What is Bitcoin? - "A Simple Guide for Non-Technical People."

in bitcoin •  2 years ago


What is Bitcoin? - It isn't just money.


This may seem like a simple question with a very obvious answer but the truth is that Bitcoin is actually a network composed of multiple key features (sometimes referred to as a blockchain).


Not just money but a network with a number of useful features.

Bitcoin is:

1. A system of digital money.
2. A distributed ledger (a secured list of transactions).
3. A means of reaching consensus (agreement).
4. Decentralised and allows anyone to participate.
5. Incredibly secure due to the way the operations on the network are carried out.

This combination of features can be used in multiple ways.

One of the most obvious ones being that it allows for a system of exchanging value (money) which puts people in full control without the need for trusting a middleman (like a bank).

As long as you have control of the private keys (these are like passwords that secure your bitcoins) then you have full control of your bitcoins.


Is Bitcoin Hack Proof?


Nothing is completely hack proof.


Nothing is completely hack proof. Bitcoin is very secure though.

There are areas of the bitcoin protocol that can potentially be exploited - just like any other type of technology.

The way that bitcoins are produced involves solving very complex mathematical problems.

These do a number of things that involve protecting transactions on the network from falsification, double spending and the like.

Millions of computers around the world compete to solve these complex problems and in return they enter a kind of competition where the winner gets a certain number of bitcoins (currently 12.5 bitcoins) for their trouble.

Due to the vast number of computers involved, the most obvious form of attack to the network (something called a 51% attack) would require an immense amount of computing power.

As the network grows and more people mine bitcoins this computing power grows and that makes it harder for bitcoin to be attacked and hacked in this way making it more and more secure.

There could be defects or bugs in the bitcoin code that could allow other types of exploits. Thankfully Bitcoin is open source software and anyone can check the code.

This means that people around the world are constantly checking it for problems and it keeps being improved. The moment someone alerts the community to a problem, it can start being fixed.

So in summary, we can't say for sure that bitcoin cannot be hacked but as time passes it becomes more and more secure.


Why is Bitcoin Better Than Regular Money?


Unlike regular forms of "fiat" money there is no central authority in control of bitcoin.


Bitcoin is not controlled by a central authority.

This means that there is no central government or bank that can block transactions or freeze your money on a whim.

It is also cheaper to make transactions compared to other means of transferring money.

One of the biggest advantages is that the total supply of bitcoins that will ever be mined is fixed at 21 million. This is baked into the system and there will never be any more than this.

This makes it quite different to fiat money where governments have a tendency to print money as and when they feel like it - something which creates inflation and devalues the money you already hold.

The end result is a currency that is better protected against inflation.


What Gives Bitcoin Value?


This is a question I often hear and there are a number of different ways of answering this.


People give it value.

The most basic answer is that Bitcoin has value because people believe it has value.

This may seem like a strange concept but if you think about it, this is exactly what gives "fiat" money like US dollars or Euros value.

There is no longer anything backing them (like gold), they simply have value because people believe in them and the system backing them.

Similarly people believe in Bitcoin and the Bitcoin network (with it's ability to securely transmit value) and hence they have value.

Another way of looking at it is to consider the costs required in mining bitcoins.

In the same way that certain minerals are expensive due to the costs of extraction, as bitcoins become harder to mine, so the valuation of them goes up.

One further source of value is the ability to use the security of the network to carry out other "accessory" operations.

There are a number of projects working on using the bitcoin ledger to secure other information (including creating other tokens) - these also bring utility value to the network.


So Bitcoin is Perfect Then?


No that isn't what I said. No human created system is perfect.


Brilliant but not perfect.

As with any technology there are risks.

It can be misused and exploited - e.g. for crime - but that is a risk that has existed with virtually all technologies since the dawn of humanity.

If you don't look after your private keys (which are like your bank details and passwords) properly you could lose all your bitcoins.

Technology does not change human nature or how people behave. It just gives people more options.

Bitcoin does not stop people being irresponsible or acting immorally.

Fire could be used to keep you warm, or used improperly it could burn down an entire forest.

There are a number of issues with Bitcoin that still need to be solved.

The most prominent one you will hear about is something called "scaling" - the number of transactions that Bitcoin can make in a certain period.

This is a matter of heated debate in the community and beyond the scope of this article - use Google to get the latest information on this.


How can I get Bitcoin?


The most obvious way to do it is to mine it, however, this is now beyond the means of most people due to the expensive hardware (and cheap electricity) required.


Buying options will vary depending on your location.

For most people there are 2 options:

1. Mine another cryptocurrency (see below) and convert it to bitcoins.
2. Buy bitcoins - i.e. convert fiat money to bitcoins.

When it comes to either of these options Google is your friend.

Personally in my opinion the easiest currency to "mine" is Steem as you don't need any technical know how. You earn this cryptocurrency by sharing original content (like this blog post).

For buying Bitcoins you will need to check what resources are available and legal in your area (due to legal requirements in different countries the options will vary).

One of the most popular international sites is LocalBitcoins and there are also Bitcoin ATMs available internationally.

Use Google to get the latest information.


How can I Spend Bitcoins?


ThinkstockPhotos-641222426.jpg

There are many ways you can spend your Bitcoins.

These are the main ways you can spend Bitcoins:

  1. Some businesses have started accepting Bitcoin payments directly - there is a list of them here and they are growing all the time.

  2. There is also a company called Gyft that allows you to buy gift cards (e.g. Amazon etc) using Bitcoins directly. That way even if a business does not accept bitcoins directly this is a way to get round it.

  3. There are various Bitcoin/cryptocurrency credit/debit cards that allow you to do something similar e.g. Bitpay, Xapo, Shift.

  4. The final option is to use a service like LocalBitcoins or Bittylicious to sell your bitcoins for fiat money.

N.B. Some exchanges may also allow direct conversion to fiat money.


What Are Altcoins?


Altcoins or alternative cryptocurrencies are other currencies that use principles similar to Bitcoin such as a distributed ledger to operate.

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There are a whole host of altcoins with unique features.

To use an analogy, just like we have Coke we also have a host of other soft drinks. Some do the same kind of thing (e.g. Pepsi, or RC Cola), others have slightly different flavours like Mountain Dew or Dr Pepper.

Just like Coke doesn't necessarily cater to every specific taste or need, the theory behind many altcoins is to serve a specific purpose.

Here are some examples of the altcoins I am most familiar with:

  1. Ethereum, Stratis and Lisk - these are distributed "app" platforms that are slightly different in their approach but allow people to create their own blockchain apps.

  2. DASH, Monero and ZCASH - these all allow anonymous transactions using a variety of different methods.

  3. Bitshares, HeatLedger, Komodo, WAVES - these make up something called decentralised exchanges (DEXs). WAVES is also a crowd funding platform.

  4. STEEM - this is a cryptocurrency that is optimised for monetising content sharing - think blogs, photographs, links - everything you share for free on other sites (or monetise through advertising). Steemit is one of the sites that runs on STEEM and the easiest way to start earning STEEM (make an account here).

  5. LTC/Litecoin - this is very similar to Bitcoin only it is a bit faster. Many people describe this as the "silver" to Bitcoin's "gold". It has also become somewhat of a testbed for new technology before it is implemented on Bitcoin.

  6. XRP/Ripple - very big right now Ripple is a closed system that is working closely with international banks. Most people do not consider it to be in the spirit of Bitcoin because it was created to make life easier for the banks and not the ordinary person on the street.

  7. There are many, many more - as Bitcoin rises in popularity many new companies are coming up with their own versions of blockchain technologies and their own tokens.


How Can I Find Out More?



There are lots of free and paid resources for learning more.

There are a huge amount of useful resources online. The Wikipedia page on Bitcoin is a fantastic resource and a good starting point for more in depth information.

If you prefer learning in book form, I would highly recommend Andreas Antonopoulos' book "Mastering Bitcoin: Unlocking Digital Cryptocurrencies".

This is really easy to read and goes into quite a lot of depth about the underlying details of Bitcoin. I also think a new updated version is coming out soon.

There are also resources (including Bitcoin wallet links) on the main Bitcoin website.


Conclusion


I hope you have found this guide useful.

My intention was to create something that is simple and easy to understand for people who are not familiar with cryptocurrencies and I hope I have succeeded.

This can be a tricky balance to achieve so please let me know if you feel anything is incorrect or too far off the mark.


Thank you for reading


ThinkstockPhotos-598825938 (1).jpg




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I kinda like Bit Coins version of Louis Litt, Andreas M. Antonopoulos explaining what Bitcoin and Money really are.

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2 months ago, I had the opportunity to see Andreas talk live in Singapore.
He knows the bitcoin stuff very well and it was quite entertaining to hear him speak that I thought I should read his book.

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I love Andreas - he is one of the people that first helped me to understand it. He is also very approachable even though he probably gets bombarded with thousands of questions a day.

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ME TOO. I learned a lot from him. He's brilliant.

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Earn passive income daily with bitcoin!

Shared to facebook :)

Thank you for the post! Although most of us know what cryptocurrencies are, we get drawn into our own world and forget how to explain these currencies to everyday people who aren't very technologically inclined.

Really interesting read, thank you.

Steem on!

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You're welcome :)

The best thing you said is that the believe of people gives bitcoin any value, or any other cryptocurrency. With time, more and more people are learning about botcoin and as it has been there for a while, people are now believing on it. Some are believing on it more than fiat, because of economic breakdown of their country, their currency has devalued but botcoin investment has given 3 times returns in last 6 months. Some are believing that tbe value of bitcoin will go in 100s of thousand. Seeing current scenario, even I am starting to believe that but only after a few years and if everything goes right. So I think Bitcoin Will keep rising because more and more people are starting to believe in it and the previous ones believe is growing stronger day by day.
I think we will see bitcoin valued at 5000$ at the end of the year, but that's my believe.

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I think you are right and 5k is possible for sure!

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I hope it keeps growing like that, people keep believing like that and our future keeps shining like bitcoin.

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Me too and I think it will. I think the current issues with block size/scaling are minor hiccups and will be overcome.

The potential with bitcoin and cryptocurrencies in general is huge. It is a whole new economy which I think will dwarf anything before it.

I don't think it will take long before we are looking at a trillion dollar industry (and beyond).

I may be biased but I think STEEM will be amongst the top 5!

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Just because of Your optimism towards steemit, bitcoin and Life, I am a true follower of your, I read all your articles.
And I hope that You will be wrong and Steem will be on Top, and You can call me biased.

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:)

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I hope you have found this quick guide useful.
My intention was to create something that is simple and easy to understand for people who are not familiar with cryptocurrencies and I hope I have succeeded.

intent achieved!
am retweeting for my friend who's a newbie!
Thank you!

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That's quite helpful for new people, "Sharing is Caring".
The best thing you could do in life is to pass on the knowledge you have learned. Pass more knowledge to people so that more people will believe in bitcoin and we all will grow more.

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Me too,
Steem have a wonderful project and i believe that this coin will go to top 5 in coinmarketcap, soon .

Well first of all I had to upvote because you were at "666" and we can't have that.
I am so sincerely grateful for this post and am going to forward this page link to many friends and family tonight when I get home. Also, I'm saving it for all future conversations. The amount of time and energy I've spent over the past 3 1/2 years trying to communicate this is staggering and here you have it all wrapped up for me going forward. Thank You!

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Lol! Thank you so much. It was because I kept being asked this kind of question by people online who had heard of bitcoin but did not know what it was that I created the guide. Hopefully it will also introduce new people to Steemit/Steem in a gentle way too.

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But the flip side however is I do enjoy going up to the drunkest person at a dinner party and putting my arm around them while opening with "let me tell you about the wonderful world of crypto currency".
It is very entertaining, especially the next time I see them and they're trying to remember what we discussed like if remembering a dream they had. LOL, it's way too much fun to give up.....

One thing I see a lot is people who confuse the hacking of exchanges or wallets with the "hacking" of Bitcoin. I blame a lot of this on the media and how they report on the events but also on people lack of understanding, which is sad.

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Yes very true. They also sometimes call the Bitcoin Foundation the people that "control" Bitcoin which is funny.

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Most ppl I encounter that are opposed to BTC either are held captive by their ideology and beliefs about money, or they do not understand the technology. That is why posts like this are so important, once ppl gain understanding of the tech they are much more likely to use it.
Yes I also find that comical lol

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I agree. I think most people live in ignorance until they need to know more.

Your article is very detailed and easy to understand for non -technical people. I will refer to it in the future whenever someone asks me about bitcoin!

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Thank you - I'm glad you found it useful!

excellent work i follow you and voted you
i also share news about cryptocurrencies if you like to visit my blogs :)

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my pleasure , i hope we can be friends also

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sweet i like it i will look forward for that my friend :)

Congratulations @thecryptofiend!
Your post was mentioned in my hit parade in the following categories:

  • Upvotes - Ranked 3 with 638 upvotes
  • Comments - Ranked 2 with 137 comments
  • Pending payout - Ranked 9 with $ 581,29

really great work so i will resteem this post

it is legan in japan now , and it will be legal everywhere soon : https://steemit.com/bitcoin/@clixmoney/bitcoin-is-a-legal-currency-in-japan-now

Has Bitcoin and become new generation.

This is really good! Thank you for writing this and explaining things so well!

🍒 Wow excellent post o_o, I will reesteem this, it's good

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Thank you very much!

Nice post to understand the basics of bitcoin... if somebody interested in more futuristic and idealogical views can check this film on blockchain and bitcoin:

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Thanks for the link!

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As a strong believer in blockchain based technologies, this film was very refreshing and inspiring.

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Thanks I will add it to my list of things to watch:)

this gave me a whole lot of knowledge about bitcoins and cryptocurrency, thank you for sharing ;) Good read ^_^

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you're most welcome @thecryptofiend, looking forward to learn more from you. :-))

thank you for sharing this useful information about bitcoin and cryptoccurency:) I am new to all this so these help me a lot !

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Thank you that was my intention - thanks for taking the time to let me know :)

Thanks. It gets clearer and clearer each day.

Thank you for your effort. And i would tell you a thing : doing this kind of post, you are helping the bitcoin to grow, bringing more and more people in this new world ;)
Let's be a part of a new world with bitcoin as the 1st currency!

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Thanks I agree. I think the more that bitcoin grows the better it is for all of the cryptocurrency world.

Wonderfully explained..many many thanks!!

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You're welcome!

Truly excellent post. Well done!

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Thanks mate!

I appreciated the simplicity of your breakdown. I've been reading a lot of "beginners" guides to Bitcoins that still have been extremely convoluted and I love how you put it in the simplest terms possible. I've been trying to explain it to family members based off the other guides. Now, I'm just going to direct them to this post. Definitely sharing it on my social media accounts as well.

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Thank you for your kind words. My whole intention was to make it simple without going into maths or cryptography :)

Thank you. This post really helps!

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You're welcome!

You can publish this as a book.

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It's not that long!

Very nice description.

Security and coin have always been a problem,hacked or thumped over the head and your wallet stolen either way its gone .. But must say hacked is somewhat less painful lol

Thank you for the info. I understand a lot better now

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Great thank you:)

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Finally someone who made total sense. Thank you

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Thank you :)

very good guide for new-comers :)
Upvoted :D

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Think BTC is one of the few things in crypto and trading i roughly understood - you managed it again to explain the entire topic absolutely perfect for newbies! What a talent!

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Thanks mate!

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always welcome -you are still my role model here

i love your post and thank you for the all the info

Thank you @thecryptofiend for an informative and easy to read article. Keep up the good work.

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Thanks you're welcome:)

Thanks @thecryptofiend

I'm just getting into this stuff and your guide was hugely helpful.

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Thanks glad you found it useful!

What an incredible article. In fact, one of my favourites so far. So much so that quite a number of my friends have been asking me for a breakdown of what Bitcoin is and how it works. Easy, just direct them to your awesome article!

Again, your flow and formatting make it so easy to understand. A blogging masterclass at it's finest, @thecryptofiend.

Thanks also for including a section of summerizing some altcoins as they too have earned there place in the crypto space and deserve a mention.

Take care, good friend! Keep on pushing the limits and flying higher! :)

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Thanks mate!

Very useful and helpful thank you plus love the puppies :)

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Thanks, can never have too many puppies!

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That is so true :)

Thank you very much for this post it really helped. I am still having trouble to understand how will any of the cryptocurrencies will eventually decouple from fiat currency. I think that in the near future once we all agree to give the same value in a specific crypto-currency to an item that we want to trade then at that point in time we can start getting away of those common fiat currency used in our everyday life.

how to get bitcoins.jpg

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Good point. I think it will happen when we can buy our essential goods and services with cryptocurrency.

In my opinion bitcoin is a magic number that can make you real money into your bank account. Lol

This must be one of the most simplified and thorough explanations I have ever come across. I bookmarked it for future reference and reposted it to my community

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Thanks mate you are very kind. I wanted to keep it as simple as possible.

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np man. it is simple but very well written for just about anybody.

thanks for sharing! i keep learning about it! i resteemed! ;)

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hi colombiana nice pic i invite you to visit my blogs too :)

nice...rs and upvote for you...

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u r welcome...

Thank you for this interesting article all this is very new to me so I am indeed your target market for this blog.

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Glad you found it useful!

They key to understand what bitcoin really is :
https://www.youtube.com/user/aantonop/videos
;)

Great work @thecryptofiend ;)

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Thanks mate! I am hoping it brings more curious people in to wonder about Steem too!

Very nice right up thank you!

thank you for going into detail about certain aspects i still don't understand..though i got a better handle on it. i hope my ramblings about ghosts and divination and such will earn me money. Steemit might not be the best venue for this train of thought. it seems far more political and socio economical than i can keep up with, but i hope to find my niche

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I think if you stick with you will slowly build up an audience as we expand - just keep going!

GREAT post, thanks for sharing!

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You're welcome!

Thanks for this post! I'm a complete ignorant with regards this topic. My question is, where and how can this 'money' be spent?

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That is a question many people have!

These are the main ways you can spend Bitcoins:

  1. Some businesses have started accepting Bitcoin payments directly - there is a list of them here and they are growing all the time.

  2. There is also a company called Gyft that allows you to buy gift cards (e.g. Amazon etc) using Bitcoins directly. That way even if a business does not accept bitcoins directly this is a way to get round it.

  3. There are various Bitcoin/cryptocurrency credit/debit cards that allow you to do something similar e.g. Bitpay, Xapo, Shift.

  4. The final option is to use a service like LocalBitcoins or Bittylicious to sell your bitcoins for fiat money.

N.B. Some exchanges may also allow direct conversion to fiat money.

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Thank you!! That's very interesting!!
And, then, another question from a beginner! 😜
How are the bitcoins generated? I mean, here for example, you're getting steemits for each vote...but how is this "money" generated? Sorry if I'm a bit silly, but it's been 3 days only in this community and haven't really understand how it works! 😌

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It's not silly. It is generated in a similar way to how bitcoins are generated using something called delegated proof of stake.

Regular proof of stake generates new coins or tokens according to how much each account holds, DPOS is similar but uses a combination of elected "witnesses" who run the network (like nodes) and in the case of Steem, voting to allocate the rewards.

So to put it simply a certain amount is produced every day and the majority of it is allocated using votes (depending on how much Steem Power the voter has, more SP = more money).

A small amount also goes to witnesses for running the network.

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Very helpful ! Thank you! :)

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You're welcome!

Sweet! Wish iwould have bought it sooner.

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We all wish that!

Hi I just want to say a big thank you for creating steemit help, I just read it and it was a huge help.
Also great article.
Thanks again
Followed

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Thank you so much - I'm glad you found it helpful!

@thecryptofiend Thank you so much for sharing this. This is a great post for noobies like me in the cryptocurrencies field. I hope to learn more from your posts. Followed.

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Thanks you're welcome!

Thank you. I have come late to the crypto currency thing. But learning. Thanks again.

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You are still early compared to most - welcome:)

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Thank you.

O great! I was looking for an explanation like this!! Thanx so much!

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Glad you like it. I'm hoping it will bring in curious people to Steemit too.

Much tnx new also to all things cryptocurrency this helps :)

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Glad you found it useful!

Beautifully designed blog and very informative too, enjoyed, upvoted and followed!

Thank you for the informative post. I'm new to AltCoins/Bitcoin. Great info! I wanted to get in, but have been intimidated by it.
I just wrote my 2nd article on Steemit. Please upvote and resteem. Resteem would be incredible.
https://steemit.com/money/@jdawg/diversify-out-of-the-dollar

Great post, I am learning things quickly because of post like this. Thank you!

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this is a great post!

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Thank you:)

Keep up the good work.

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Your post was the most commented on one day

Click on any badge to view your own Board of Honnor on SteemitBoard.
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The ledger can also hold other information for instance one can put up a contract (the old fashion type not a smart one just some text ) and it will be immutability

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Yes and in fact I heard that microsoft were partnering with someone to do something along those lines.

Great post! Cute puppies too (my weakness) :)

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Mine too! Thanks!

Bitcoin is new money in the world.

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I think a lot of people have trouble understanding how it's value is derived. This usually takes the most time for people to understand or I just suck at explaining this part

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I think it is because most people don't understand where the value for fiat money comes from.

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So you're saying the US dollar isn't backed by anything but faith? I used to go at my college professors arguing this point. People thought I was crazy

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In my opinion yes. Others will probably say it is backed by all the government infrastructure and the ability of the country to make money - but I think it becomes meaningless if people lose faith as we have seen in places like Venezuela and Zimbabwe.

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I completely agree with you, but trying to explain this to someone is tougher than nails! Seems like Zimbabwe has not learned from their mistake made just a few years ago..

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Yes I know! We just have to keep trying.

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Exactly! That is all we can do - fight the good fight!

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Yes for sure. I also thinking people are influenced by the value - the more it rises the more effort they will make to understand it.

Great Post, I'm sharing this with friends and family. It's hard to explain in simple words what bitcoin and other crypto currencies are with out getting technical but your article explains it perfectly. Thanks for sharing and please keep such great work coming.

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Thank you that was my intention to have an easy to use explanation to refer people to :)

Thanks, I'll use this as a cheat-sheet when explaining BTC to friends and family

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Thanks glad I could be of help:)

Thank you for sharing this information for crypto challenged people like me! ☆☆☆☆☆😎

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You're welcome. I hope people find it useful.

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Exceptionally useful. Great post!

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