Last updated on August 29th, 2016 at 03:18 pm
It seems almost impossible to explain ״What is Bitcoin” to someone who is new to it. After going through every possible tutorial I decided that the main reason people don’t understand what Bitcoin is, is due to the fact that the explanation is usually too technical. So I decided to create my own “What is Bitcoin for Dummies” video. 2:40 minutes of a completely non technical, simple explanation.
And here’s the text version:
Imagine for a second that you are in charge of the task of inventing money. But you get this task today, not in the 12th century when money was initially invented. You’re basically asked to find a way for people to exchange an agreed value between one another.
I know it’s hard, but try to think, if this was done today, would we really be using metal coins and paper for this ? Perhaps we can find a better way ?
What if we wrote down somewhere, maybe in an electronic ledger what value each person has. This way we can keep track of how much value every person can spend. So if I for example do some work for you, you would probably give me some of your value in exchange. Let’s name this value “Bitcoin”.
But how will people be defined in this ledger ? I mean, how will someone send me value or Bitcoins….I guess we will have to give each person a unique identifier or address. We will keep track of which address (or person) holds which value. These addresses are known as “wallets”.
So we’ve decided to write down in our ledger which address, or wallet, holds which amount of value. This ledger is called “The block chain” – and it keeps all of the transactions from the beginning of time.
Now it’s time to make sure that everyone follows the rules. How can we do this ? How can we insure that no one cheats and says that their address has more value then what they actually own ?
I know! We’ll spread this ledger around to tens of thousands of people, so whenever someone wants to transfer some of his value in order to get something we can check to see if his story adds up to what everyone else thinks. If he’s good for his value, we will let him spend it.
But why would these people want to carry this ledger on their computer, and who has time to verify all of this each time a transaction is made ?
Well, what if we rewarded people who did this with value, that could be a good idea. Hence the “miners” were born. Tens of thousands of people who get paid in Bitcoins for going through the ledger, making sure that everything is in order and that no one is cheating (including themselves).
You’ve just invented a modern solution for money! And that’s exactly what Bitcoin is…A digital decentralised currency…