To most people, Bitcoin can seem like a financial concept made in a parallel universe. Yes, it’s a very complex and complicated concept, but it doesn’t mean it’s impossible to learn it. When you think about it, many people started off with no idea about bitcoins and how it worked. But look at them now, they’re probably investing left and right in various cryptocurrencies like pros, and possibly profiting very nicely as well! So, in this article, I’ll try to simplify how Bitcoin works using a betting game analogy:
Imagine playing a betting game with your friends, but none of you have any money on hand, so you decide to use a ledger to record the transactions, like your winnings and losses. But you don’t want to put your trust on one friend to record everything, so a lot of you decide to make a ledger simultaneously.
This way, at the end of each game, those who kept ledgers can compare their records to see if it all evens out—which means that cheating the system would be virtually impossible unless everybody else is in cahoots with you, which ultimately defeats the purpose of cheating in the first place.
The ledger is not hidden or exclusive to the ledger keepers; you can view it anytime you want. To add your transactions to the ledger, all you have to do is broadcast your transactions to the ledger keepers, and you pay as little or as much as you want to make sure they put your name down on that ledger as soon as possible.
Your friends who keep the ledgers up to date get compensation for their hard work with a reward in the form of money. This money comes from an external source—say, a vault with a limited amount of money. The money in the vault wasn’t part of the money circulating in the betting pool, but it became so once it was acquired by your ledger-keeper friends.
This simple analogy is exactly how Bitcoin operates, albeit on a much more complicated level. Bitcoin runs on a global computer network, and each transaction is compiled into new blocks which are then connected to the last block on the blockchain. And the bitcoin miners are the ledger-keepers who work hard to record transactions and mine those precious bitcoins.
Bitcoin is fast becoming integrated into the everyday lives of people living in developing countries. With unstable and hyper-inflated national currencies, bitcoins are proving to be a much more viable solution to solving the financial woes of their citizens.
Here are 4 reasons why Bitcoin has a massive appeal for the masses in developing countries:
- You Don’t Need Banks
In developed countries, it’s relatively easy to sign up for bank accounts and credit cards. But in the developing world, it’s a vastly different story. It’s much harder to get credit and setting up a bank account is no walk in the park. But Bitcoin changes all that. With Bitcoin, you can save your own bitcoins yourself – all you need is a secure wallet to keep your digital money safe.
- Fast, Cheap and Borderless Payments
With Bitcoin, you can send any amount of bitcoin to anyone in the world in a matter of minutes. When you send money through banks you not only pay those costly bank fees, you also need to wait for several hours or a few banking days. But with Bitcoin, as we’ve mentioned previously, you don’t need banks to send or remit payments to other people. All you need is their bitcoin address and voila! Your payment should arrive in the next 10 or so minutes.
- Bitcoin Can’t Be Manipulated By Anyone
Governments and banks can dictate the production and movement of their national currencies which ultimately leads to inflation. Unlike fiat currency, however, Bitcoin is a decentralized virtual currency. This means there is no controlling entity that tells the Bitcoin network what to do. Everything has been hard-coded into the network and the underlying technology behind Bitcoin, the blockchain, is tamper-proof and can’t be manipulated by anyone, not even its developer, Satoshi Nakamoto.
- Bitcoin Will Help Authorities Catch Criminals
Contrary to popular belief, Bitcoin is not anonymous. Rather, it is a pseudonymous currency because while your alphanumeric public keys provide a certain level of anonymity, computer experts can trace who owns which wallets and the amount of bitcoins each wallet contains. Now the masses who make small transactions don’t have anything to worry about. It’s the criminals who move large amounts of bitcoins that catch authorities’ attention, and it’s who they focus their research on, not the millions of people who make minute transactions.
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