I just don’t get Bitcoins..
Is something I hear fairly often and I remember feeling the same way when some friends were explaining it to me while we were sharing a house at SXSW in 2010. (Story starting, you can skip)
*This post is an explanation of the idea of bitcoins, my next post will have instructions on how to start mining, buying, and trading*
The whole idea felt scary and dangerous to me, so I created a whole new online identity to experiment with it thinking the government would be hunting me later for getting involved. I let my macbook pro mine all week. I recall ending up with .3 or .7 of a bitcoin, its hazy. I had no idea how the concept of the wallet worked and remember uploading it to my new gmail account. I have no idea what the heck that email was called so I have no access to the wallet or the coins.
Fast forward to November 2013. I was about to attend a conference for online gambling that was piggy backed on a bitcoin conference. As I started do my research on who to meet while there I was quickly sucked into the crypto-currency culture and how much it had advanced over the 3 years since I first heard about bitcoins. Now I want to teach you just what the heck is going on at the easiest level possible.
(Story over, definitions now, followed by instructions in my next post)
Bitcoin is an open source peer to peer money. Simple as that, but what the heck is that?
Let’s break it down.
Open source means it is basically free for anyone to use, change, and redistribute.
Peer to peer means everyone on the network acts as a server, removing the need for a central server. Imagine you are in a construction crew. The only one that can tell you what do is the boss. Peer to peer is nothing like that. Peer to peer allows anyone to communicate, store, and share orders/data as long as they are connected.
Money is defined as a medium that can be exchanged for goods and services. The most important part of this simple definition is what we are currently used to, fiat currency/money.
Fiat money is currency that a government has declared to be legal tender, but is not backed by a physical commodity. The US dollar was at one time backed by gold, called the gold standard. It changed because of the Smithsonian Agreement in 1971, and the US dollar was officially changed in October of 1976 when all references to gold were removed its definition creating a flat, fiat currency.
How did bitcoin become a real thing?
You can read about the lore here. https://bitcoin.org/en/faq#who-created-bitcoin
Ultimately it was created by Satoshi Nakamoto in 2009 based off a theory from 1998 published by a person named Wei Dai in a cypherpunks mailing list. Pretty cool.
Why is bitcoin important now?
Main reason is no one and no government owns it. It is a free trading economy and growing everyday. It is freedom, low transaction fees, offer security, and is transparent/neutral.
My next post will get right to the point on how to get into this fascinating world!