What Is Bitcoin?

 

Bitcoin is an online financial currency that people use to payments to one another. Bitcoin is another method of payment system similar to MasterCard credit cards or Paypal. Everyone knows Mastercard & PayPal's networks have to be managed by rules, laws and make a profit for its shareholders.

Bitcoin is different, it is decentralized. No one owns or controls the Bitcoin Network. Everybody knows the U.S. dollar is monitored by Federal Reserve, Mexico governs the Mexican Peso and the Euro by the European Commission. What's different about bitcoin I mentioned is there is no one entity that is "in charge" of bitcoin. Bitcoin has a peer-to-peer structure, with thousands of computers working together to process Bitcoin transactions in what is called a blockchain (recording of bitcoin transactions).
The way bitcoin was setup means that it is the world's first completely open financial payment system.
 

Plain English?
Bitcoin is a worldwide online currency. No government owns bitcoin but it's governed by its users.

Why the heck would anyone want to use online currency?

Well, back then our U.S. dollar was backed by gold called the Gold Standard. Our lovely President Richard Nixon took us off the gold standard in 1971. So now the U.S. dollar is considered Fiat (currency governed by regulation or law).

What am I getting at?

Well, since our dollar is not tied to a commodity anymore (gold) there has been a loss of faith in government-backed currency.

We aren't the only ones, there are many around the world that don't have faith in their government making the rules and laws of their currency like the Chinese Yuan, the Euro etc.

So, the person that invented bitcoin named Satoshi Nakamoto created this bitcoin system/currency for a way to still use currency while not relying on governments. It started off a couple years ago very small but bitcoin's value has caught on and more people are accepting it.

Bitcoin is also anonymous.

How? Well, you do not need a bank account, need to prove your identity, there is no government that governs it.

Instead, bitcoin, when purchased, is a recorded transaction in the blockchain.

Unfortunately, many people that love that bitcoin is anonymous has also attracted the wrong type of people too like drug purchasers or cartels. Bitcoin is a favorite for these types of people because again it's anonymous.

Where do bitcoins come from?

In our U.S. financial system, new money is printed/created by our central bank, the Federal Reserve. Bitcoin doesn't have a central bank or government, right? So, there needs to be another system in place for producing currency into circulation.

As mentioned earlier thousands of computers work together to process bitcoin transactions. These computers are called "miners". Every 10 minutes a bitcoin miner wins a computation race and gets a prize of 25 bitcoins.

Every 4 years, this reward is cut in half. So in 2009 miners were rewarded 50 bitcoins, 2012 it is 25 bitcoins, and of July of 2016, it will be 12.5 bitcoins.

There are 21 million bitcoins that will be produced over the next few years, no more will be produced. So technically, it's a commodity since no more can be produced, unlike the US dollar, Chinese Yuen, or Euro which can be easily printed by governments.

I'm not sure if you've heard of bitcoin more often lately in the news but it is because next month in July of 2016 it will halve again.

What does that mean exactly?

Well, simple economics tends to give bitcoin more value since less are produced in the world. (generally making something worth more).

Should you buy bitcoin?

It's up to you. Remember the internet was not a practical technology for regular people until the 90's. Online currency sounds crazy now but how many people use the internet and purchase things from eBay, amazon etc.

Online currency could be common place in the future. It couldn't hurt to learn about it early.

I actually bought a couple of bitcoin years ago when it was valued at $220 a bitcoin. As I'm writing this email, 1 bitcoin currently equals $737 dollars. It sometimes pays to catch on early.

Set up your bitcoin account in less than 4-minutes!