Getting Started with Bitcoin

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Getting started with Bitcoin

What is Bitcoin?

Bitcoin is the world’s first digitally native money and payment network. The asset has a limited supply and can be sent anywhere in the world with no government, corporation, or individual having control over the network. Anyone with an internet connection can download the appropriate software on their device and start using Bitcoin.

“Software is eating the world.” – Marc Andreeson, August 2011

Software is a collection of instructions and data that tells a computer how to work. Put simply, software applications from Facebook, to email, to Google search, and many others that millions of people use on a daily basis are a set of rules that a computer follows and executes. Users of these software tools optionally opt in and take advantage of these platforms based on the value that they are able to provide. Facebook allows you to connect with friends, email allows you to communicate quickly, Google allows you to search, and the list goes on. 

Bitcoin is no different in this sense. Bitcoin is monetary software that follows a certain set of rules which users, when interacting with this software, can take advantage of. In the case of Bitcoin, the high level rules are simple:

  1. New bitcoin can only be minted by miners who help secure the network and process transactions with their computing power.
  2. Bitcoin has a pre-programmed inflation rate that eventually hits 0% once the 21 millionth bitcoin has been mined in approximately 2140.
  3. Transactions are processed approximately every 10 minutes.
  4. Confirmed transactions are irreversible.

Why is Bitcoin valuable?

Money is useful because it stores value over time and can be exchanged for various goods and services. Bitcoin is no different than any other money in this respect. However, bitcoin is uniquely valuable compared to monies of the past as it lacks counterparty risk, is natively digital, is globally accessible, and has a hard cap on its supply. Bitcoin can be sent anywhere in the world at any time over the internet and users have high assurances that their holdings will not be diluted by any unexpected inflation, all without a trusted central party like a bank or government in the middle. No other monies on the planet, up until the creation of bitcoin, have had these characteristics.

People can choose to hold their personal assets in many different forms, whether that is in U.S. dollars, stock in a company, bonds, etc. However, by holding any of these assets, and many others not mentioned here, there is inherent counterparty risk, meaning holders of these assets must trust centralized organizations to maintain the value of these assets and remain honest in their operations. In contrast to trusting an organization, Bitcoin relies on a distributed network of computers, mathematics, and incentives for its successful operation.

If you hold one bitcoin, you hold one out of 21 million bitcoin that will ever exist. How you decide to secure your bitcoin determines your reliance on outside parties. You can hold your bitcoin in a vault on your smartphone, in a vault on your computer, in a vault on a special hardware device, in a vault with a bank, and believe it or not, you can even hold bitcoin in a vault in your head

Bitcoin Said Simply

Bitcoin is an asset that is absolutely limited in supply with no third party having the means to tamper with this feature. Bitcoin can be sent anywhere in the world to anyone with an internet connection, unobstructed by borders or would-be censors. Bitcoin can be stored in countless ways, each of which has its own security implications, but if a user so desires, they have zero need to rely on a financial institution, a bank, or a custodian of any kind for securing, holding, and/or managing their assets. These features are what drives incredible demand for bitcoin and gives bitcoin a strong foundation for an even brighter future. 

Want to learn more?

Additional resources:

  1. What is mining and how does mining supply bitcoin to the market?
  2. What are private keys?
  3. What is a wallet?
  4. What is an exchange?
  5. Where can I spend Bitcoin?