Bitcoin For Dummies. Prypto

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       In this part …

      Chapter 1

      Introducing Bitcoin

       In This Chapter

      So, bitcoin … you know it’s a new form of money – a digital currency, to be exact – but just how does it work? Sit yourself down comfortably, and we will begin with the basics, the three major aspects of bitcoin:

      Exploring each of these aspects will help you understand bitcoin (or BTC, as it’s sometimes known) and find out whether and how it can help you. Don’t worry – we will stay top-level for now. Later chapters dig deeper.

      Ready? Let’s go.

      The most important aspect of bitcoin may be the concept behind it. Bitcoin was created by developer Satoshi Nakamoto. Rather than trying to design a completely new payment method to overthrow the way we all pay for things online, Satoshi saw certain problems with existing payment systems and wanted to address them.

      The concept of bitcoin is rather simple to explain: During the financial crisis of 2008, people from all over the world felt its debilitating economic effects. And at the time of this writing (early 2016), many are still feeling the effects in terms of the dwindling value of their fiat currency (the currency approved by a country’s government). As the global financial system teetered on the brink of collapse, many central banks engaged in quantitative easing – or in simple terms, turned on the printing presses. Central banks flooded the markets with liquidity and slashed interest rates to near zero in order to prevent a repeat of the Great Depression of the 1930s. The effect of this was large-scale fluctuations in fiat currencies and what has since been termed currency wars – a race to competitively devalue so that an economy can become more viable simply by its goods and services being cheaper than those of its neighbors and global competitors. The response of central banks around the world was the same as it always has been when these things happen: Governments had to bail out affected banks and they printed extra money, which further devalued the existing money supply.

      In bailing out the banks, there was a net transfer of debt to the public purse, thus adding to future taxpayer liabilities. This created a sense of social injustice among some quarters. Aside from that, no one really knows what the long-term effects of quantitative easing will be. Perhaps inflation at some point in the future and a further devaluation of those fiat currencies who engaged in the schemes? What seemed clear is that central bankers, supposedly acting independent of governments, were taking many economies into the unknown and were prepared to devalue their fiat currencies at will just to keep the wheels turning. In doing so, they bailed out the very same institutions and bankers whose reckless behavior had brought about this crisis in the first place. The only other option would have been to let the whole system collapse and be purged, as for instance happened in Iceland. That country defaulted on its debt and endured great economic turmoil in the aftermath of that event.

      Therein lies the genesis of bitcoin: a decentralized financial system taken out of the hands of a few elite global decision-makers.

      Satoshi Nakamoto decided it was time for a new monetary system, one so different from the current financial infrastructure that you could even call it a disruptive force. Whether or not bitcoin was ever intended to completely replace the financial infrastructure remains unclear, but we do know that multiple banks are looking at the technology that powers bitcoin, because they see its potential and want to adopt this technological power for their own use. They are free to do so, of course, as the core bitcoin technology – known as a blockchain (much more on that in Chapter 7) – was open source from day one for everyone to see. Creating bitcoin as open source meant that anyone was allowed to come up with their own improvements and build platforms on top of it.

      Viewed from this angle, bitcoin could СКАЧАТЬ