Still don’t know what Bitcoin is? Read this.

Bitcoin’s astronomical rise in value and innovative technology are making waves in every corner of the internet.

An overview of Bitcoin for beginners.
Bitcoin. It’s a term you’ve no doubt heard here and there over the past few years. But what does it mean? Why do you keep hearing about it?
I first learned of Bitcoin while attending University back in 2011. It appeared in a tech blog that boldly stated Bitcoin was going to be the future of money, but that it faced some significant hurdles to get there. One of the main challenges to mainstream adoption I remember reading was that Bitcoin held a certain stigma because it was mostly used to buy drugs and illegal weapons online. But despite this and many other obstacles, the author attempted to convince his readers that Bitcoin was a good investment.
The story broke right as Bitcoin reached an iconic point in its history — one Bitcoin became worth $1. It was sweet validation to all enthusiasts that Bitcoin had a chance to go mainstream. Four months later the price skyrocketed to $31.
Then this week one Bitcoin became worth $5,700.
If I had invested a measly $175 in Bitcoin after reading that article in 2011, it would be worth $1,000,000 today.
This is why you’ve been hearing so much about Bitcoin.
Ok, so it’s a tremendous financial opportunity. But what is it?
The Bitcoin record is a shared record of who owns which Bitcoin.
Bitcoin is a form of digital money that can be sent over the internet to anyone anywhere in the world.
It’s secure in the sense that there’s a publicly available record of who owns which Bitcoin, and that record is shared between thousands of computers all over the world. You can see it here (but I didn’t say you’d understand it 😉).
Each time Bitcoin is exchanged it’s etched onto this record. You can’t secretly unspend Bitcoin you’ve sent to someone because the record is public, and as soon as you send it the record captures that transaction and everyone knows it no longer belongs to you.
How do you know who owns which Bitcoin?
To receive Bitcoin you give the person or business you’re trading with your public Bitcoin address (think of it as an email address). They then use their Bitcoin address (email) and private key (password) to send Bitcoin to you.
As soon as the transaction is complete, it’s recorded on the public record that your address now owns that Bitcoin.
However, unlike email, Bitcoin addresses are not tied to personal identities, so the transactions are anonymous. No one really knows who the Bitcoin belong to, but everyone can see which addresses hold how many Bitcoin. And just like email, as long as you don’t lose your private key (password), you’re the only one who can access your Bitcoin.
Why and how is it worth anything?
Bitcoin solves some significant issues and opens exciting new opportunities that are currently impossible with traditional currencies. Here are a few examples:
Bitcoin can be sent to anyone anywhere in the world in a matter of minutes. The transfer fees are incredibly cheap, and you don’t need to go through any banks to do it.
Bitcoin doesn’t require you to trust the person on the other end of the transaction. If a Bitcoin shows up in your digital wallet, it’s yours. This way you don’t need a middleman to verify the transaction and take a cut to do so.
Bitcoin’s public record, decisions, and changes are decentralized. This is in contrast to centralized governments and banks that can be manipulated by relatively few people. Since it’s stored and operated on computers all around the world, no one party can manipulate Bitcoin to satisfy their individual desires.
Bitcoin is mined. But not in the traditional sense. Instead, miners of Bitcoin use powerful computers to solve complex math equations. The first miner to solve the problem is rewarded with Bitcoin. Only 21 million Bitcoin will ever be mined. This creates scarcity and a relationship between supply and demand that can’t easily be manipulated. Scarcity is a driver of value and is what makes things like Gold and Silver worth what they are.
The Bitcoin community is one of the strongest and most dedicated on the planet.
Online stores can receive purchases from anywhere in the world if they accept Bitcoin.
Japan has legalized Bitcoin as a payment method, and over 260,000 stores accept Bitcoin in the country. Japanese residents spend about $2.6 trillion every year to buy things. If only 10% of those transactions were in Bitcoin, then the Japanese Bitcoin market alone could justify Bitcoin’s current price. Basically, the current price of Bitcoin is still meager compared to the potential it has if people around the world start using it regularly.
What are some of the challenges?
Bitcoin almost sounds too good to be true. But is it?
You likely have heard as many criticisms of Bitcoin as you have praises. Many of those criticisms are true, and many are not. Here are a few valid ones:
Bitcoin can’t handle many transactions — This is true. Bitcoin handles an average of 5 transactions per second. Visa does 2,000. To process transactions all over the world and be viable for everyday use, Bitcoin will likely need the ability to process an equivalent of 100,000 transactions per second. Fortunately many different solutions are being worked on and proposed to allow for scaling without sacrificing Bitcoin’s famed security.
Bitcoin can get hacked and I’ll lose my money — This is partially true. While Bitcoin itself hasn’t had a single major hack in its lifetime (except for bugs early on that were quickly fixed and didn’t result in any substantial amounts of money being lost), plenty of surrounding softwares and companies have been hacked. Since the Bitcoin public record is near impossible to compromise, you don’t have to worry about someone stealing your money that way. What you do need to be careful of is where you store your Bitcoin. Bitcoin Exchanges are favorite targets of hackers because they save your private keys (passwords) together with everyone else’s, and if the exchange gets hacked the intruder could likely access and steal everyone’s Bitcoin at the same time. Also, sending your Bitcoin to the wrong address (which is easier than you might think!), will result in the permanent loss of your money. The company that creates an effortless and safe way to store and send Bitcoin will become one of the most valuable companies in this space. Currently, Coinbase is the most accessible and reliable method out there, but they still have a long way to go.
Governments can shut it down and kill the value — This is partially true. While governments can’t control where you send your Bitcoin, they can make it illegal to trade or buy things with them. China recently shut down all of the Bitcoin exchanges in its country while they work on regulations for Bitcoin and other currencies. This had a severe short-term impact on the value of Bitcoin (the price has rebounded strongly since then) as people realized governments could make it difficult to use Bitcoin. Though in Venezuela, where officials have tried to ban Bitcoin mining, it serves as one of the only viable ways to make money (alongside “farming” for gold in Runescape) and people continue to do it despite pressure from local authorities to stop. While many central banks and governments fear Bitcoin and the disruption it’ll bring, many are embracing it and seeking to understand its possibilities.
Smart people call Bitcoin a “fraud” — This is true... That people call it a fraud. But they are mostly misinformed. Perhaps the most common objection to Bitcoin is that it has no intrinsic value (value beyond its price). But neither does a $1 bill. The $1 bill used to be backed by gold, giving it a second layer of value. That’s no longer the case. $1 is only worth $1 because people agree that’s what it’s worth. A currency’s value is driven by a collective belief in a government’s good faith. In fact, when paper money was introduced in the late 19th century many skeptics had the same arguments against it as current skeptics do about Bitcoin. If you read their objections and substitute “Bitcoin” for “paper money,” you’d find that the talking points are nearly identical. This happens any time there’s a financial revolution. Many people feel they have lots to lose if their way of life is being disrupted, and there are many who do, which is why they spend so much energy fighting back. Next time you hear a naysayer of Bitcoin, stop and think about what they have to gain by putting Bitcoin down.
Ethereum and other cryptocurrencies will surpass Bitcoin — This may be true. But no one knows at this point and it’s extremely difficult to predict. Bitcoin is a living currency. It’s always being developed and improved upon, and it has proven to be highly adaptable. All decisions are made on a consensus basis between the miners and users of Bitcoin. But this is where its strengths become its weaknesses. No one party can grab the wheel and control Bitcoin to make it applicable to a particular use case (like using it for groceries). Other cryptocurrencies skew more control towards the developers, allowing them to build new technologies into the coin at a quicker pace than Bitcoin. The most significant thing Bitcoin has going for it is user adoption. Nothing else comes close to the awareness and overall value of Bitcoin, and as long as the Bitcoin community stays strong, active, and (mostly) devoid of politics, Bitcoin will remain the leader for the foreseeable future.
Conclusion
Fast forward six years and my interest in Bitcoin has only grown. As I continue to dive deeper into the studies of Bitcoin, I discover that there’s so much more to it than meets the eye. Understanding Bitcoin and its underlying technology will truly be a lifelong pursuit.
And while the premise of Bitcoin seems simple on the surface — creating digital copies of things that can’t be further copied — it has laid the foundation of the future of money and opened the door to applications that aren’t yet possible with modern technologies.
We are only at the beginning of perhaps the most significant technological revolution since the internet. I hope you’ll join me and millions of others around the globe as we study and build the future.
You may not realize it, but you now know more about Bitcoin than most. Don’t let that knowledge go to waste.
**Update 10/12 to reflect price of one Bitcoin at $5,700.
Thank you for reading. If this helped you please leave a comment and some 👏👏👏 below. While Bitcoin is a phenomenal investment opportunity, please consult an expert in the field before buying any. I don’t intend this as investment advice. If you’d like to see a breakdown of Ethereum and blockchain for beginners, please let me know!