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A Super Basic Guide To How The HECK Bitcoin Works

OK, so Bitcoin has been back in the news lately.

I mean, get this: the value of a Bitcoin has gone from less than a cent in 2010… to almost $13,000 in 2017.

Meaning, if you bought $10 worth of Bitcoin in 2010, it’d be worth around $5.2 million today.


In our everyday lives, it’s cropping up in all kinds of places.

A bloke selling his family home in Melbourne is willing to accept Bitcoin as payment, in what could be the first cryptocurrency property transaction in Australia. 

But a stack of places now accept Bitcoin, including Subway stores. Yep, you can pay for your 12-inch meatball sub and three cookies (don’t judge me) with cryptocurrency.

But, TBH, it can be an odd concept to get your head around.

So, here’s how to explain it like you know what you’re talking about.

Say you have an apple. Like an actual apple.

You give that apple to your friend.

They now have the apple and you don’t.

    Two things: the exchange was real, tangible. You also didn’t need a third person to help make the transfer.

    The apple now belongs to the person you gave it to. You can’t control it anymore. Your friend can keep it or give it to their friend. And so on.

    Now let’s say that apple was digital.

    How do you know that that digital apple that used to be yours, is now friend’s, and belongs only to your friend?

    Like how does your friend know that you hadn’t sent it as an attachment to a few other people before they got it? Or that I made a ton of copies of it or made it available to download?

    This is where our brains generally start to explode.

    In the real world, money can be tracked.

    In the digital world, so can Bitcoin.

    In the real world, you might track money in a ledger.

    Bitcoin also has a ledger. A digital one.

    But as Nik Custodio reported on Medium, there’s a problem with that.

    What if some guy over at Bitcoin just created more? Adding a couple of digital apples to his balance whenever he wanted?

    The solution, he reported, was the concept of "what if we gave this ledger – to everyone?"

    So, all transactions that have ever happened, all the digital apples will be recorded in it.

    You couldn’t cheat it or send digital apples you don’t have because it wouldn’t sync-up with everyone else in the system as the rules of the system were already defined at the beginning.

    The public ledger lets users of Bitcoin:

    - Know the exact amount of cryptocurrency that exists… “The total number of apples was defined in the public ledger at the beginning. Within the system, I know they are limited,” Custodio said.

    - Not need a third party because the ledger is public.

    “Within the system, the exchange of a digital apple is now just like the exchange of a physical one,” Custodio said.

     “…the exchange involved two people only. You and me — we didn’t need a third party there to make it valid.”


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