If you still can’t figure out what the heck a bitcoin is, this simple explanation for a five-year-old may help you …
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We’re sitting on a park bench. It’s a great day. I have one apple with me, I give it to you.
You now have one apple and I have zero. That was simple, right?
Let’s look closely at what happened:
My apple was physically put into your hand. You know it happened. I was there, you were there – you touched it.
We didn’t need a third person there to help us make the transfer. We didn’t need to pull in Uncle Tommy (who’s a famous judge) to sit with us on the bench and confirm that the apple went from me to you.
The apple’s yours! I can’t give you another apple because I don’t have any left. I can’t control it anymore. The apple left my possession completely. You have full control over that apple now. You can give it to your friend if you want, and then that friend can give it to his friend, and so on.
So that’s what an in-person exchange looks like. I guess it’s really the same, whether I’m giving you a banana, a book, a quarter, or a dollar bill…
But I’m getting ahead of myself.
Back to apples!
Now, let’s say I have one digital apple. Here, I’ll give you my digital apple. Ah! Now it gets interesting.
How do you know that digital apple which used to be mine, is now yours, and only yours? Think about it for a second. It’s more complicated, right? How do you know that I didn’t send that apple to Uncle Tommy as an email attachment first? Or your friend Joe? Or my friend Lisa too?
Maybe I made a couple of copies of that digital apple on my computer. Maybe I put it up on the internet and one million people downloaded it.
As you see, this digital exchange is a bit of a problem. Sending digital apples doesn’t look like sending physical apples.
Some brainy computer scientists actually have a name for this problem: it’s called the double-spending problem. But don’t worry about it. All you need to know is that it’s confused them for quite some time and they’ve never solved it. Until now.
But let’s try to think of a solution on our own.
Ledgers
Maybe these digital apples need to be tracked in a ledger. It’s basically a book where you track all transactions – an accounting book.
This ledger, since it’s digital, needs to live in its own world and have someone in charge of it.
Just like World of Warcraft, say. Blizzard, the guys who created the online game, have a “digital ledger” of all the rare flaming fire swords that exist in their system. So, cool, someone like them could keep track of our digital apples. Awesome – we solved it!
Problems
There’s a bit of a problem though:
1) What if some guy over at Blizzardcreated more? He could just add a couple of digital apples to his balance whenever he wants!
2) It’s not the same as when we were on the bench that day. It was just you and me then. Going through Blizzard is like pulling in Uncle Tommy (a third-party) out of court (did I mention he’s a famous judge?) for all our park bench transactions. How can I just hand over my digital apple to you in the usual way?
Is there any way to closely replicate our park bench transaction digitally? Seems kinda tough …
The Solution
Download game killer mod apk. What if we gave this ledger to everybody? Instead of the ledger living on a Blizzard computer, it’ll live in everybody’s computers. All the transactions that have ever happened, from all time, in digital apples, will be recorded in it.
You can’t cheat it. I can’t send you digital apples I don’t have, because then it wouldn’t sync up with everybody else in the system. It’d be a tough system to beat. Especially if it got really big.
Plus, it’s not controlled by one person, so I know there’s no one that can just decide to give himself more digital apples. The rules of the system were already defined at the beginning.
And the code and rules are open source – kinda like the software used in your mom’s Android phone. Or kinda like Wikipedia. It’s there for smart people to maintain, secure, improve, and check.
Bitcoin For Beginners
You could participate in this network too – updating the ledger and making sure it all checks out. For the trouble, you could get like 25 digital apples as a reward. In fact, that’s the only way to create more digital apples in the system.
I simplified quite a bit … But that system I explained exists. It’s called the Bitcoin protocol. And those digital apples are the bitcoins within the system. Fancy! So, did you see what happened?
What does the public ledger enable?
Download game nova 3 freedom mod apk. 1) It’s open source, remember? The total number of apples was defined in the public ledger at the beginning. I know the exact amount that exists. Within the system, I know they are limited (scarce).
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2) When I make an exchange I now know that digital apple certifiably left my possession and is now completely yours. I used to not be able to say that about digital things. It will be updated and verified by the public ledger.
3)Because it’s a public ledger,I didn’t need Uncle Tommy (third-party) to make sure I didn’t cheat, or make extra copies for myself, or send apples twice, or thrice…
Within the system, the exchange of a digital apple is now just like the exchange of a physical one. It’s now as good as seeing a physical apple leave my hand and drop into your pocket. Just like on the park bench, the exchange involved two people only. You and me , we didn’t need Uncle Tommy there to make it valid.
In other words, it behaves like a physical object.
But you know what’s cool? It’s still digital.
We can now deal with 1,000 apples, or 1 million apples, or even .0000001 apples. I can send it with a click of a button, and I can still drop it in your digital pocket if I was in Nicaragua and you were all the way in New York.
I can even make other digital things ride on top of these digital apples! It’s digital after all. Maybe I can attach some text on it – a digital note. Or maybe I can attach more important things; like say a contract, or a stock certificate, or an ID card …
So this is great! How should we treat or value these “digital apples”? They’re quite useful aren’t they?
Well, a lot of people are arguing over it now. There’s debate between this and that economic school, between politicians, between programmers. Don’t listen to all of them though. Some people are smart; some are misinformed. Some say the system is worth a lot; some say it’s actually worth zero. Some guy actually put a hard number on it: $1,300 per apple. Some say it’s digital gold; some say it’s a currency. Others say they’re just like tulips. Some people say it’ll change the world; some say it’s just a fad.
I have my own opinion about it, but that’s a story for another time.
Hey kid, you now know more about Bitcoin than most.
Bitcoin has gotten a lot of press, and not all of it good. So is it Internet money, an alternative currency, a parallel financial system, a new way of life? The answer is yes, it’s all of those things and more. Start by finding out the basics of what it is, where it came from, what it does. You can buy bitcoins just like you can buy ice cream and concert tickets. But you can’t really keep them under your mattress or in your piggy bank — or your regular bank account, for that matter. In fact, you had better pay some extra attention to securing your bitcoins once you get some. Bitcoins don’t come from any gothic-columned mint, but from a complicated digital calculating process known colorfully as mining.
Bitcoin Basics
Bitcoin is an alternative type of payment system that is sometimes mentioned in the media. Is it “Internet” or “digital” money? Is it a way to conduct business outside the mainstream financial infrastructure? Is it a new way of life that could transform multiple aspects of society in the future? The answer is yes.
Origins: Bitcoin was created by developer Satoshi Nakamoto in 2008.
Purpose: Bitcoin provides a viable decentralized alternative to the current mainstream financial infrastructure. Audition online game download.
Method: Bitcoin enables spending with full transparency through a publicly available ledger known as the blockchain.
Security: A bitcoin transaction involves both a public key, which is generally known to everyone, and a private key known only to the bitcoin user. No coins can be spent without knowing the private key.
Buying Bitcoins
To use bitcoins, at some point you actually have to acquire some bitcoins. Unfortunately, doing so is not quite as easy as sticking a card into an ATM. The following are a few of the ways you can get your hands on some bitcoins.
Establish that the platform you are using or the person you are buying from is legitimate, as you would with any other online transaction.
Use an exchange such as Gemini to purchase. You register your details through this trusted exchange, deposit your local currency such as USD or GBP, and then purchase the bitcoin at the current rate of exchange.
Remember that once you have purchased your bitcoin, move them to a location that is in within your control. Don’t store them long-term on an exchange.
Storing Bitcoins
Don’t use exchanges to store your bitcoins for any length of time. Exchange storage is only as secure as the exchange’s security infrastructure, so although many people do use this option, the coins are still not within your control. Storing on an exchange should not be considered as anything other than a temporary option.
Instead, use a software wallet (such as the Bitcoin QT client) to store your bitcoins. A software wallet allows you to secure your bitcoins on your own computer. Encrypt the wallet and make backups to ensure your bitcoins are safe. This option requires you to carry out virus checks and have a good understanding of Internet security. Alternatively, you can try a popular online wallet such as the one offered at Blockchain.info while you become familiar with the workings of a wallet. This can simplify the process for you.
Another option is to use a paper wallet to send your coins to a bitcoin address that is not connected to any online exchange nor to software that is on your computer. This bitcoin can only be spent when you decide to manually redeem it through using your private key.
Bitcoin Explained
Securing Bitcoins
Security is as paramount with bitcoin as it is with your personal bank account. The more secure you make access to your bitcoins, the less likely somebody will succeed in nabbing them. When asked to provide a password, for example, make sure it is unique. Don’t use any password that you use on any other website, in case that website is compromised.
When using any online service, look out for additional security such as 2FA, which stands for two-factor authentication. With 2FA, even if somebody else discovers your password, they would also need to gain access to the second-level password which normally is reset every 20–30 seconds using a device such as a smartphone. Always immediately enable this additional security feature if offered.
Mining Bitcoins
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Bitcoin mining is accomplished with very fast computers solving complex equations, not with picks and shovels. It’s how bitcoins are created. Without bitcoin miners, no transactions could be processed, and no confirmations could be given to validate your bitcoins were genuine. And of course no new coins could be brought into circulation, because no rewards would be given.
The bitcoin network is only as strong and secure as the people and companies who are supporting it, either by running a bitcoin node or by dedicating computational power to the mining process, which is what miners do.
You have the option of setting up your own “rig” by buying your own hardware (very expensive) or alternatively using a third-party cloud-mining service such as Genesis Mining, which allows you to mine bitcoin without the hassles of maintaining your own hardware.