Gday all,
I've been learning and lurking for a while, now I've put together a simple explanation for bitcoin - suitable for a layman, not an engineer.
What do readers think of my explanation ?
Bitcoin is like a world-wide online bank owned by no-one, with
records visible to everyone.
The records (called the
blockchain) is securely spread over many computers.
The blockchain openly shows the
quantity of bitcoins at every bitcoin address.
A
bitcoin address is a bit like a public online bank account number, and somewhat like an email address too :
- It's like an account number because it has an amount of bitcoin recorded in it.
- It's like an email address because anyone can send bitcoins to it.
Bitcoin addresses are
essentially anonymous, but buying into the system usually leaves a trail somewhere.
Bitcoins are created (called mining) at the rate of
25 every new block -
about every 10 minutes.
Creation will gradually halve and then stop at 21 million bitcoins.The newly created bitcoins are the
reward to the miner for doing the hard processing needed to create each new block.
A block is a collection of bitcoin transactions that are verified, then
added to the blockchain.
A transaction - i.e.
sending bitcoins from one address to another - is quick and easy (typically 10 minutes or so), and very cheap (not quite free.)
Bitcoin transactions are safe and secure and there is also no chargeback - it is protected by the proven mathematics of encryption and hash functions. Of course there are still various risks in buying and using them.
Spending bitcoins from an address requires the owner's
private key for that address (like your secret password for an online account.)
A wallet is used to
store all your private keys - which represent ownership of addresses (which contain bitcoins.)
Your wallet must be kept safe and secure, and can be stored on a web-site, on your PC, on a USB stick, or even printed on paper.You can
buy bitcoins online using your bank account (leaving a trail), or with a
cash deposit if you want more anonymity.
You can use
bitcoins to buy goods and services, more and more every day.
There is
no middle-man to charge fees (
but there IS a small transaction fee, typically 5 US cents), or required to provide trust.
I.e. - it's a
revolutionary new form of money that is not controlled by the banks, or anyone else.
If you are curious, you can observe the blockchain and transactions happening in real-time here :
https://blockchain.info/On top are the latest blocks, bottom left are transactions pouring in. Click on addresses, blocks, transactions, miners etc. to see the details.
(later changes in brown, thanks 7788bitcoin and Raimonn and Kprawn and franky1 and others )Kapyong
