what does winston spend his spare time doing? why does he have to hide this from the government
If you're reading this, you've probably heard of bitcoin by now. Either via the news, or friends, or websites, the name 'bitcoin' has popped up enough to pique your curiosity. But what exactly is bitcoin? And why is it so complicated? What the heck is 'hashing' and 'mining'? Where do you even start to endeavour to sympathise information technology? In this post, I attempt to provide digestible and like shooting fish in a barrel to understand explanations of certain bitcoin questions. Equally a disclaimer, I practise agree a little bit of bitcoin, simply this mail is meant to exist unbiased. If you want to larn more about this new currency that's taking over the web, read on!
Why Does Bitcoin Exist?
Earlier we swoop into exactly what bitcoin is, it's important to understand a niggling bit nigh the history of bitcoin.
It all started in 2008 when the stock and housing markets went to crap. The verbal reason for this crash is contested, but one agreed-upon point is that banks played a big role through their irresponsibility. Banks run on something called a "fractional-reserve system" which substantially ways that for every 1 dollar that goes in, they tin can lend out many more. Intuitively, it would brand sense that for every i dollar that goes in, they can lend out exactly ane dollar, but by lending out more coin, banks can make more coin. For example, if I eolith $100 into my savings account, the depository financial institution can go and lend out $500 to y'all. They make money off of interest on that $500, so only need to pay me back with $100.
Usually, this arrangement works out okay, but in 2008, banks were lending out fashion too much coin to people who couldn't pay it back (sub-prime mortgages.) Once again, the reason for this is because the more money they lend out, the more coin they can make.
Well, lo and behold, a lot of lenders ended up non being able to pay back their mortgage and defaulting. This basically crashed the markets and left banks with lots of debt that they owed, and not a lot of coin to pay it back with.
Enter: the US government. In 2008, the authorities decided to stride in and impress lots of money to assistance out the banks. The government essentially bailed them out.
Here Comes Bitcoin
Printing coin causes inflation. What that means is that the price of appurtenances and services go up and coin is basically worth less. And then when the authorities printed $700 billion to aid out the banks, a lot of people weren't happy.
Amongst one of these people was Satoshi Nakamoto. Nakamoto proposed the idea of a currency that was controlled by nobody, and couldn't be manipulated by the government. He chosen this thought "bitcoin" and created a website as well equally a whitepaper documenting it. The software was adult and on January 3, 2009, the bitcoin network came into being.
What Exactly is Bitcoin
Bitcoin is a:
- Digital
- Decentralized
- Peer-to-peer
Currency.
Let's break that down a bit.
Bitcoin is digital equally in it's completely on computers. There is no physical coin that you can touch or experience and all the records are online. This may audio unsettling, just if you think about it, most money is digital nowadays. You lot can still use cash just a lot of the day to solar day transactions are through stuff like Apple Pay, debit/credit cards, and phone tap. Too, you tin can convert your bitcoin into normal money whenever y'all want with a tap or two.
Bitcoin is decentralized which means in that location's no cardinal authority that controls it. If you think about coin supply in the world, it's controlled by the authorities and banks. Whenever they want, the government tin can create money out of sparse air, and banks have control over the money flow. With bitcoin, nobody controls the money. There is no central authority, therefore bitcoin is decentralized.
Similarly, bitcoin is peer-to-peer. If you take a bank, most of your digital transactions probably go through your bank. "Yous" may be the ane to send money to your friends, but really it'due south your depository financial institution sending money from one business relationship to another account. With bitcoin, your transactions are purely peer-to-peer with no centre human being. This is possible considering at that place is no primal authority.
How Does information technology All Work?
I'yard going to be completely honest, I don't entirely understand the logistics behind bitcoin and don't think I ever will. The truth is that it's a very complex system that has many levels to information technology. For every i minute of research that I do, I usually spend 10 minutes trying to digest it and empathise it.
Here's what I DO know and then far:
- There's a public ledger that anyone tin can access
- Even though you lot tin can admission this, it'southward encrypted so the identities of people are hidden
- A transaction is basically a broadcast to the rest of the world that you want your transaction added to the ledger
- Every transaction is verified before being added to the ledger
- Verification happens via "miners"
- All bitcoin transactions are strung together therefore it'south (basically) impossible to hack into the system
Why Does the Price Alter?
Just similar most things in the earth, the price of bitcoin is just determined via supply and demand. The more than of something there is (supply), the less information technology's worth, and the more people desire something (demand), the more than it's worth.
Think of gold. What intrinsic value does information technology actually accept? Maybe it'southward good for some jewelry but its true worth comes from people wanting it. If anybody on world decided tomorrow that they didn't want gold anymore, the value of gold would plummet. Bitcoin is similar in this style: information technology simply has value considering we assign value to information technology.
With bitcoin, there tin can simply ever be 21 million in the world, ever. So supply is pretty consistent. Therefore the toll of bitcoin is substantially just a reflection of how much demand there is for it. The more people buy bitcoin, the college the cost goes. The more people sell bitcoin, the lower the cost goes.
Typically, bitcoin is bought as a "hedge" against inflation. What this means is that when people lose trust in the government (because of too much money press) they purchase bitcoin as a way to protect themselves from inflation. Information technology'southward typically sold considering people want to greenbacks out or because they lose trust in the bitcoin network.
What is Bitcoin Mining?
Recollect how earlier I mentioned "verification" of transactions? Y'all might've idea to yourself "if bitcoin is decentralized, who's doing all the verification?" It tin can't exist banks or the regime and then who is information technology? The answer is, you!
Bitcoin is verified by peers like me and you via a arrangement called "mining." What mining is, is verifying a transaction and then solving a really hard math problem. The first person to exercise this wins and is rewarded with payment in bitcoins.
This is how transactions are verified and how new bitcoins are added to the organization. There are a lot of criteria for verifying a transaction (similar 17 or something), just the tough function is the math problem. Imagine this: I take picked out a number in the range of 1 to 100000000000000000000000000000000000000000000000000000 and I want you to guess what number I picked. That's kind of what the problem is like: estimate and cheque. Obviously, the procedure is less difficult with computers, but it's withal not like shooting fish in a barrel, specially considering the fact that you lot need to complete information technology earlier ANYONE else.
Regular money is verified on a system of trust. You need to trust that the bank and government are responsible enough to get your money to where information technology needs to be. Bitcoin is different. Bitcoin is verified on a arrangement of greed. People'southward greed to make coin (bitcoin reward) motivates them to accurately verify transactions and help the system.
Why Do People Like/Dislike Bitcoin?
People like bitcoin because:
- The authorities tin can't suddenly print a ton of it and lessen the value of information technology
- It's digital and new (age of technology)
- It has lots of growth potential
People don't like bitcoin because:
- Due to its decentralized nature, transactions are completely private and therefore are sometimes used for illegal activities
- There's null physical that yous can touch or experience and it has no intrinsic value
- In that location are no refunds or reimbursements if you lot get scammed considering at that place's no fundamental authority to entreatment to
How to Purchase a Bitcoin
In that location are many services that tin can be used to buy bitcoin simply be sure to do research before committing to anything. Similar previously mentioned, bitcoin being decentralized has pros and cons and one of the cons is that if you lot lose money on bitcoin, yous're never getting information technology back.
Also, it's extremely volatile and potentially risky. This means that it moves upward and down very rapidly. Even if it'due south been growing for the by niggling while, at that place is the chance that information technology could still drop to nix. Only invest what you are okay with losing. That existence said, here are a few services you can look into if you want to buy your first bitcoin:
- Shakepay
- Wealthsimple Crypto
- Coinbase
You can buy bitcoin in any denomination (half a bitcoin, one and a quarter bitcoin, 20 bitcoin) as one bitcoin is split into smaller denominations called Satoshis, but once again, please do your inquiry before making any transaction.
Bitcoin is a newly popular digital currency that is taking the globe by storm. It'south important to understand a little bit about it before putting whatsoever money in. A few central points are:
- Bitcoin was made in 2009 after the corking fiscal crisis
- Information technology is a digital, decentralized, and peer-to-peer currency
- Everything is online and on technology
- The price changes via supply and demand
- Verification happens via mining and runs on human greed
- There are many people who are proponents of bitcoin and many people who are strongly against information technology
- They both have good reasons
- In that location are many platforms which you can use to purchase bitcoin, just do your research first
That's about information technology for me. Any more commentary would be irresponsible as that'due south really all I know. Some great places to learn more than about information technology are:
- Bitcoin.org (Its official website)
- Investopedia
- CoinDesk (News site specializing in digital currencies)
- Youtube (99Bitcoins is a great channel admitting a fleck former)
Cheers!
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Thank you for reading through this post! Despite existence a chip long, I hope you learned a matter or 2 about bitcoin from it and feel like yous gained some understanding. To acquire about how to build income opportunities every bit a student, head over to this postal service hither. If you want to larn more about me, head over to this link here. Finally, if yous want to go exclusive updates and tips, driblet your electronic mail in the "go updates" box (might take to scroll upwardly a scrap.) Permit me know your thoughts and suggestions in the comments!
Jeff is a Harvard 2025 educatee passionate nearly making smart fiscal decisions both in schoolhouse and in the workplace so that he can spend more time doing what he loves (like playing golf, spending time with family unit, and travelling). He has experience working in the financial industry and enjoys sharing all things personal finance, academic, and golf-related. Outside of blogging, he loves to cook, read, and golf in his spare fourth dimension.
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