What is Bitcoin?
To keep things simple, we can say Bitcoin is currency. You likely have at least one kind of currency you use every day unless you’re broke. In that case, move along.
To add to that, we can say Bitcoin is digital currency, meaning we can’t physically hold it. Similar to the balances in our bank accounts, credit cards, gift cards, or PayPal accounts.
We can go on to say Bitcoin is a decentralized digital currency. Decentralized meaning that it does not belong to any banks or governments. Once you own it, it belongs to you and only you, unless you decide to exchange it for goods to another person or business.
To take that even further, we can say Bitcoin is a decentralized digital cryptocurrency, which is the most accurate description of Bitcoin.
Don’t trip. All you need to know is that when we take the root word “crypto,” we’re not using it in the sense of being “cryptic.” We’re talking "cryptography" which is the part of mathematics that focuses on securely encoding information.
Seriously: just by you understanding the above information, you already know more about Bitcoin than most people.
Now, let’s get deeper.
You use cryptography every day. Whether you’re sending a text on your phone or when you log in to social media, you’re using cryptography. You use it for emails, when entering your PIN, and any other action where you would want to submit private information securely.
In a digital world, cryptography is super important if you want to keep your private life safe…And, well, private.
Alright, big shot. You get the “crypto” part, and you’ve always been familiar with the “currency” part. So when we put these words and concepts together, what we arrive at is Bitcoin.
To understand what Bitcoin is and how you can use it, you need to know a little about its history, which is surprisingly less involved than trying to understand the history of the current paper money you use.
In 2008, someone, or a group of people under the name of Satoshi Nakamoto, shared the concept of Bitcoin and the decentralization of currency to a popular cryptography website. Satoshi shared this idea in what is referred to today as the White Paper.
The White Paper is a 9-page PDF that you can try to read here. But let’s be real, if you found your way here, you’re obviously looking for the most simplified version of how Bitcoin works.
Satoshi was looking for a more secure way to send and receive money without having to use a third party.
The problem Satoshi saw with the current way we spend online or with cards is not only the additional party needed to complete an electronic payment but also, that it was payment based on the trust of that same third party - Financial institutions.
Why would Satoshi want to eliminate them? There are countless reasons. Some are personal, but most are factual.
What sets Bitcoin apart from other currencies is that it's “open”, meaning anyone can find out anything and everything about how it works. With Bitcoin, transparency is optimal. The current system is set up so you have to trust financial institutions with your money - using Bitcoin means you don’t.
Nakamoto wanted to ditch the trust-based system (for reasons like the 2008 financial crisis) and move to a proof-based system involving math. *Simply put, don't trust a bank on faith for legal and political reasons, trust math. Because, Math.
By adopting a decentralized financial system, we are essentially our own bank. A result of that could eliminate a pattern of debt that people, banks, businesses, and even governments so often find themselves falling into.
For some, the current banking and credit system works. Some might say it was made for the people that it works for.
For the rest of us, there’s another more transparent way.
Bitcoin is a digital, decentralized cryptocurrency that was brought to the attention of other cryptographers in hopes of finding a new proof-of-work electronic payment system to take the place of the current trust-based electronic payment system that was founded by financial institutions and credit card companies.