You’re the absolute bitcoin boss, but you have a hard time explaining cryptocurrencies to your friends and family? Here’s a version that even your grandmother will understand.
The Bitcoin price is currently in a downward spiral. Nevertheless, many people are probably asking themselves whether it is worth buying in at a low price. After all, the classic stock jargon also says “buy low, sell high”.
However, investing in something you don’t understand is always a bad idea. For crypto fans who are already deep into the matter, it is sometimes difficult to explain the complexity of digital gold to so-called “no-coiners” in simple language.
Get rid of the bitcoin jargon
That’s why it’s especially important to use light language and not claim to be complete. Some details, such as when the next BTC halving will take place or what changes the Taproot update has brought to the Bitcoin network, can be left out for now.
The version for grandma and grandpa
We go to the grocery store around the corner. Products from producers are sold there, which the shopkeeper has bought there before. In the store, all food products are displayed and marked with a price. At the checkout, you can then pay accordingly.
Blockchain technology also makes it possible to exchange goods. However, everything takes place digitally. For example, with the blockchain, you would no longer have to walk to the store around the corner, because the technology allows you to trade directly with the milk producer, skipping the intermediate step at the grocery store.
This is possible because under the blockchain, it is not just one organization that calls the shots. The power is distributed among all participants – be it the farmer or Hans Müller, who needs milk for his coffee party. The blockchain functions as a ledger in which all transactions are recorded.
Because everyone has the same information about purchases and sales, false information is quickly detected and can be rejected. Even after the fact, information about transactions that have been made cannot be changed.
Blockchain technology also forms the basis for Bitcoin. Bitcoin is a digital currency and payment system in one. For example, it is no longer necessary to rely on banks to carry out transfers – the blockchain does not need any intermediaries. Also, no one can get in the way of the Bitcoin network: It is not controlled by the state and is therefore safe from censorship.
Why do you need Bitcoin at all?
Bitcoin is a censorship-resistant, decentralized, transparent and transnational digital currency that can also be used quickly and cheaply. Because of these characteristics, many speak of a democratization of money. The limit of 21 million Bitcoin is also said to help the network achieve a deflationary effect, meaning that BTC increases in value due to this shortage.
Who is in control of Bitcoin?
Generally, it is the network participants:inside that make decisions for the Bitcoin blockchain democratically. Responsible for implementing various decisions are the so-called “Bitcoin Core Maintainers”. This is a small group of developers who have the ability to change the Bitcoin code in the interest of the community. However, they can only make certain adjustments if the community has previously agreed.
How secure is bitcoin?
Because of cryptography – the science of encryption and decryption – the blockchain is considered one of the most secure technologies around. The decentralized nature of Bitcoin, for example, makes it very difficult to impossible to hack the network. Because not just one central entity, but tens of thousands of network nodes have a copy of the Bitcoin code, an attack on all of these participant:s would have to occur simultaneously, which is technically next to impossible.
Doesn’t that consume vast amounts of energy?
Yes, the consensus mechanism in the Bitcoin network (proof of work) is energy-intensive. However, the discussion does not end with this statement. For one thing, it is very difficult to find reliable data on Bitcoin’s energy consumption and also on what exactly the energy mix looks like. For another, you have to ask yourself what people are willing to consume energy for in the first place. For example, the annual Christmas lights in the USA take up significantly more energy.
Picture by Pixabay
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