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-nerds. However, there are now hundreds of cryptocurrencies and more and more people are starting to want to know how they work, perhaps driven by the distrust of bankers, which is a completely different debate.
It is difficult to get an explanation from a layman without the use of technical terms such as “secret keys”, “digital keys”, “digital wallet” and “cryptocurrency”, so I will do my best to make things as clear as possible.
The concept of fiat money, ie. paper currency, is formulated to make it easier for people to exchange goods or services that would replace the exchange, as this would at best be limited to an exchange between two willing parties, while money allows you to provide your service or goods and then buy any service or goods you seek from another or others.
Therefore, I would argue that the 21st century bitcoin is equivalent to an exchange, because it works as an exchange for goods or services directly between two willing parties. Barter had to be based on every promise and trust, in order to provide and deliver the promised goods or services.
Today, with Bitcoin or any other cryptocurrency, each party would need a single file or a single key to share the agreed value with each other.
Having a unique key or file makes it easier to keep track of every transaction. However, this also comes with problems.
Now, barter is a simple exchange of skills or goods, as I have already mentioned, the modern equivalent, that is, bitcoin is subject to security breaches, that is. stealing or hacking files, here in the equation for insurance comes “cryptocurrency wallet”. your transactions.
Basically, you need a secure location to buy and hold cryptocurrencies / bitcoins. Hence the need for a hardware wallet.
So now that you’ve written down / recorded which address contains which amount of Bitcoin, and then updated each time a transaction is made, the file is known as “Blockchain” – and keeps a record of all transactions made with bitcoin.
The next issue is to ensure that our files remain unique.
I will address this in my next article.