Decrypt Bitcoin for Your Latin Parents
Technology has moved from being just machines to becoming part of our existence. With technology focused on innovations of safety, cryptocurrencies like Bitcoin have thrived since 2009. It is easily one of the most talked about innovations during the last 10 years. Being an open-source and with a public design, it is truly a democratic way of payment and networking.
With Bitcoin becoming part of our frequented parlance, is there a straightforward way to explain the intricacies of Bitcoin and Cryptocurrency to your child - let alone your parents? The best way to explain would be to anticipate their questions and answer it in a systematic and simple way.
Bitcoin, a cryptocurrency or virtual money or digitalized currency, or is it all of it?
To start with, Bitcoin is simply - money invisible but creatable on a network of computers connected (called as Nodes). Now, simply put, each unit of Bitcoin is a digital currency WHICH IS VIRTUAL, and its value fluctuates, because it is not issued by a central bank!
Your Latin parents hooked yet?
This money is electronically used to make online payments - yet it is different from using the internet banking and credit/debit cards.
Properties of Bitcoin
So, what exactly is it - It is a notional money and each unit is recognized by a string of alphabets and numbers - pretty much like we have on a currency note?
You can transfer them from one person to another without going through the bank or a financial institution. This is a big advantage as the dependency like any other currency is not there.
This clearly helps in keeping the fees or costs for transfer very low. Now, you do not need to open any accounts with a minimum balance of currency.
The most amazing thing about Bitcoin as a currency is you can use it across the globe without any need for conversions/ foreign exchange issues etc.
There are no limits of government on it for usage or carrying it as it can be accessed from your internet account anytime, anywhere!!
How cool is that?
How did it originate?
Bitcoin came into existence in the year 2009 and the alias used by the creator was Satoshi Nakamoto. He/group "mined" rewarded 50 Bitcoins for their efforts. His peer-to-peer network had a limit to mine 21 million Bitcoins only.
What do the network users of Bitcoin do?
The network users of Bitcoin work like a creator as well as bookkeepers or accountants of the currency. These people are also called "miners" in technical parlance. The transactions done using Bitcoins are recorded in an online book or ledger. Essentially, it is an open source network. This ledger is open to all public to keep a tab on transactions and maintain the legality of the ledger.
The owner of Bitcoin uses his money to make an online payment. He uses the coded password also known as key for the same.
The miners receive a message of this payment and they must play the role of an auditor. They need to check the authenticity of the transaction.
They do it by decoding the set of numbers and match it with the key used by the owner. The decoding is a highly complex algorithm and it needs a vast computing system.
The miners who crack the code correctly first will announce his success within the network. The other users will verify the result and update their books accordingly. The successful decoder gets newly minted Bitcoins as rewards. Thus, the network not only ensures the authenticity of the transaction, but also helps to create new Bitcoins.
The verified transaction becomes a part of the transaction list maintained in the books of accounts and is known as the blockchain in the Bitcoin network.
Who regulates Bitcoin?
Bitcoin is not controlled or governed by any Central bank or government. The Bitcoin software is designed in a cryptic manner to ensure no duplication or incorrect transactions happen. The authenticity of each transaction is verified by the bookkeeper or miner. The records are made public and details are permanently recorded, and it cannot be deleted or modified. The ledger shows the total number of Bitcoin minted, the holding details, and the transaction details. The complexity of decoding the key in the peer to peer community maintains the authenticity of the decentralized system of Bitcoin.
How is Bitcoin valued?
The value of the Bitcoin is determined by the growth of the users which includes merchants and start-ups. The more the number of users accepts as payment, the higher the Bitcoin gains in value. Initially, in 2009, there was no value associated with Bitcoin. From the year 2010 Bitcoin attained its value and has grown exponentially, as the number of online transactions done using Bitcoin has increased.
How can we own Bitcoin and use it?
You can buy Bitcoin through the cryptocurrency exchange like bitcoinloophole.io using credit or debit cards or bank transfers.
Bitcoin purchased is stored in a Bitcoin wallet app. The money can be sent from our wallet to another person once we key in the password. The entire system is like the way we use the Debit card or credit card pin to complete any online transaction. Once the transaction is complete the wallet will show the updated balance of Bitcoin.
Can we convert Bitcoin into physical cash?
Yes, we can trade Bitcoin on cryptocurrency exchange, like the stock exchange. We can sell the Bitcoin at the value it is traded and get the amount transferred to the bank account.
Can Bitcoin be minted forever?
The software is designed to shell out 21 million Bitcoins and this can be done only till 2140. Post-2140 Bitcoins will not be created.
We can sum up Bitcoin as a virtual currency. The number of Bitcoin you hold is displayed in your wallet app. You can choose to send or receive it for any type of online transaction done. The bookkeepers or users keep track of the number of Bitcoin issued and the owners and update its movement in the ledger. They receive new Bitcoins if they can crack the complex code used to verify the transaction. You also have the option to convert Bitcoin into cash using traditional banking methods.
The entire process seems simple; however, the algorithm & design of Bitcoin software is an exceptional creation of man.
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