Bitcoin is very complex and there is no one
simple way to explain all of it quickly. In this weekly series of blogs we will be
learning about Bitcoin in depth, starting from the most basic aspects of it.
What is Bitcoin?
Answering the seemingly simple question “what
is Bitcoin?” can be harder than it seems.
You will get many different answers
depending on whom you ask.
To start we should probably answer a simpler
question: What can I do with Bitcoin?
There are two main things you can do with Bitcoin: You can own it, as a digitally scarce
resource, and you can do censorship resistant payments across the world without
using third parties.
These are not the only things Bitcoin can
do, but they are the two most common use cases so far.
What problem does having a digitally scarce resource solve?
Having a digitally scarce resource can be
very useful sometimes. A scarce resource can be a useful store of value; a good
example of this is gold.
Gold has some very interesting properties:
it’s shiny, it’s very electrically conductive, it is very malleable, but it is
also very rare.
The last property is what allowed it to be a store of value for
thousands of years.
Similarly the scarcity of Bitcoin allows it
to be a store of value in the digital world. Being a store of value in the
digital world gives it a couple advantages over gold.
Since it is digital, it is nothing other
than information (zeros and ones on a computer), this allows anyone to store
information anywhere and even to encrypt it in a way that they are the only person
that can access the information.
This property allows anyone to own a store
of value and conceal it; it allows citizens to hold a store of value that does
not inflate as their local currency goes through hyperinflation, even in the
scenario where a government tries to seize all assets from its citizens.
What problem does having a censorship resistant payment network solve?
It was not too long ago that everyone used
censorship resistant payments all the time; these censorship resistant payments
were done with cash. Now in the digital age cash is slowly
getting less and less used, and credit card companies and banks process most
This can be a problem because these big
companies are allowed to choose who they think should be allowed to send or
receive payments, and they can censor payments to people or companies they do
not like, or that they disagree with.
Bitcoin not only allows you to make
payments to whoever you want without risk of being censored, it also allows you
to make these payments to any place in the world.
This was a brief explanation of Bitcoin’s use cases; Next week we will explain how Bitcoin achieves these use cases.