A guide on how to understand bitcoin and cryptocurrency?
Although bitcoin is one of the most searched terms (according to Google), it is a very technical topic for many people and can become too technical for non-maniacs. However, there are now hundreds of cryptocurrencies and more and more people are starting to want to know how they work, probably driven by the distrust of bankers, which is a completely different discussion.
It is difficult to get an explanation from a layman without having to use technical terms such as ‘secret keys’, ‘digital keys’, ‘digital wallet’ and ‘cryptocurrency’, so I will do my best to keep things as clear as possible. I can.
The concept of fiat money, ie. paper currency is formulated to make it easier for people to exchange goods or services to replace barter, as this would be limited to exchanges between two willing parties at best, as long as money allows you to provide your service or goods, then buy any service or goods you want from another or others.
That is why I would argue that bitcoin is the 21st century, equivalent to barter, as it works as an exchange of goods or services directly between two willing countries. Barter had to be based on every promise and trust to secure and deliver the promised goods or services.
Today, with bitcoin or another cryptocurrency, each country will need a unique file or a unique key to exchange the agreed value with each other.
Having a unique key or file makes it easier to keep track of each transaction. However, this also comes with problems.
Now, barter is a simple exchange of skills or goods, as I said, the modern equivalent, or bitcoin is prone to security breaches, ie. stealing or hacking files, this is where the “cryptocurrency wallet” enters the equation to protect your transactions.
In general, you need a secure location for cryptocurrency / bitcoin purchases and holdings. Hence the need for a hardware portfolio.
So now that you’ve saved / saved which address contains which amount of bitcoins and then updated each time a transaction is made, the file is known as “The blockchain” – and stores a record of all bitcoin transactions.
The next problem is to ensure that our files remain unique.
I will deal with this in my next article.