What is Bitcoin?

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Bitcoin 101: A Gentle Introduction

Have you been curious as to what is Bitcoin? The technology is not complicated to understand, nor is it technically difficult to absorb. Bitcoin presents an alternative method to our current monetary system. When you decide to learn about Bitcoin, you are making a choice to expose yourself to a different way of thinking. You are embarking down a new road that leads to knowledge about a parallel finance system to the one that you have grown up with. In this module, we will explain Bitcoin in easy to understand terms with the hopes of broadening your horizons and opening doors you didn’t even know existed.

Bitcoin For Beginners

Bitcoin (BTC) refers to a digital currency, used by millions of people around the world. Our current fiat currency system relies on central banks to facilitate transactions. Technologically speaking, Bitcoin enables a similar system but transactions are automated, which means there are no trusted 3rd parties or centralization of control. Even more exciting is that each participant has complete autonomy over their money.

Bitcoin Explained With an Analogy

Paying for something online requires trusting a third party for the exchange, like Paypal. Paypal processes your credit card on a secure server, allowing you - the customer - to pay for a service or product without having your financial information exposed. Bitcoin offers a better solution to trust and privacy issues with a technology known as the blockchain. It is the first implementation of a technology that allows for peer-to-peer barter without 3rd party involvement.

Who Created Bitcoin, and When did Bitcoin Start?

The invention of Bitcoin was marked by the release of the first version of the Bitcoin software client. The author took on the pseudonym Satoshi Nakamoto but the individual’s true identity is unknown. Many speculate it was a group of people, familiar with cryptography who invented it. A white-paper was published in 2008 outlining blockchain technology which was followed by the first software release in early 2009.

It doesn’t really matter who invented it because it is an open-source software and it is here to stay.

Bitcoin’s Features

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2:18 minutes
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The Advantages of Bitcoin

The advantages of Bitcoin are found in the problems it solves. What is Bitcoin? Each Bitcoin is unique. It’s not like a Mp3 file, or a video file. It is digital information that is impossible to replicate. This is why it’s able to be used for value transactions. It has created an alternative financial system. Users are not exposed to the risks of inflationary government policies. There are no centralized banks that can crash the economy. Bitcoin is decentralizing control of the monetary system and putting individuals in control of their money supply.  

The features of Bitcoin allows it to be used as a payment transaction method. Bitcoin is able to be used like money without relying on a trusted, centralized, 3rd party. This is why Bitcoin is good, it solved the problem of trusting banks and governments by inventing a decentralized and trustless solution. Bitcoin’s unique characteristics are what make it so special.

Bitcoin is Pseudonymous

When users exchange Bitcoin, they do so using a computer program, known as a wallet. Wallets are free to use by anyone and there’s no need for any identity verification. It is feasible for a single person to use as many Bitcoin wallets as desired. Each wallet has a public address, which is used to send and receive payments. Bitcoin is not anonymous because each transaction is traceable through the public address. It’s also not completely transparent because there is no identity associated with wallet addresses.

Thus, Bitcoin is considered pseudonymous.

Bitcoin is Fast and Global

The advantages of Bitcoin over fiat currency are easy to see in global money transfers. Bitcoin is able to be transferred to anyone at any day of the week and any time of the day. You don’t need a bank or a Paypal account to send and receive Bitcoin. Nobody needs to approve your request to open an account, to transfer or to withdraw money. You just need a computer and an Internet connection. There are no limits to how much can be transferred and the fees are fixed, regardless of the value being sent.

The following examples of huge transactions will low fees were pulled directly from the blockchain. You can click on the links to see for yourself!

Bitcoin is Secure

Do you see that green padlock in the URL bar of your internet browser? That’s what is known as an SSL security certificate. It is encrypting the data from the server you are accessing. This prevents 3rd party actors from gaining access to your computer while you are surfing the web. Encryption can get complicated but it boils down to using complicated algorithms to keep your data safe from hackers. Bitcoin uses the same technology to secure each and every transaction.

In addition to being encrypted, Bitcoin is decentralized thanks to the underlying blockchain. There are no servers storing the information. There is no data storage system to hack. This makes the entire Bitcoin network more secure than any other transaction technology.

The only way someone can take your Bitcoin is by knowing your private key. The private key is a string of numbers and letters that are required to access your bitcoins. A public key acts as an address which anyone can use to send a deposit. Think of this like a piggy bank, and Bitcoin is being slipped in through the top. The private key enables the piggy bank to be opened. The private key is unable to be replicated, which makes it extremely secure.  As long as you keep your private key safe, no one will ever be able to take your Bitcoin.

Bitcoin is Permissionless (Everyone Can Join)

Even if each country has its own rules about Bitcoin, nobody can stop you from using it. It is an automated form of peer-to-peer transactions, allowing the free flow of value for everyone participating. The underlying software is open source, preventing anyone from changing the rules without consensus. It is a new form of financial democracy.

Bitcoin is Changing the World

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1:30 minutes
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Use Bitcoin to be Your Own Bank

If you have family in Mexico but you live in Chicago, how would you send them money? Most people in this situation rely on a wire transfer. This method of value exchange takes time and charges a hefty fee but it gets the job done. You could use a bank transfer but again, it takes time and costs money to initiate such a move.

What if you live in Venezuela? What if the regime controlling your country has devalued your currency so badly that you can’t even buy food with it.

Enter Bitcoin.

The advantages of Bitcoin result from the creation of a global transaction network, independent of governments, policies, and restrictions. Private, peer-to-peer (p2p) barter is a human right. History has shown us that intervention from centralized power structures is not to be trusted. When the bureaucracy controls the money system, like in Venezuela, inefficiencies can lead to disasters where a currency can lose most of its value and become worthless.

Decentralized Value Transactions

Bitcoin transactions are powered by computers spread all over the world. These computers are called nodes and the people running them are called miners. They contribute to the network security and operations. If one country loses electricity or access to the internet, Bitcoin stays operational. The same thing happens if a country decides to ban Bitcoin, the decentralized network perseveres. All of this security exists without help from governments. Bitcoin is a monetary system that for the first time in human history, allows every individual an opportunity to trade on a global scale.

Say Goodbye to Banks

Remember the Lehman Brothers investment firm going bankrupt? A fiat financial crisis leads to not only companies being shut down but the value of the currency being called into question. An even stronger example of this happened in Cyprus. When banks over leveraged themselves in the housing market, it led to austerity measures being implemented across the country. Greece faced a similar catastrophe. When centralized institutions control the finance system, bad investments can sink a nation’s economy. People generally don’t like banks, and certainly not a financial crisis. What about you? Are you comfortable with trusting the banks with your money?

Banks are the cause of serious financial crisis but their importance in the global market is undeniable. People without access to bank accounts are at a serious disadvantage. Over 2 billion people worldwide still lack the ability to open account. In this situation, people are left to beg for a bank account or else get shut out from using digital transactions, such as a debit card.

Bitcoin allows everyone to be their own bank. You never have to ask permission to use it or wait on holidays for transfers to be conducted. You never get charged unreasonable fees, and your money is never used to gamble with on the stock market. No one can audit you, lock you out of your account, or touch your financial wealth.

A Tool to Fight Totalitarianism

While we are scratching the surface of Bitcoin for beginners, its global use is what makes it so exciting. Before the invention of Bitcoin, subverting the state took shape in the form of large-scale protests and violent crackdowns. With Bitcoin, if you don’t want to support a particular government, stop using their money. It’s not violent and it doesn’t hurt anybody. Using Bitcoin provides an option to not be a part of a system you don’t agree with. It’s peaceful and more subversive than any other form of protest. If governments didn’t control our money, maybe the people would have more control over the government's decisions.

Is Bitcoin Legal?

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Is Investing in Bitcoin a Criminal Activity?

Bitcoin is legal in most countries. In some countries, such as Bangladesh, using Bitcoin is a punishable crime, enforced with a jail sentence of 10 years. In this specific example, everyone using Bitcoin is a criminal, in Bangladesh.

Is Bitcoin For Bad People?

When Bitcoin was first beginning, it gained notoriety as the currency of choice for “criminals”. Thanks to its pseudonymous abilities combined with its ease of use, anyone from around the world could use Bitcoin in place of fiat currencies. Its most popular application was for buying marijuana via the internet. Famously, the SilkRoad operated as an exchange where the only currency allowed was Bitcoin. Users could buy and sell anything they wanted to. The website has been shut down since then but it was the world’s first glimpse into cryptocurrency.

Things have changed since then. Bitcoin has matured into more than a black market exchange device, it is now a global phenomenon, facilitating payments for people across the globe. The majority of countries don’t regulate Bitcoin with much force. Individuals are free to use it as their leisure. Even Bitcoin mining is legal in the USA.

Regulating Criminal Activity Is Separate From the Currency

If you define criminals as drug dealers, most bad-guys prefer to use American cash for payments. By this logic, people who want to ban Bitcoin in order to stop unacceptable transactions should first wipe-out USD cash transactions since it makes up nearly 100% of all drug purchases and sales in the US.

Start Using Bitcoin

If you trust your current government and you think fiat currency is as permanent as the sunrise, Bitcoin probably seems silly to you. If you enjoy using only one form of value exchange and have no desire to use anything but the money you grew up with, then Bitcoin might not be for you. However, if you want to use cutting-edge technology and be part of a brand new industry, it’s time to start using Bitcoin.

Be a part of the biggest financial revolution of the last 100 years. Never before has humanity experienced a democratized currency like Bitcoin. With Bitcoin, you are your own bank.

Why Use Bitcoin?

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1:39 minutes
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Getting Started with Bitcoin

The advantages of Bitcoin are easy to illustrate. If you’re still on the fence as to why you should start investing and using Bitcoin, keep reading.

Financial Autonomy

Bitcoin is not meant to replace fiat currency. It presents an alternative to fiat currencies. As Warren Buffett likes to say, diversify your investments. Bitcoin is a new currency which has real-world value. Thousands of people use it on a daily basis, what do you have to lose by being one of them?

You Can Get Rich

Bitcoin is a store of value in the cryptocurrency industry. There are hundreds of cryptocurrencies, all of which can be traded for Bitcoin. Investing and simply holding onto some has the potential to reap huge rewards. Many enthusiasts have discovered that holding Bitcoin is a way to make money off Bitcoin. The world is quickly adopting Bitcoin and similar digital currencies, joining early enough might allow you to enjoy impressive financial rewards. There are a handful of early adopters that have struck it rich.

  • Erik Fineman invested $1,000 in Bitcoin and became a millionaire before he was 18.
     
  • The Winklevoss Twins - those guys who claimed to invent Facebook - became the first crypto-billionaires in the world.
     
  • The mysterious Mr. Smith, who has been traveling the world as a millionaire for years because of his early Bitcoin investment.

Getting in on the ground floor of new technology has huge payoffs. The stories of crypto-millionaires are only just beginning.

Live a Free Lifestyle

As an individual, your wealth should reflect such a mentality. Adopt a currency that reflects your values and lifestyle. Once you start using Bitcoin, you will meet like-minded individuals who see the world as you do. Bitcoin is the monetary manifestation of freedom and personal responsibility.

Advance Your Career With Bitcoin

Becoming a Bitcoin expert is not without its lucrative benefits. From developers to marketing, even roles such as HR and Sales, understanding the fundamentals of Bitcoin and the blockchain technology might help you advance within companies. These jobs are in high demand, which is reflected by the payscale Bitcoin professionals are receiving.

Learn the Fundamentals of Bitcoin for Beginners

Bitcoin was the first cryptocurrency. Now, there are thousands more, and most of them have their own merits. We wrote this “Bitcoin for beginners” module to help you understand the basics. The cryptocurrency industry is huge and only getting bigger. There are a lot of things to learn and plenty of opportunities. To best take advantage of the crypto epoch of history, it’s mandatory to learn the fundamentals of the blockchain, the technology that underlies Bitcoin. If you are eager to own your first Bitcoin within the hour, check out our premium course to walk you through the buying process.

See you in the next module where we discuss the blockchain and how it works!

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