and decentralized currency?

What is Bitcoin?
This sounds like a simple question but it tends to get some complicated answers.

The mouthful answer is 'The first decentralised Digital Currency'. So before we begin to understand this we will try to understand what is money?
Money is a simple tool which is used to exchange value.
In history there are different forms of money.
Some of them are seashells, precious metals, salt and most popular one out of them was gold.
Since the gold is rare metal it worth more and it is a tangible asset.
If you are holding gold in your hand it is probably yours. pretty simple.
And this worked for thousands of years, no matter whether it is a king or government. Gold just worked.

Paper money era:
Then came a new invention called paper money. when you think about it, for someone who uses gold their whole life, paper money is a hard sell.
Trust paper instead of metal? Well, Paper money actually started out as just a representation of gold.
For example US Dollar was originally just a 'gold certificate' which is a piece of paper saying you own some gold thats sitting in a vault at the treasury. In other words, people never trusted paper money, they trusted the govt. to holdthe gold for them.

Time passed and the US has since abandoned the 'gold standard' during 1970's and today the US Dollar is actually a 'fiat' money
where as 'Fiat' is a latin word "it shall be" which means 'forget about gold, lets all just agree that this paper worth something, ok?'.
And that apparently works, because were all using fiat money these days and we don't have to have 'hard currency' or 'tangible money(which is gold)'.

Disadvantages of paper money:
Paper is easy to counterfeit, something thats practically impossible with gold.
Almost anyone can simply print paper at home.

Advantages:
Fiat is actually a form of 'Digitization'. that is we are dealing with numbers not metals.
This makes money much easier to count, manage and move. In fact the vast majority of money these days are just numbers in computers.

The age of digital money:
So if today's money is digital how does that even work?
If I have a file that represents a dollar, what is stopping me from copying a million times and having a million dollars?
This is called the 'Double SPend Problem'.
The solution that banks use today is a 'centralized' solution. They will keep a ledger on their computer which keeps track of who owns what.
Everyone has an account and this ledger keeps a tally for each account.
We all trust bank and bank trusts their computer, and so the solution is centralized on this ledger in this computer.
Computer scientists weren't pleased.

Bitcoin Invented:
Almost after 3-4 decades, In 2008 an ananymous researcher publishes a paper describing how to solve this problem without a centralized solution.
that is without a bank. He called it 'Bitcoin' and went on to describe how you can make a ledger that doesn't rely on a single particular bank.
This is a decentralized solution. This may be like a science fiction.

How does something work if it is decentralized?
May be you guys know the answer by now you are learning about bitcoin through whatsapp on the internet.

Think about it: Nobody owns the internet. It's the most vast and powerful network that humans have ever created -
But till date there is no "internet inc". so it's decentralized.
Lots of individuals and private companies all build the infrastructure of the internet, across companies and border and even ideologies,
and it works - much thanks to profit motives and economic interests.So if the internet decentralizes information technology,how does bitcoin decentralize money?

Distributed Ledger Technology:
Bitcoin is just a distributed ledger system.
At this point every one would start getting techinical and complicated. we will keep it simple.
In Bitcoin, the coins or we call transactions are all recorded in a ledger.
The big deal with bitcoin is that this ledger is public and shared.
its also maintained by the public.
Thousands of people have a copy of this ledger around the world and anyone can download and verify this ledger.
In Bitcoin, instead of accounts, money is moved between addresses- kind of like email.

Usually peopele get concerned when they hear about this ledger being public. Isn't this a privacy problem? it is complicated.
Isn't this a security problem? it's not a security problem. If you think that this public ledger is easy to hack, try to imagine hacking the English languauge -
you can probably hack into Oxford dictionary computers and change some definitions, but that wouldn't be a big problem.
There are lots of copies of dictionaries all over the world.
You can't fool everyone by hacking only some of the copies.
In Bitcoin the dictionary that helps everyone stay on the same pageis the ledger, and this ledger is called the "Blockchain".

So now we understand why Bitcoin is digital and Decentralized.
So whenever we say Bitcoin is the first decentralized digital currency, It is not a mouthful answer for you anymore.

What does bitcoin mean for this world?
But Does this all matter!? Is Bitcoin going to change the world?
That's a question we'd like to know?
Well let's assume that Bitcoin is non-geographic.
If economies fall or governments change, Bitcoin won't be affected like fiat currencies.
It is also much more internet friendly, which means online commerce can improve.
But the biggest winners here are probably the billions of people across Asia, Africa and other places have an internet connection but have horrible banks.

I mean, with my bank I can shop online and send money across the world even though it's really slow and quite expensive.
But in Kenya, they use cell phone minutes as money, they buy groceries with air time.
In Argentina people are exchanging money in the black market because of inflation that makes it impossible to save money for a rainy day or for retirement.
Non-geographic, global money is exactly what these people need - it works even if your government or banks don't work.

Bitcoin is not only offering an economic alternative or technological alternative.
Just think Dollars today are numbers on a computer which represents numbers on a paper which used to represent hard metals, according to laws written hundreds of years ago.
Bitcoin was born in 21st century which is why it is able to do lots of things that make people call it smart money.
For the same reason phones today are called smartphones, because they have more features than cellphones from a decade ago.
Apart from that, bitcoin has some advanced features that you don't get with the old money that we have today.

Who accepts bitcoin?
Businesses have already started accepting it around the world, some big names include Microsoft and TigerDirect and a whole bunch of airlines.
There are websites to help you find Bitcoin accepting businesses.
In fact some of the freelancers are receiving their paychecks in bitcoins for over a year.
And there are lots of people offering professional services in exchange for bitcoin.

The implications for bitcoin are obviously hard to measure.
In reality there is a whole industry fields of research and grass roots movements growing - much like executives of AOL and students trying to explain about internet way back in 90's.