Bitcoin for Newcomers

Submitted by editor on Sun, 05/13/2018 - 18:34

The degree of complexity is proportional to the degree of unwillingness to participate. This applies in the technological work just as it does in other areas in other words the more complex a subject and its application the higher the reluctance to participate. No one likes to confront what is to them unconfrontable or complex. On the other side of the coin, understanding gives a willingness to participate and if there is no or little or confused understanding of a subject then participation or usage of the subject will increase with confidence.

I mention this as the complexities of buying, selling, handling and storing Bitcoin for a newcomer can be quite complex and possibly has put off many people who acquired an initial interest in the subject.

For example Warren Buffet, the famous investor Billionaire has consistently denigrated Bitcoin as basically worthless. He also, some might recall, did this during the emergence of Google and Amazon. His misunderstanding cost him dearly in terms of investment as both companies have since risen to be in the top 10 biggest companies on the planet In this case it is a classic example of not understanding and possibly because the concept of Bitcoin and blockchain as being a decentralised philosophy as against a centralised philosophy goes against the grain for an established old school investor in terms of fiscal policy.

So where does that leave the newcomer to crypto currencies? It leaves the door wider open in fact for anyone to participate in crypto currencies simply by increasing their understanding of the subject and really it is not that hard. Any new subject can appear confusing at the introduction of the subject. But all that is required is to understand one piece of information or datum, one thing about a subject, to start off the understanding process. One then starts to understand another aspect and then one can continue the process to a full understanding.

Bitcoin

Understanding what Bitcoin IS for example. Reading What is Bitcoin is an easy read and gives you an understanding of what it is. That it is simply a currency much like the dollar except that there are no physical Bitcoins you can grab with both hands. It is Digital. A 'something' on the internet that has been given value, as evidenced by the fact that one can exchange a Bitcoin, or fraction of one, for a dollar value. And then back again to buy a Bitcoin by paying a dollar value. It is also evidence by the fact that you can buy goods and even services using Bitcoin much as you would with any other currency. In some countries you can buy a cup of coffee or a meal using bitcoin just as you would using the currency of that country. The complexity for many people comes with the secure storing of Bitcoin. You store your dollars or pounds or yen in a wallet which you keep in your pocket. You also store some in a bank. In the same way you store your Bitcoins in a wallet, but not a bank. You have more than one wallet. One can be like a USB specially designed to store Bitcoin (or other crypto currencies for there are many others) and in that case THAT one is your bank.

But it is a bank that YOU control. No one else. If you access your bank account on line you will know that you have to put in a user name and password. That gives you access to check your account, buy something on line, pay bills and generally play around with your money. The same with Bitcoin except that it is a bank that you plug into your computer, check the total number and value of your Bitcoin as expressed in your local currency and receive or send money to other Bitcoin owners. You can even keep a small amount of Bitcoin on your smart phone and use that to make purchases just as with banking. The difference there is that, unlike traditional banking where you have access to your full banking, you only keep a small amount on the phone and your main asset is stored in the USB wallet (Called a cold-wallet) elsewhere. So that if your phone is hacked, your main value is stored off line safe and sound where a hacker cannot get their hands on it, whereas a traditional bank could be accessed by a hacker and all the funds removed.

Blockchain

Blockchain is the platform or basis on which a cryptocurrency such as Bitcoin operates. You can read all about blockchain at What is Blockchain?. It is not necessary to understand all about blockchain to use Bitcoin but it does help to understand of course the basic principle of Blockchain. Whereas when you put your money in a bank, you are effectively 'loaning' the bank your money and they now owe you that money so an account is set up for you so you have a record of how much you 'lent' the bank. The money from all the accounts is then pooled into a general account of money which the bank then uses to loan to others at interest. This is called a centralised system. You own or control what is in your account according to the banks terms and conditions. If they decide to renege on the arrangement it is difficult to recoup your funds. Banks have been known to extract the money, removing it from a customer's account, for their own purposes such as to repay their own debts (as in Greece). Blockchain is a platform that is decentralised. No one person owns it. Every transaction is recorded in it but recorded, anonymously for the most part, in multiple computers called nodes so that once a transaction is recorded it cannot be changed or duplicated, meaning one cannot go back and change it in any way. This is more secure and if you have a cold-wallet the value is updated every time to connect it to the internet.

This brings us to the value of Bitcoin. Like any currency, it is subject to the trials and tribulations of life, in this case economic and financial 'life.' All money, regardless of the currency, is based on the idea of confidence. The more confidence one has in a currency the more it is considered valuable, hence the fluctuations between currencies which currency traders rely on to make a dollar. Currency value fluctuates based on the economic climate, the value of the country's economy and various other factors. The same principle applies to Bitcoin. There is much discussion on the internet as to why the price rises and falls and the degree of volatility of that price but the fact remains that it is a currency and although it is likely the volatility will lessen over time, it will continue to be there.

Bitcoin, and the other 1500 or so crypto currencies, are here to stay and their use will get simpler and simpler as the technology is smoothed out and becomes more generally understood. Initially the internet was a mystery to most people, and then the World Wide Web came and made it simpler for everyone. Email became simpler and advanced have made it simple to interact with others on social media platforms and people get used to using these new tools. The same will apply to Bitcoin.

This article is for information purposes only and is not to be construed as financial information for any purposes such as investment or speculation and it is the responsibility of the reader to perform proper due diligence before acting upon any of the information provided. We recommend that you consult with a licensed, qualified investment advisor before making any investment decisions.

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