What is Bitcoin?
Before I explain what is Bitcoin, let me explain to you in easy way how the financial system in banks works.
Let's say that you want to deposit $100 in your saving account. You go to your bank and say to your banker that want to deposit the money to your saving account, the banker takes your $100 bill and digitally write "+100" and it's already. By now, you think your bill is save in your bank, but NO..
There is two scenarios of what happened with your $100 bill:
About the 2 second point, it is very normal that banks lend money (your money) each other banks.
You may now think , so if I go to my bank and deposit my money in my account , why I need to worry to what the bank do it after the deposit?
It's simple, in an crisis scenario, if you want to withdraw your money, probably the bank will put a withdraw limit (like what happened in Greece crisis). And if that happen you may be worried about what's going on with your country. This is called "Fractional reserve banking". Later I'll explain to you what that is in other topic.
Once you put your money in your bank account , you never know what is happening behind the what your bank show to you. Every time you go to ATM you will see the $100 digitally but if your country is on financial crisis, try withdraw $100 and tell me if the bank let you.
Loans between banks, taxes on your money, low interest rates for keeping your money in your account is ones of things that happen and ,maybe, you don't know.
Other think you may noticed is that with $100 you can't buy same things now compared to a few years ago, this is called "Purchasing power of consumer dollar" and that is decreasing very quickly. I'll explain later in other topic.
Now is time to explain what is Bitcoin. I've talked primarily about Financial crisis because Bitcoin appeared in 2008 with the 2008 crisis going on.
Bitcoin is a decentralized cryptocurrency that allows financial transaction without a bank, it's a peer-to-peer transaction. Every transaction is verified by a network node (Hash rate) and are registered on a Public Ledger called Blockchain.
Bitcoin was created by Satoshi Nakamoto which is a pseudonym of a person. He released in November 2008 a Whitepaper of Bitcoin.
In that Whitepaper, Satoshi explains how Bitcoin works, how many Bitcoin will be created, how much Bitcoin will be rewarded to the Miners. How much trasanctions will be per block.
Bitcoin works in a POW system. POW is Proof of Work and basically works like this:
A miner put their computer running a software that do algorithm maths to confirm a transaction, once that transaction is confirmed, the transaction goes to a block. Once a block reach 1MB of transaction, the block link to previous block. This is called Blockchain.
The miner had the work of his computer do a algorithm maths to confirm the transaction.
After the block links to previous block the miner is rewarded 12.5 BTC. (In May 2020 will happening a Halving that cut in half the reward).
There is two scenarios of what happened with your $100 bill:
- Is possible that the next client that after you, withdraw $100 and the banker given "your" $100 bill to the client. With that scenario , your $100 is only digital.
- Your bank lent to another bank that is in financial difficulty (or no)
About the 2 second point, it is very normal that banks lend money (your money) each other banks.
You may now think , so if I go to my bank and deposit my money in my account , why I need to worry to what the bank do it after the deposit?
It's simple, in an crisis scenario, if you want to withdraw your money, probably the bank will put a withdraw limit (like what happened in Greece crisis). And if that happen you may be worried about what's going on with your country. This is called "Fractional reserve banking". Later I'll explain to you what that is in other topic.
Once you put your money in your bank account , you never know what is happening behind the what your bank show to you. Every time you go to ATM you will see the $100 digitally but if your country is on financial crisis, try withdraw $100 and tell me if the bank let you.
Loans between banks, taxes on your money, low interest rates for keeping your money in your account is ones of things that happen and ,maybe, you don't know.
Other think you may noticed is that with $100 you can't buy same things now compared to a few years ago, this is called "Purchasing power of consumer dollar" and that is decreasing very quickly. I'll explain later in other topic.
Now is time to explain what is Bitcoin. I've talked primarily about Financial crisis because Bitcoin appeared in 2008 with the 2008 crisis going on.
Bitcoin is a decentralized cryptocurrency that allows financial transaction without a bank, it's a peer-to-peer transaction. Every transaction is verified by a network node (Hash rate) and are registered on a Public Ledger called Blockchain.
Bitcoin was created by Satoshi Nakamoto which is a pseudonym of a person. He released in November 2008 a Whitepaper of Bitcoin.
In that Whitepaper, Satoshi explains how Bitcoin works, how many Bitcoin will be created, how much Bitcoin will be rewarded to the Miners. How much trasanctions will be per block.
Bitcoin works in a POW system. POW is Proof of Work and basically works like this:
A miner put their computer running a software that do algorithm maths to confirm a transaction, once that transaction is confirmed, the transaction goes to a block. Once a block reach 1MB of transaction, the block link to previous block. This is called Blockchain.
The miner had the work of his computer do a algorithm maths to confirm the transaction.
After the block links to previous block the miner is rewarded 12.5 BTC. (In May 2020 will happening a Halving that cut in half the reward).
