Bitcoin Explained in Simple Terms

Bitcoin is a new type of money. A money that isn’t controlled by any single entity. A money that was born out of the frustration of the banking and government corruption. A money that beats off any corruption because unlike centrally controlled government money Bitcoin can’t be printed at will.

But what exactly is Bitcoin? Let’s try and explain Bitcoin so a five year old can understand it.

Bitcoin Explained Like I’m Five

ELI5 Bitcoin is the best place to start to understand Bitcoin, as it’s a complex computer program, but if we strip it down, we can explain it so a five year old can understand it.

Well, let’s say we’re playing monopoly, and as we know in a game of Monopoly the money in is limited. There can be no copies made of the money, and everybody who plays the game is the banker so nobody can cheat it, because everybody can see everything.

That’s like Bitcoin.

Obviously Bitcoin isn’t a game, but everyone who participates in Bitcoin is the banker, auditor and player.

There are only ever going to be 21 million bitcoins, because that’s how the program is set up.

Nobody can change it, because like Monopoly, everything is open and if anyone tried to change the amount of bitcoins, everyone will see, so they won’t be stopped by everyone else in the Bitcoin network.

When you play Monopoly everybody usually helps out with the banking, and nobody can cheat it because everyone is watching everything.

That’s like Bitcoin, but the Monopoly bank in the Bitcoin network is called the ledger. It’s like a big digital bankbook showing all transactions, and anybody can check them at any time.

But the truth is, players can cheat at Monopoly. When nobody is looking, you can take a few Monopoly notes and make the game swing in your favour.

Bitcoin is Powered by Its Network of Workers

That’s the difference with Bitcoin. Nobody can cheat it, because the ledger is secured by hundreds of thousands of mining machines that work together to add transactions to it.

They all pick up transactions, put them into the newest page of the bankbook (block), and send the block to these other workers called nodes. Once the tens of thousands of nodes agree that every transaction is ok, they send them back to the miners.

The miners then compete against each other to work out the difficult mathematic puzzle that is asked of them.

The mining machines are very powerful computers and they frantically try to work out the maths, because whoever does first, will get the reward of 6.25 bitcoins. A bit like passing go, but not everybody can, but if you stay in the game long enough you will pass go.

This happens with every new block every 10 minutes or so, and all this combined computing power makes Bitcoin the most secure network created.

In fact it’s so secure, it is about 400,000 times more powerful than the most powerful supercomputer. Let me say that again: Bitcoin is about 400,000 times more powerful than the most powerful supercomputer.

Like Monopoly, Bitcoin is Open To Anyone Who Wants To Play

That’s why nobody can cheat it. And it makes Bitcoin the most secure store of value. One that is portable anywhere in the world, is not limited to where it can go, and can be sent for pennies in a matter of minutes.

Think about that: Bitcoin lets you send as much value as you have, anywhere in the world, in minutes and it costs nothing compared with moving value in the legacy world.

But the best thing is, because it can’t be cheated, and because we don’t need a banker to check everything, and because it has no limits, anybody with a phone or laptop can use it.

If banks aren’t scared, they should be. When everyone adopts Bitcoin, because they will, we won’t need expensive bankers, money transmitters, or any expensive third party to guarantee something.

Bitcoin is a revolution and it’s already happening, and the boardgame is open for everyone to get involved.

To find out more go to Bitcoin for Beginners and discover it for yourself, but be warend it’s a very deep rabbit hole.

Bitcoin Explained in Simple Terms was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.

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