What is Bitcoin - Explained So Even Your Parents Can Understand It

Almost everyone has heard of Bitcoin at one time or another, but the number of people that actually understand it is quite a bit lower.  Before I begin, I want to express that this is intended to be a beginner friendly overview of cryptocurrency and not a technical review.  I think I'm also required to inform you that I'm not a financial adviser and any money you invest, you do at your own risk.  Now that we have that out of the way, lets get on with it.

To begin with, I find it easier to understand cryptocurrency if you first understand fiat currencies such as the US Dollar.and Euro.  When you ask someone, "what gives a dollar bill any value?"  You are liable to get at least a few people saying that it is backed by gold.  It is true that there was a time when our currency was backed by gold, but those days have been gone since the Great Depression in the 1930's.  The dollar bill today isn't backed by anything other than the "Good Faith" of the Federal Government.  What this means is that the government can print however much cash they want and dump it into the system, and we the people put our trust into them that they will be responsible with it.  The problem is, every dollar that is printed and pumped into the economy brings the value of the dollars in your bank account down.  So far the government has been pretty responsible with this vast power, but how long will that last?  We live in uncertain times, and I for one loose more and more faith in our federal government daily.  How far are we really from a financial collapse like we've seen in Greece?

In today's digital age, we rarely actually see the money that we have physically.  It is just a set of numbers and digits in a bank account that we access through an app or debit card.  At this point, the dollar is really nothing more then a ledger system.  This is exactly what Cryptocurrency is.  In crypto, we refer to this ledger as the blockchain.  The difference is in who controls the ledger.  With the current banking system, the bank has the final say in what is listed in anyone's ledger.  If that bank closes, there's even a possibility that you could loose whatever you had listed on that ledger.  With Cryptocurrency, the 'stake holders' all have to come to a consensus agreement that a transaction is valid.  This means that if any individual outlet folds or is hacked, the money is still safe because the rest of the network is still unaffected and do not recognize the transaction.  In order to be hacked or seized, 51% of the stake holders would have to be affected.  In this way, Crypto is much more secure then any bank could ever be.

'Where do these coins come from?'

This is a question I hear all the time.  Well, do you remember those 'stake holders' I was talking about?  There are various ways that different coins identify those people, but most of them do it through a process called mining.  A miner runs a specific program on their computer that basically processes transactions on the blockchain.  As a reward for processing these transaction, they are awarded digital coins as a sort of transaction fee.  These coins are then sold on exchanges similar to the stock exchange where a value for them is determined.

A beautiful thing about blockchain technology is that it can be used for much more then just a monetary system.  The blockchain can be used to store any number of things from financial transactions to files to media.  Companies like Siacoin are using blockchain technology to build a decentralized cloud storage service.  Steem is even building a social media site on top of blockchain technology that pays you for posting in Steem coins which can be traded for the currency of your choice.  As you can see, the possibilities are endless.

Another great thing about crypto is the speed at which transactions can take place.  If you were to wire money from your bank to a family member in Australia, for example, it's going to take a few days to show up.  A time frame of 2-5 days would be typical.  It would actually be quicker to go to your bank, withdraw the money, and fly to Australia to give the money to them personally.  It may actually be cheaper as well depending on how much money you sent due to bank fees.  The same transaction could be done with cryptocurrency in about 5 seconds for fractions of a penny on the dollar.

Momentum is growing in the Cryptocurrency community. In 2010 a single Bitcoin was valued at about 1/10th of a cent. In 8 short years, that same bitcoin is valued at just over 4,000 USD at the time of writing this article. An investor who took a chance and spent just 10 USD on Bitcoin in 2010 would have a nice little nest egg of 40,000,000 USD. That's right! Cryptocurrency is making millionaires, and it's doing it all the time! The great thing about it is that the more mainstream it becomes, the more these prices will increase!

You might think that the time has passed and you've missed your opportunity to get in at a reasonable price, but that's just not true.  There are literally thousands of these cryptocurrencies on the market today, which means there are tons of opportunities.  For example, many of the worlds top banks and even the Federal Reserve are now working with a crypto called Ripple (XRP) which is only valued at 15 cents today.  An investor could buy a large number of XRP for very little money and be pretty sure it will be quite a bit more valuable 5 years from now as digital currency becomes more mainstream.  There are literally hundreds of opportunities out there just like this.  NEO was trading around 1.50-2.00 USD a few weeks ago, and rocketed to 50 USD each due to backing by the Chinese government, which made quite a few people a hefty profit.  As you can see, whether we like it or not, digital currency is the way of the future.  I'm sure it will go through changes, growing pains, and added governmental regulation as time progresses, but it is coming regardless of all of these.  If you are new to cryptocurrency, now may be a great time to get in while it is still young.  As companies find ways to make blockchain technology more accessible in our everyday lives, these coins will just continue to gain in value.

If you think this sounds like something you want to get into, the easiest way to purchase digital currency in the USA is through a website/app called Coinbase.  Coinbase offers the three top cryptocurrencies available today.  They offer Bitcoin, Ethereum, and Litecoin.  Right now Coinbase is running a special where you and I both will get 10 USD worth of free Bitcoin when you purchase your first 100 USD of digital currency through this link!!

Stay tuned to my next blog post for information about how to trade your digital currencies on an exchange!!