Lets start with the real basics and then expand to more complex material after in our other Bitcoin section.
So what is bitcoin and can you actually have one in your hand?
Well, its basically like cash that you use on the Internet to buy and sell things although most people don’t buy anything with their crypto like a pair of shoes but they simply buy and sell bitcoin and other cryptocurrencies as an investment.
Bitcoin is like a brand name of cryptocurrencies like Kleenex and there are over 6,000 other crypto currencies that you can buy today with odd names like Ethereum, Litecoin, Dogecoin etc.
Its just that Bitcoin was the first one started in 2009 and everyone knows the brand.
But just to make it more confusing there are not only 2 Bitcoin names that you will see on the exchanges and on market price listings…there are maybe 5
- Bitcoin BTC the original
- Bitcoin Cash BTH the spinoff
- BitcoinBEP2 BTCB
- BitcoinSV BSV
- Wrapped Bitcoin WBTC
So what is Bitcoin?
Its digital money, so you never actually touch it although you’re told to copy your digital coins that you buy on some online exchange onto a physical usb stick or some physical wallet for security reasons,
We’re also told that security is so important (we’ll later talk about the blockchain) that you must never forget your password or key, or you may lose whatever amount you had forever.
Now you almost never buy one full bitcoin or just about any type of crypto in your daily transactions because the value of one Bitcoin has gone up and down over the years like a roller coaster but right now a full one bitcoin is worth in December 2021 about $60,000 which is up about $10,000 from 2020.
So when you do trading with Bitcoin or any other major cryptocurrencies you’re usually only buying or selling a tiny amount of a coin, represented by a number like .0000 BTC
Now Bitcoin is not just a coin anymore but like any company that is first to arrive in an industry it takes on extra responsibilities or credentials.
It is considered to be like the Gold Standard of cryptocurrencies which makes it a safer purchase than other cryptos because most people expect it to survive longer.
It was started in 2009 and the mystery surrounding it is that a Japanese person named Satoshi Nakamoto was the creator and just about nobody has ever seen him or her.
Now one major difference with bitcoin (not all other coins) is that they agreed to make or mint a finite number of coins and not any more unlike government money where they just print more as they see fit.
So when bitcoin came out it was agreed that there would never be more than 21 million coins and about 19 million have been mined up until the end of 2021 with about 2 million left which is estimated to take until the year 2140.
The topic of mining comes up and we’ll explain in a different section but mining is one way that more of the coins that have been put aside can be produced.
Computer experts say that it could take only 10 minutes to mine 1 bitcoin but that the average residential miner would need about 30 days to mine one full bitcoin.
The experts also talk about the blockchain and blocks and say that when a new block gets created another 6.25 bitcoins are added.
There is a also a great deal of technical, mathematical and philosophical explanations that we’ll try to cover in the next section but lets first briefly explain why there are two bitcoins listed on every crypto marketplace.
There is the original BTC bitcoin and BCH Bitcoin cash.
Its almost like in the stock market, that when a popular or blue chip stock like IBM gets worth hundreds of dollars, it becomes too expensive and unwiedly to handle, so they have a stock split and then shares are more affordable to buy again.
Also in the stock market there were blue chip stocks and there were semi scam stocks called Penny stocks which appealed to people with less money since they were affordable but the chance of success with them was usually pretty low.
Similar with Bitcoin where its price got so high and some say technically too hard to handle on the magical block chain, that they broke it up into two coins.
There is also a technical term called “halving”which means that every 4 years a crypto coin splits up which we’ll cover later.
The way you buy a crypto coin is usually to go on the internet to a major crypto exchange (Coinbase, Binance, Bitbuy,Ndax) and set up an account.
You often use your credit card or make an etransfer from your bank and get some crypto currency although some cities have Bitcoin ATM machines you can buy bitcoin from.
Once you buy some crypto then you can have it stored online in a digital wallet or you copy it to your hard drive and then onto perhaps a usb stick.
Lets touch on the history a bit again.
The technologies for bitcoin were around in the 60s, 70s and 80s but it wasn’t until 2009 that all these technologies and mathematical algorithms and methods were all put together to make things happen.
The whole philosophical thing is that Bitcoin was started as a movement to make it easier for the average person to move money around without having to answer to one central or several central banks.
The movement starte in Silicon Valley in the 1980s with the cypher-punk movement and a desire to create money that could be transfered worldwide that did not rely on the centralized banking system.
So today you will hear all kinds of references to words like DeFi or decentralized finance, blockchains, immutable, trustless systems, etc etc
As I mentioned there are over 6,000 cryptocurrencies out there now but the name you hear the most frequently other than Bitcoin is Ethereum.
One other source of confusion is the fact that in crypto there are two words which do not mean the same thing, coins and tokens.
Only bitcoin is a digital coin which means that you can take bitcoin coin and buy almost anything if you can find a grocery store or retailer who will take it.
Tesla said that they hope to take bitcoin.
The rest of the 6,000 crypto for the most part are called tokens which are not as good as cash and must be converted into a crypto like bitcoin to be used as cash.
Its like some companies like Uber have had tokens for years and if you had an Uber token you could buy some Uber rides buy you could not buy a loaf of bread.
The same thing with the 6000 or more crypto currencies which are pretty well all tokens.
Now there are two main categories of tokens..utility tokens and security tokens.
Then other companies started to create their own tokens and they used Ethereums blockchains and in many cases they didn’t like the high gas fees charged when using the Ethereums blockchains that they created their own separate blockchain.
Utility tokens mean that these tokens can be useful and can be used to buy something within that specific area where they are available and usually they are involved in the gaming world, an NFT or the metaverse.
You can use a token to buy some avatar in an online world and the value of some of these tokens is skyrocketing but you still can’t directly go to your exchange and get cash back but you must generally convert them into another popular crypto like bitcoin.
This is why you see people who want to sell their own artwork on a NFT site like OpenSea will first go onto a place like MetaMask where they can use Ethereum with their NFT project and will be charged a certain amount of gas fees for the ability.
Now another source of confusion is that the organization that releases a token can also have their own blockchain.
In the beginning there was only bitcoin and they had their own blockchain.
Then Ethereum came out with their own coin and they created their own blockchain.
They are both a coin and a blockchain. There are hundreds or thousands of blockchains but Ethereum is the one that every body follows.
So now you have all kinds of cryto currencies that are being built using the blockchain technology of Ethereum and then new blockchains being developed.
One problem with Ethereum was something called gas fees so the competition stepped up and made their own crypto and blockchain to reduce that fee to the user of their coins….it gets complicated to explain.:)
(under construction Dec 16, 2021)