WTF is Bitcoin?
So WTF is it? Is it real money? What can I spend it on? How is it backed? Is it secure? Who manages Bitcoin? When will it hit mainstream? What about wallets? Is Coinbase legit? Can I make money mining? Don't people use it to buy drugs and hookers and WMDs?
Slow down, homie. Let's start off with, yes, BTC is a digital currency. It's also a technology.
To the general masses, its a form of letting people exchange money electronically. However, unlike Venmo/Paypal, you don't have to link it to a bank account or credit/debit account to use the service. You are completely independent of those financial institutions. The Matrix no longer has you.
For those who have an engineering or computer science background, it is a protocol - or set of rules/standards - that defines a peer-to-peer networking that operates on encryption that everyone involved in crypto technology must follow. Its purpose is to remove the middle-man and allow transactions between you and your recipient.
Allow me to explain it in layers.
- It's cash on the internet. When you have it, it lies on your computer or mobile device in a digital wallet. It's not stored in a bank or vault somewhere overseas. It's yours. Just like clothes in your closet. When you send it, it goes directly from your computer to the recipient's wallet on their computer or mobile device as digital cash.
- Beneath it is a shared ledger. On the BTC network, everyone sees all the transactions and also must come to a consensus that those transaction are valid.
For example, when I send my $1M worth of BTC over to your digital wallet, the entire BTC network will see that transaction. After some complex math, the network eventually agrees that yes, I did send you $1M of BTC to your wallet. The ledger is updated and BOOM, that $1M is now reflected in your balance and you can go f_ck up some commas.
In an attempt not to bore you or hog your attention, here are a few pointers to get you up to speed with BTC.
- Read Satoshi Nakamoto's Bitcoin whitepaper which started it all. Don't worry if you don't understand the technical jargon because someone broke it down here. The importance of the whitepaper is getting that fundamental understanding of BTC and blockchains. (more on that later).
- Check out the YouTube video "The Essence of How Bitcoin Works" linked above.
- Google is your best friend, but as a beginner, I would stay away from Reddit or Twitter just because of the number of opinions that circulate. For someone new, it could definitely make the learning curve exponentially overwhelming.
Never stop learning ladies and gents. Just like any language, immersion is key. And as always, if you have any questions, drop me a line. I may not know all the answers, but I can certainly help you on your way.
Welcome to the world of Bitcoin.