Simple Bitcoin Explanation - The Most Undervalued Asset In Human History

in bitcoin •  2 years ago

Simple Bitcoin Explanation - The Most Undervalued Asset In Human History

By: Keith Smith


Imagine a gold coin with every gold transaction in human history written on it and guaranteed to be 100% confirmed true and immutable. It would be the Library of Alexandria of banking. That one gold coin would be the most valuable banking instrument ever devised in human history. 


That's where Bitcoins value is derived from. 


That is why, because it was first, it will always be regarded as the ultimate history book. 


Bitcoin is digital ownership with a digital transaction record that goes all the way back to the first transaction. Think of it as digital real estate. A Bitcoin does not physically exist in the USA and Germany, but when someone in Germany buys a portion of a Bitcoin from someone in USA, the person in the USA sends the deed/title (key) to the Germans possession due to an agreed upon price on market. 


You could also think of it as a car Key and the car is a bank. In order to drive the car(operate the bank) you would need a key. That is the Bitcoin. I'm done with this Key, would you like to buy it? 


This transfer of ownership does not require third parties such as states and banks. It is completely voluntary. You cannot be forced to give up your Bitcoin without extreme violence. They could hold a gun to the head of every human on earth and force them to cough up their Bitcoin keys but let us be realistic.


 "What Bitcoin keys?" I would ask.



It does not require digital real estate agents licensed by the state. It's peer to peer. Person to person. A decentralized collective of voluntary networks working together towards the common goal of prosperity. 


That Bitcoin is a hectare of land on the digital globe known as the blockchain. The blockchain is the public ledger with all the transactions ever made in Bitcoin. The miners and nodes are the notaries and the currency of Bitcoin itself is the oil (blood) of the network. 


Your bitcoin address is much like an email. It is the destination you give someone to send the digital property ownership of the Bitcoin to. 


One Bitcoin is 1.0 

If I say I'm going to send you Bitcoin it could be any amount down to bit 0.00000001 BTC. 


When you get down to the bits of bitcoin, we like to refer them as Satoshis... after Bitcoin's Creator Satoshi Nakamoto.



Think of a currency as water (current) that runs in a river between two banks. Except with cryptocurrency, there is no need for banks. You are the river bank. Exchanges are the island in the middle which make it easier finding the other side. 


All cryptocurrency exchanges are like stock exchanges (FOREX currency exchanges) but are far cheaper to use and operate. Cryptocurrency exchanges are centralized hubs built for users to trade amongst each other. There currently exists, and will continue to advance in the marketplace, exchanges that are decentralized. These exchanges will operate much like Bitcoin. They will be run by everybody, not just one centralized company or person. Decentralized exchanges are continuing to gain popularity due to the principle that you only need one decentralized point in a centralized system to fail. This makes centralized systems less secure than decentralized systems. 


Bitcoin is called cryptocurrency because it is secured through a form of mathematics known as cryptography. Banks and businesses use this today to secure money and information. With Bitcoin, cryptography is used to encrypt a wallet (ensure no one can use funds without a password), make it impossible to use another persons wallet, or corrupt the blockchain with malicious transactions. Malicious transactions such as the “double spend” could cripple an economy. It's a form of counterfeiting where a user attempts to send Bitcoin to two different addresses at the same time. This is made impossible due to miners using cryptography to confirm transactions. 


These confirmations are needed to ensure that the transaction won't be reversed. After about six confirmations, it's mathematically impossible to reverse them. It means this transaction is etched in digital stone on a digital hectare of the blockchain globe. 


Being written on the blockchain is better than being written in stone. 


Your private key is yours. You never have to give that to anyone. They only ever see your public key when you request or send Bitcoin to other addresses. You can sign your Bitcoin in your wallet to show the world it indeed did come from you. If it's signed, it is you. The wallet is a piece of software which holds your private keys and makes it easier for the user to engage in the Bitcoin economy.


 Miners can vote for or against upgrades to the Bitcoin code. Bitcoin miners check all new transactions and all others to ensure they are true with other miners and nodes. Bitcoin Miners are rewarded by winning a lottery. This lottery is called a block. The block is a bundle of transactions which together get confirmed by miners. The lottery ticket (block), is sometimes won by a pool of people all putting their hashing power together to win the lotto and split the earnings. 

Miners use a lot of hardware and power to calculate these trillions of mathematical calculations per second to secure the blockchain. This is called the Hash Rate. The higher the Hash rate the more secure the network becomes. The more secure the network becomes, the higher the Hash rate, the more difficult it becomes to win a block. This is known as the difficulty. 



It is no coincidence that as difficulty in mining Bitcoin increases, and Hashing Power increases, and the new supply of Bitcoin decreases... That Bitcoin becomes even more valuable. It is supply and demand.  Those who scream "Bubble!" have no true grasp of economics.


Nodes can also vote for or against upgrades to the Bitcoin Code. Full Nodes check all transactions except for the new ones Miners check. If miners chose to use their power (electricity) to overpower the will of the user base, the users can override their vote with a User Activated Soft Fork. 


Yes, there is politics in Bitcoin. Except with Bitcoin, you can't have voter fraud. If you vote. It happened.


 Some competing cryptocurrencies have deployed a system known as Proof of Stake. There are many forms of PoS, but generally they all operate as low energy consuming user nodes. This makes each and every crypto user their own bank.


 This makes Bitcoin digital oil, digital money, digital real estate, digital banking and digital government. The blockchain is a history book of which the winner of wars cannot rewrite. Imagine that. The very first history book which cannot be written by the victors. 



Those who invest and risk early are rewarded compared to the old way where it was "he who killed and conquered enjoyed the spoils of war". It took centuries to convince people to accept paper over metals... it took people decades to have them accept plastic over paper, but I believe it will be just a few years to convince them to accept the digital blockchain.


 There are a lot of currencies that call themselves cryptocurrencies yet have no blockchain. Some currencies are run by anonymous shadowy figures or internet trolls. Others have reversible blockchains and can delete people's wallet balances if they so wished. 


They may have their places in the marketplace and may rise or fall. It's up to you to put your money where it counts most. 


Would I sell my only form of transportation to panic buy Bitcoin? Would I wait to buy a house to buy Bitcoin? Would I invest my life savings into Bitcoin? Probably not. But I wouldn't have a roof over my head, a form of transportation, or a life savings, if it wasn't for a little investment here and there into cryptocurrency.


Read Satoshi's White Paper to gain a clear understanding of why he built Bitcoin.

https://bitcoin.org/bitcoin.pdf


 The real kicker is it's Bitcoin vs Big Bank Crypto. 


Either Satoshi's Decentralized principles, which gave birth to Bitcoin wins, where no one can take your Bitcoin, or Fedcoin.


"Fedcoin", which if/when you dissent, they can switch you off from engaging in commerce. Let's hope bitcoin wins this battle. I have hope. 


____________________________________


Keith Smith is a core Team Member of  the Cryptocurrency called Nexus found at www.nexusearth.com 


New to Cryptocurrency, Bitcoin, and Trading? Read this Simple Tutorial and get the resources you need to get started:

https://steemit.com/cryptocurrency/@keithsmih/how-to-become-a-cryptocurrency-trader-simple-tutorial


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Thank you for your analysis, nice one. The concept of Bitcoin is brand new and fits our society a lot. In fact, the concept of crytocurrency makes use of the peer to peer technology. It's liquidity is one of the most amazing and unique things comparing to other currencies we have right now

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It is a very new concept. I truly enjoy watching someones eyes light up when they grasp how it works.

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I just wrote this post about reasons I believe Bitcoin might be currently undervalued. Also wrote a bit on why we gotta watch out for a possible ICO Bubble. Don’t get me wrong, I’m a total crypto-enthusiast, I just try to be very logical about my analysis as an investment.

Awesome analysis, thanks for sharing! Those who still think we are in a #Bubble are just too late and the day they will have to join is when they will be too late

I do like this analysis, it is personal and thus it feels real and truthful. It will take time before people get around to the concept of crypto currency, but surely articles like this can speed up the process

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Thank you for sharing :-)

Thanks for this vivid explanation and insight. Bitcoin is indeed something that could have been imagined yet believed not to be true and yet it is very true and as true as my illustration appears confusing...lol

Long, but good explanation. Whenever I explain Bitcoin to someone I usually start out with the words "digital gold".

thank you for your post.
it's helpful

Thanks for sharing this valuable and informative post.

This is very clear and well-written. I also look forward to any future posts you may have on Nexus as well. Upvoted and following. Thanks

Length but nice one and yes I agree with your post it truly is bitcoins is a blessing in disguise to mankind.

I have to buy bitcoin because I'm too poor to play around with it in the markets (minimum of 2800usd... no thanks!). But I'm hoping my already doubled coins will keep rising...Will study this after work cheers!

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Its best not to play in the markets. Do some research in your spare time and pick a good long term position. I have been vastly successful by buying and holding.

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Yeah I think for now I'm just gonna hold on to my own bitcoins and just see over the months. Even if there is a giant pop, BTC should climb naturally to the skies down the line

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Sounds like a good plan, buy and hold :-)

Hi this was a super informative piece for new people. Will share with my buddies . Also followed , follow back if you interested in seeing some crypto trade ideas . Thanks

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Thank You

love it, makes a hell of a lot more sense then when you speak to a computer geek about it. lol

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Lol thanks

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it's all about explaining not telling

The most undervalued asset in history is Silver at this very moment. FAR more than BTC.

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Gold and Silver are both artificially suppressed thus extremely undervalued... You could give 3.7 ounces of silver to every person on earth. Doing the math... I cannot agree that it is more undervalued than bitcoin.

Thanks for the comment though!

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As context, silver is supressed 500 to 1 paper to physical, and gold 231 to one.. so silver has far more pressure from short sells, as it's truely the more valueable metal for industry.

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Yes, I am well aware of that. I believe there should be some unity in the PM markets and Crypto.... since I am in both myself. I see all three shooting through the roof not too long from now.

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The point is, if no massive physical is demanded from exchanges, the paper trade will continue. It could even be that paper price moves to zero while physical becomes unobtainable.

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Did you read the article or just comment on the title :-) Just wondering

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I already know the fundamentals of everything related to crypto and precious metals. You are underestimating the punch silver is about to give, it's likely to go parity with gold, so I don't put them in the same boat.

Also BTC is a great bet long term but you will do far better going long silver now, then selling off to BTC even if it goes up 10 fold.

BTW Big time crypto advocate. I hold a number of ICOS, as well as BTC, Ether, Dash, and Bytecoin.

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I have more silver than I can carry. I was in silver before it was cool at 4 dollars an ounce. This writing is to educate the hundreds of people asking me about bitcoin on FB, EMAIL, TEXT and phone calls. I hope to help them understand Bitcoin and Crypto Better. Its good to be diversified.

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Agreed. It's not the most undervalued :) That's my only point. I love crypto. I just got in the vertasium ICO. I'm not crypto hater. I run a bitcoin ATM lol.

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Just as a casual observer here, why is Silver about to blow?

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The Stock Market looks like its long overdue for a correction plus when the shorts on silver get wiped out... its up up and away

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Ah, fascinating. Time for me to start doing my homework

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That's true. BTC was the most undervalued assets in the early 2009.

I am very new at this bitcoin and every time I read something about this novel technology that is transforming the world of finance worldwide I am more aware that I know nothing about it.

This article seems very good, in fact I would like to take some ideas for a presentation that I will make in my coworking community in Managua (Nicaragua) next June 28.

And the only thing I could add is that bitcoin and blockchain not only represent a new technological paradigm but a new cultural paradigm that is disrupting power relations and human experience, and will have to see if it is not also changing the relations of production.

And obviously there will still be a lot to see in the future because we are facing something that is just being born.

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Feel free to use what you would like for your presentation. This is information to be shared :-)

This helps a lot for someone who is still learning about Bitcoin. I have been doing research on it and trying to understand because there are so many other factors also contributing but thank you for the analysis!

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I am glad it could be a help to you :-)

thank you for your post.

it's really good posting.

Awesome post. I totally agree.

I just wrote this post about reasons I believe Bitcoin might be currently undervalued. Also wrote a bit on why we gotta watch out for a possible ICO Bubble.

Very good post. I fully understand what you're talking about. The current total market cap of all cryptos might seem high but blockchain is here to stay and will involve all our lives. I do see a bright future for everyone that's hold's their coins with a long term vision. Personally I always use: https://www.coincheckup.com I'm really enthusiastic about this site, they let you analyze every single coin out there. Check: https://www.coincheckup.com/coins/Bitcoin#analysis For the Bitcoin Investment research.