What is Bitcoin?
Bitcoin is the world’s first open source, decentralized digital currency, payment network and ledger.
Bitcoin is an internet based, peer to peer, electronic cash protocol — similar to SMTP, VOIP or HTTP — that enables low cost, fast, programmable and censorship resistant value transfer between any individual — or thing. Important to note that bitcoin can do all of these great things without the need of a trusted third party. No government or company or person owns bitcoin. Bitcoin belongs to everyone and redefines ‘permission-less innovation’.
First, there was the printing press. Then, there was the internet. Now, we have bitcoin.
Google‘s definition of bitcoin
A type of digital currency in which a record of transactions is maintained and new units of currency are generated by the computational solution of mathematical problems, and which operates independently of a central bank. Here’s another amazing description of bitcoin and why bitcoin is revolutionary by the Director of Coincenter as he explains it to the Senate Banking Committee.
Still don’t get it?
Go back 15 or 20 years, before email was widely used. Do you remember what it was like to send a letter to your grandmother on the other side of the world? You’d sit down, take out a pen and paper, write out a nice long letter, seal it up, walk over to the post office (9–4) and finally after waiting in line for 15 minutes, you’d get to send off your letter to your sweet grandma. Not to mention, it would cost a lot of money and time to do all of this, it would literally take your grandmother weeks to receive that letter. By the time she received it, the news was old and irrelevant. What a great system.
Sending money today
Think about how money travels around the world today. Let’s say your grandma from half way across the world needs you to send her $100 so that she can get groceries for the month. You will need to go to your bank ATM, take out $100. Wait until Western Union is open. Drive to Western Union. You’d end up paying nearly $20 in fees and if you’re lucky, she’d receive the money in a few days. Does that remind you of something?
With bitcoin, you literally just click a button and send as little or as much value to another person for just a few pennies. Whenever I introduce new people to bitcoin, I always share the following video. Check it out.
What is bitcoin?
Gold with a tele-porter
Bitcoin is like gold with a teleporter. Due to the inherent nature of bitcoin — fungible, divisible, predictable supply, impossible to forge, portable, global, etc. — many people equate bitcoin to be like an internet based digital gold. Since bitcoin is inherently interoperable, you can easily send bitcoin to anyone, much like how you send an email.
If you’re looking to dive even deeper, check out Khan Academy. Here’s one of the best technical descriptions of bitcoin, given by Andreas A., author of Mastering Bitcoin. Below, is also another fairly new, but quite accurate description of bitcoin. Check it out:
What does Satoshi have to say?
If you really wanna know, ask Satoshi, the creator of bitcoin. Satoshi’s white-paper is the most accurate answer to the question, “what is bitcoin?”. Here’s what the white paper says:
“A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending. We propose a solution to the double-spending problem using a peer-to-peer network. The network timestamps transactions by hashing them into an ongoing chain of hash-based proof-of-work, forming a record that cannot be changed without redoing the proof-of-work. The longest chain not only serves as proof of the sequence of events witnessed, but proof that it came from the largest pool of CPU power. As long as a majority of CPU power is controlled by nodes that are not cooperating to attack the network, they’ll generate the longest chain and outpace attackers. The network itself requires minimal structure. Messages are broadcast on a best effort basis, and nodes can leave and rejoin the network at will, accepting the longest proof-of-work chain as proof of what happened while they were gone.”
I suggest reading the complete bitcoin white paper here.
Until next time…