It’s not as complicated as you might think.
If you’ve asked what bitcoin is before, you probably got one of these answers:
“It’s a global, decentralized peer-to-peer payment network.”
“It allows people to send or receive money across the internet, even to someone they don't know or trust.”
“It’s digital gold.”
Unfortunately.. none of these descriptions really help to explain it.
So let’s break it down.
This is bitcoin.
Yep, that’s it. It’s a list of people’s names. But it’s not just their names, their bank account balance is on there too.
Not quite the technological revolution you were expecting? Let’s take a second to figure out what makes this list so special.
Need a bitcoin wallet? Check out Blockstream Green.
But first, realize that our current banking system is just a list of names and balances too!
Our society has already made the transition to digital money. We know how many dollars we have based on the number we see in our bank account.
Your bank isn’t actually holding that exact number of dollars in a vault somewhere, it’s just a number in their database.
A bank is just a list of people’s money… and bitcoin is too.
Ok, what’s different about this bitcoin list?
Well.. everyone we know has access to this list. Now it’s not just the bank who knows how much money everyone has, but every person with a copy of the list knows too. Weird, right?
If you want a copy, just ask! Since everyone has access, the list is very easy to find. You'll see below that Alice is happy to send her copy around.
Why is this shared list helpful?
Let’s say Bob and Dave are out to dinner one night, and of course Bob forgot his wallet again. Dave picks up the tab.
But now that we’re in the 21st century.. Bob realizes he has a couple of ways to pay Dave back.
Bob owes Dave $7 for dinner
Let’s first look at how Bob would pay Dave using a bank, then we’ll see how he would pay him using Bitcoin.
1
Use a Bank
I’m sure you’re familiar with this method. You tell your bank the person you want to send money to, as well as the amount.
The bank will change the numbers around in their “list” to make sure Bob now has $7 less, while Dave has $7 more.
2
Use Bitcoin
With bitcoin, there’s no need for the bank. Remember… its just a list, and Bob and Dave each have a copy of it.
So Bob subtracts $7 from the balance next to his name, and adds $7 next to Dave’s name. Money sent, no middleman required!
A quick note.
The bitcoin list doesn’t keep track of balances of dollars ($), it keeps track of bitcoin (₿). To learn about bitcoin as a currency, click here.
And that’s it.
We’ve just described bitcoin at its core. A shared list with names and balances. Want to send money? Just edit the list! Anyone can make a change and send around their edit to let others know they made a transaction.
Ready for the more technical explanation? Click here!
Looking for more help?
Schedule a 1:1 coaching session today for personalized help
with beginning (or advancing in) your bitcoin journey.
Surely, it can’t be that simple.
What about “mining”, “cryptography” and “blockchain”?
Those are just fancy terms to describe how this whole process works, and why it’s safe to use. If you want to learn more, click the button below!