A guide on how to understand Bitcoin and cryptocurrency?
Although Bitcoin is one of the most searched for terms (according to Google), it is a very technical topic for many people and can get too technical for non-nerds. However, there are now hundreds of cryptocurrencies and more and more people want to know how they work, possibly driven by a distrust of bankers, which is an entirely different discussion.
It’s hard to get a layman’s explanation without using technical terms like “secret keys”, “digital keys”, “digital wallet” and “cryptocurrency”, so I’ll do my best to keep things as simple as possible. can keep.
The concept of Fiat money i.e. paper money was formulated to make it easier for people to exchange goods or services as a substitute for barter as it would at best be limited to an exchange between two willing parties, whereas money to provide your service or goods, purchase the service or goods you need from another or others.
Therefore, I would argue that Bitcoin is the 21st century equivalent to barter in the sense that it works as an exchange for goods or services directly between two willing parties. Barter had to be based on every promise and trust, to deliver and deliver the promised goods or service.
Today, with Bitcoin or any other cryptocurrency, each party would need a unique file or key to exchange the agreed upon value between each other.
Having a unique key or file makes it easier to keep track of every transaction. However, this also brings problems.
Now, barter is the simple exchange of skills or goods, as I’ve said, the modern equivalent, or bitcoin is prone to security breaches, ie file theft or hacking, this is where a “cryptocurrency wallet” comes into the equation to secure your transactions.
Basically, you need a safe location for your cryptocurrency/bitcoin purchases and possession. This is where the need for a hardware wallet comes from.
So now that you have written down/recorded which address contains which amount of Bitcoins and then updated each time a transaction is made, the file is known as “The blockchain” – and keeps a record of all transactions made with Bitcoin.
The next problem is making sure our files remain unique.
I will cover this in my next article.