What is a Bitcoin?
Simply put, Bitcoin is a Decentralised, Peer to Peer, Encrypted Digital Currency.
It is based on Blockchain Technology.
That sentence might sound simple but it carries some amazing ramifications. Ramifications which may not be immediately obvious to those of us who do not have a grasp of the novu tech. Voculabulary. So if like most people you can gloss over those words, get to the end of the sentence but still it doen’t carry much meaning to you, allow me to elaborate.
you don’t have to buy a whole bitcoin! You can start with bits of a bitcoin.
To understand you will need to get a grasp of the new vocabulary. Don’t worry, it wont take that long. Just put a bit of time aside to read and learn. Come back here for a reference.
I should begin by explaining Block Chain Technology.
Blockchain is an Open Source, Peer to Peer distributed ledger.
The Bitcoin Blockchain is the engine, or the coding, behind Bitcoin. It is the ledger that contains all of the Btc transactions ever performed. This is distributed among all of the peers, (P2P), meaning that it is not held on a central server (computer).
This means that no one owns it and no one controls it!
You can also look here for more about BlockChain.
Open Source = Software for which the original source code is made freely available and may be redistributed and modified.
Decentralised = To distribute administrative powers and functions over a less concentrated area.
P2P, (Peer to Peer) = In a P2P network, the “peers” are computer systems which are connected to each other via the internet. Files can be shared directly between systems on the network without the need for a central server. In other words, each computer on a P2P network becomes a file server as well as a client
Encrypted = To convert information or data into a code. Especially to prevent unauthorised access.
Currency = A ‘thing’, (shells, coins, paper notes, metals, jewles, alchoal, …), which exibits generally recognised properties that allow it to be offered and accepted as a medium of exchange. Money. A store of value.*
So again; Bitcoin is a medium of exchange in digital form that requires no central authority in order to conduct transactions.
There is a wealth of information available on the internet for a more in depth explanation.
Just Google it!
In fact you can find so much information and so many interpretations out there that it can seem overwhelming to the un-initiated. This is no doubt one of the main initial barriers to mass adoption at the moment. A lack of understanding. I don’t blame some of the ‘old school’ for shrugging their shoulders right here, before they even begin and just giving up altogether on what they might prefer to dismiss as a massive con – due to their inability understand and to percieve the far reaching implications.
Perhaps the most easy to understand explanation I have found so far is here
You would do well to read the original whitepaper – Nakamoto.
Bitcoin is one of a growing number of Crypto-Currencies. All of which are based on various forks of Blockchain Tech.
Why Buy It?
- Medium of Exchange. More merchants and individuals every day accept Btc for goods and services.
- Instantaneous. Avoid ridiculous clearing times.
- Store of Value. Wealth preservation away from centralised control.
- Speculative Investment.
- Hedge against currency manipulation, devaluation and capitol controls.
- Travel. Avoid excessive Bank fees.
Where Can I Buy Bitcoin?
There are more exchanges popping up every day. Simply Google ‘Bitcoin Exchanges’. All have various Pros and Cons, advertise a range of different ‘live rates’ and charge a range of different fees! Some reasonable, some expensive. Some will accept cash – via bank deposit, pay-pal, bank transfer, visa or a combination. Some may become overloaded and will ‘lock you out’ or increase fees at times of high demand. Some will have lax security (could be hacked). Some are Country specific.
All require a level of technical ability. A computer and internet connection.
There are even Bitcoin ATM’s in some Countries that will exchange cash for Btc (fees seem quite high though, around 15%).
- If you know someone who has Bitcoin. There is no reason you can’t ask them to sell you some. You will need to set yourself up with an address to be credited. See my How To Guide
Why Does The Advertised Rate (Value) of Bitcoin Vary Widly Between Exchanges?
Perhaps the best simplified explanation I have found is here.
By Will. “In a market exchange, price is determined as being where buy and sell orders meet. Consider two towns in the medieval period separated by twenty miles. They both have markets and people sell apples in both markets. In one market people really like apples. They pay 2 coins for the apples. In another market they aren’t as enthusiastic, they only pay 1.5 coins for the apples. The economic thing to do would be to buy the apples in the second market and sell them at the first. But it’s hard. It’s a twenty mile walk, and all your friends are at the other market. Plus, the price could change by time you get there. It’s just easier to stick with your current market, even if you’re not maximizing your return”.
Will The Value Go Up? Will I make Money?
With hindsight I can say for sure that if you had invested $200 in 2010 at around 39 cents US, it would be worth over $2 million today! (26.09.2017). Damn it I wish I had that foresight.
(There are new millionaires being made every day. Like Erik Finman.
However, If anyone ever guarantees you 100% that what happened yesterday will happen again tomorrow, don’t listen to them!
I can say, that as I write this the value sits at USD$3,963. (26.09.2017).
With the adoption rate still at only 0.3% of global population. I think its a safe bet that it has a long way to go yet. 3 or 4 grand sounds like a lot. Knowing that it began at around just 39 cents in 2010 it’s easy to think that you have already missed the boat, but if the adoption rate climbs to just 5% the value should soar to around $60,000. (Rough calc. 3*0.3= say1%. 5*3=15. 15*3,963 = 59,445). From where it sits now. A 1,500% increase in value.
I believe that Btc/Crypto will achieve mass adoption way beyond 5% sooner, or later. I have strong reasons for this belief.
If you have just been turned on to Btc you are probably eager to get started right away. Right Now! Please slow down. Jumping in blind without having an idea ofwhat you are doing is a excellent way to loose money. There is a multitude of clever malware, spyware and hackers out there particularly focused on stealing Btc. Dangers can arise especially when you ‘think’ you know what you are doing.
For your own security I strongly recommend you implement a number of steps which will keep you secure. See my How To Guide
There Are over 900 Crypto coins with more appearing every day. Why should I buy Btc over another?
Thats your choice. Do your due diligence, however, most ‘Altcoins’ can only be purchased with Bitcoin so you will need that first in order to buy into others.
In 1808 the first Auto-mobile was invented. (Which ran on hydrogen! BTW). Mainstream consensus considered it a passing fad that would never replace the horse and cart.
In 1980 there were only one million Personal Computers in use. 0.02% of world population. They too were considered a passing fad that would only be used by Businesses and nerdy hobbyists. Now that figure is closer to 90%, (median 70% in developing countries), and still climbing.
In 1995 just 0.3% of global population used the internet. 16 million. By 2016 that figure had reached 3.6 billion or 48%.
Today in 2017, just 9yrs after its creation it is estimated that the number of people holding Bitcoin represents just 0.3% of global population.
Due to a lack of understanding by the mainstream it too has been labelled as just a passing fad.
Crypto-currency is the way of the future, is here to stay and is set to reach mainstream adoption, sooner or later.
The Peoples Money by Adam Tepper – downloadable pdf.
Calculating Bitcoins ‘Fundamental’ Value