Bitcoin is sometimes portrayed as a magical black box that somehow produces “value” by mere virtue of not being something you can point at in the real world. For instance, no “Bitcoin user” or entity by that name. There are only people who run bitcoin instances.
An attempt to compare this aspect to various other things, some of which are more or less familiar. This is not an attempt at explaining Bitcoin or how it works.
Table of Contents
Is Bitcoin a type of science-fiction money called “credit”?
Bitcoin has no such notion of “ownership” either. You don’t “have” bitcoins. You own the right to tell the network how many of them you want to be transferred from your bitcoin address to someone else’s. Making that transfer only exchanges the ability (ownership) and doesn’t move any bitcoins around. Bitcoin has no such thing as a user account.
How many Bitcoins are there?
Bitcoins are “created” (mined) at a diminishing and predictable rate. Getting one bitcoin requires expending an arbitrarily large amount of effort (in the form of participating in a proof-of-work contest).
I am keeping Bitcoins working by keeping the network secure.
Keeping bitcoins working by keeping the network secure such as software and hardware that uses electricity and storage space, both of which have value to others even if they bear no other use for it themselves. This is technically an investment of resources.
What’s the difference between coins and Bitcoins?
There are no coins. There are transactions moving bitcoins around, but not coins. Coins don’t exist except as fictional wallets (just like bank accounts). They’re merely entries in a database that will cease to exist when all bitcoins are mined.
If someone has 1 million BTC in their wallet, this means “the network” knows they should have 1 million fewer bitcoins than other people. And it wants to know who should get those extra coins – so it keeps asking “who has how many?” every time a transaction comes through.
What if we want to create our crypto-like Bitcoin?
You can do that right now with a little bit of code. There’s not already a slew of altcoins because creating a new currency means convincing others to accept it as payment,
which means you need to convince them they’ll be better off doing that than with bitcoin or any existing fiat currency.
Creating cryptocurrencies is very easy. Making them secure and stable enough for others to use is the hard part. Some cryptocurrencies have been created to create them, but they never took off because nobody wanted to use them.
Is Bitcoin about getting rich quickly?
This may have been true for early adopters who mined or bought up large quantities of bitcoins very cheaply, but that was by no means the entire population of Bitcoin users. Bitcoins were created as a “proof-of-concept” for a new kind of money, but it is up to the users whether they’re successful in that role. Unlike fiat currency, which has no other use besides being traded for goods and services within its system, bitcoins are helpful because they can be exchanged with people outside the Bitcoin world.
We are providing goods and services for Bitcoins.
Many people will accept bitcoins for things they’d otherwise sell in their currency, primarily online. The first recorded transaction of a physical item bought with bitcoin was when Laszlo Hanyecz traded 10,000 BTC for two pizzas one year ago to the day – at current market rates, that’s worth a whopping $750,000. Know more at https://cryptotraderapp.com/.
Will Bitcoin ever replace credit cards?
It’s unlikely that Bitcoin will ever “replace” credit cards because it doesn’t offer any advantage over existing payment processors and online wallets, which already do an excellent job of letting you pay for things on the Internet.
What we’re seeing right now with Coinbase and other companies is an early stage in adopting bitcoin – which has been described as a “transparent and accountable ledger.” There’s no reason the technology behind Bitcoin should be restricted to finance.
Conclusion:
Bitcoin was probably the most popular topic in 2014 due to its meteoric rise in value against fiat currencies and commodities worldwide. The main conclusion is that the criticism leveled at Bitcoin has no value outside its system because there’s nothing you can do with bitcoins besides moving them around.
