So what was the inspiration for me creating the bitcoin4dummies website? Well, after becoming involved in the cryptocurrency world myself in 2017, I became so passionate about cryptocurrency that I decided to promote cryptocurrency and the opportunity I was involved with at the time on social media. There was lots and lots of interest but simply sending people a link to a website where they could buy cryptocurrency was not enough to help them understand. Many actually explicitly stated, ‘I think I need bitcoin explained for dummies’!
So what is bitcoin?
In a nutshell, bitcoin (and cryptocurrency) is new money! Some refer to bitcoin as ‘internet money’ as it all exists in a virtual world and you don’t actually own any physical coins. Bitcoin allows a person to send value (money) directly to another person, anywhere in the world, without the need for a middleman (such as a bank or paypal). You have a wallet, they have a wallet, you simply send the bitcoin from your wallet to their wallet and it arrives within a few minutes. The money is transferred via something called ‘the blockchain’ (which will be explained in another blog) through a process called ‘mining’. You can already purchase things using bitcoin if the merchant accepts bitcoin, simply by sending the bitcoin from your wallet to the merchant wallet. It is expected that more merchants will begin accepting bitcoin once its value stabilises.
What are the benefits of bitcoin?
Bitcoin is a revolutionary phenomenon – that is, it has the potential to disrupt the current monetary system (where banks and governments have full control) in favour of a ‘better’ system (where the people have the control). There will only ever be 21 million bitcoins created! This is in stark contrast to fiat money where banks and governments create money out of thin air. The advantage of this is that, as adoption increases, the value of the coins in circulation will increase. Bitcoin adoption will thus help to enable a situation where consumers have more disposable income and savers will have increasing purchasing power. This is in stark contrast to the current system, where people are struggling to keep up with the rise in the cost of living due to inflation (a general increase in the money supply).
Additionally, bitcoin could help bring millions of people out of poverty, giving the unbanked a way of sending and receiving value and freeing them from having to use cash. It can also be seen as a ‘safe haven’ in countries characterised by economic instability, as it is a global rather than a national currency. People can send and receive money from anywhere in the world for a fraction of the cost of traditional methods, and without the need for having a (often inaccessible) bank account.
Why is there so much hype about bitcoin?
Basically, (many) people are excited about bitcoin because of its exhorbitant increase in value. They are hoping to cash in on the increase in bitcoin’s value and make a profit, which they can turn into ‘real’ money. This reflects a misunderstanding of what bitcoin is about, and an ignorance of the benefits it can bring. It also accounts for the extreme volatility in the price of bitcoin, as people are speculating on whether the value will go up or down. But, it is early days, so it is expected that this is how people will become interested, after which people begin to learn about the real value that bitcoin can bring to the people of the world. It is my belief that adoption (people start using bitcoin as a currency in everyday life) will follow.
Is bitcoin in a bubble?
Many well-respected people say bitcoin is in a bubble, meaning that it could pop at any time and the value will come crashing down to zero. This is why investing in bitcoin is considered to be very risky! However, many other equally well-respected people believe in the potential of bitcoin as either a future currency or a robust store of value. I will blog about this at a later date, as you will find that opinions are extremely divided, so at the end of the day, you need to make your own mind up! It is also worth considering that many ‘experts’ famously quoted in the past about how the television, telephone and personal computer would never work. Look how that panned out!
So that’s bitcoin in a nutshell though I’m sure the newbies will have many more questions.
Please feel free to post your questions and opinions. It would be great to hear your views!