Bitcoin Explained in 5 Minutes
What exactly is Bitcoin?
Bitcoin is the first worldwide decentralised digital cryptocurrency.
In November of 2008, a paper called Bitcoin: A Peer-To-Peer Electronic Cash System was released to a cryptography mailing list by an unknown figure called Satoshi Nakamoto. No one really knows who this person is, other than he’s basically considered the Jesus of Cryptocurrency. He proposed the idea of an online currency that wasn’t run by a middleman such as a bank. Instead, can be thought of like virtual cash. If I want to give you $5 in cash, I don’t need to go through a bank, I just give you the $5 and go on with my life. In the early days of Bitcoin, coins were worth less than a penny. However if you had held onto those coins until today, they would be worth thousands.
So how does Bitcoin actually work as a virtual currency with no bank to process transactions? It uses a new technology system called The Blockchain. The Blockchain is a public ledger, or list of all transactions ever recorded in Bitcoin's history. So all the transactions that happened in the early days of Bitcoin back in 2009, are still on the ledger that anyone can view! While the ledger is public, anyone looking through it won't find names and information about the person who sent the transaction. That's because Bitcoin is anonymous, all it would show is the sender's Wallet address, the recipients wallet address, and the amount sent. Each transaction is verified by multiple computers on the network to verify that the user sending bitcoin actually has that same amount to send. Once all verified, a random computer would be selected to publish a group of these transactions called a Block to the Blockchain.
These computers are called miners. Miners use powerful computer hardware to complete complex math equations. Miners are rewarded for verifying a transaction via fees from each transaction, then adding it to a block, and finally adding the full block to the blockchain by receiving newly generated Bitcoin. Once the block is published, it cannot be edited, and the funds are removed from the payee’s wallet.
A wallet is where you store your bitcoin as your own bank. Your wallet can be an app on your phone, tablet, PC, or hardware wallet. These store your bitcoin for safe keeping. Any virtual wallet, is as simple as logging into your email account, and sending is just as easy too.
Wallets however cannot be used to purchase Bitcoin, only hold. So in order to buy Bitcoin, you might have to go through websites like exchanges to purchase your Bitcoin. You can then hold it on your exchanges’ accounts wallet, or send to a different wallet.
Paying is Easy
Many major retailers like Amazon, Microsoft, and Steam accept Bitcoin as a payment method. You just simply checkout as Bitcoin, then copy or scan the address using your wallet, and send.
You can send Bitcoin with any amount, anywhere, and at anytime. That’s the power of a global decentralised economy. Visit bitcoin.org to learn more.