English is not my native language so i guess i made some mistakes.
The video is more like "how do i explain bitcoin to my grandma"-style.
I made the exact same video already in german .
Check it out : https://www.youtube.com/watch?v=MMqJkmfk_Jw
Now i'm going to make it in english.
If you find grammatical mistakes , or if i should rephrase some sentences please let me know.
Ok it's really uncomfortable to read the text here on the forum , you can download the .pdf here https://www.zeta-uploader.com/1808376299 .
Here comes the text :
Bitcoin
Bitcoin what is Bitcoin ?
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In this Video i will explain what bitcoin basically is and how to use it without going through the technical details behind it.For those of you who are interested in the technical stuff i recommend this video.
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So , why do i make a video about bitcoin which doesn't explain the technical details ?
Because you dont really need to understand how things work in order to use them.
Here are a few examples of things which are used by nearly everybody but are only understood by a few. :
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Laser Pointer
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Mobil Phone
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GPS
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Combustion engine
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Headache pills and so on .
A lot of people don't even want to waste their time on trying to understand these things.
If you're sick you don't care why the medication works you just want to be healthy agian.
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Before we get to the actual topic i wanna discuss the question if a Bitcoin can be valueable even though it's only digital information and isn't backed by anything either.
In fact bitcoins are only valueable because we assign value to them.
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But that's exactly the same way we do it with paper money , for example the Dollar.Actually a 100 Dollar Bill is only a piece of paper with green ink on it. But because we believe that it has value and other people too , we can buy goods with it.
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Now i here some folks say , yeah but back in the good old days the dollar was backed by gold.Although that is true , even gold is only valueable because we believe in it.
Even if we could find something which would be valueable to everybody at any given time and at any place on earth we would stil have one major issue.We would need a 100% trusted authority which provides a place to keep the coveted good secure which is used to back the money up.
As a sideonote the market price of one millibitocoin is currently 63 cents.
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Bitcoin is basically just a system which allows a decentralised network to maintain a digital ledger which can't be compromised.This digital ledger contains every single transaction that was ever made and is stored on every computer which participates in the Bitcoin Network.
Lets take a closer look.
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Decentralised means that there is no central authority like a bank which takes care of the transactions . The public ledger isn't stored on a central Place but does exist on every comptuer which has a Bitcoin Client on it.
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Lets assume that in the beginning Peter has 5 bitcoins . Where Bitcoins come from in the first place will be covered later. You're now looking at a list of all transactions . Peter sent -> 3 BTC to -> Tyler -> 2BTC -> Maria. Peter transfers 1 Bitcoin to Martin and Maria transfers 1 Bitcoin to Martin.By going through that list your computer can get everyones account balance.
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But because this ledger is public it wouldn't be very smart to use real names because everyone could see how much money you own. This is why Bitcoin doesnt use names or Acoounts but instead Bitcoin Adresses. So it would actually look like this.
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On the left side are the Bitocin Adresses and on the right side the amount of Bitcoin which belongs to the owner of the corresponding address .It is very important to understand that there is no such things as a Bitcoin which is represented by a special order of zeros and ones , there is only the information in the public ledger that this address or person owns a certain amount of bitcoin. If you understand this you are save from a lot of misunderstandings.
Lets take a closer look on the bitcoin addresses.
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To every Bitcoin-address there is a corresponding private key . These are the two components of the address-key pair.
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(Synchronise Audio with Animation )
In order to understand the thing about bitcoin adresses and private keyse i will use an analogy .Everyone owns a mailbox.That someone can send you a letter he needs your address , what in this case would be your bitcoin address. To open the mailbox you need your key which in this case would be your priavte key.You can share your bitcoin address with anyone who needs to send you something , but your priavte key must be kept secret. As soon as someone knows your private key he has access to all your bitcoins .You can have as many mailboxes as you want to and give everyone a different adress so it's easier to keep track of who send you something.
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Right now you are looking at such a adress key pair.On the left side there is the bitcoin address and on the right side the corresponding private key. You can create as much adress key pairs as you want , they are created randomly , and since only a random nuber generator is needed , you don't have to give away any personal data like your email adress or your name. If you want to get an Bitcoin Adress go to bitaddress.org and click on generate new address.
A little side note for security reasons don't use the displayed address because everybody who sees this video knows the private Key for this address and therefore everyone would have the key for this mailbox.
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Some of you might now think , but hey what happens if two people get the same adress by coincidence ? Then we're screwed , but hey no need to worry this case is extremely unlikely.
Imagine two people on earth must pick one grain of sand how likely is it that they both would pick the same grain , pretty unlikely right , now imagine that every grain of sand represented an entire other earth of additional grains how likely is it now that two people would pick the same grain of sand if they are randomly distributed , nearly 0% right , but that two people get the same address is more than a billion times more unlikely.
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Actually the only thing you need for Bitcoin is such a adress-key pair consisting of your Bitcoin
address and your private Key . Actually you just need your private key because you can get your address out of your Private Key
The bitcoin address is needed for receiving Bitcoin and can it be told anyone.
The private key is needed for sending Bitcoins and must be kept in secret.
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So where do Bitcoins come in the first place , how many are there and how much will there ever be ?
The amount and the growth of the Bitcoin supply is predetermined .
The bitcoin project started on the 3. of January. At the beginning the creation rate was roughly 50 bitcoin every 10 Minutes. This is how the creation rate works , the first 4 years every 10 minutes 50 bitcoin , the next 4 years every 10 minutes 25 bitcoin , the next 4 years every 10 minutes 12.5 bitcoin , the next 4 years every 10 minutes 6.25 bitcoin and so on. Because of this , the number of existing bitcoins approaches asymptotically 21 Million but will never truly reach it. Due to this you are save from inflation. We get to feel the inflation every day , things get more expensive and you can buy less with same amount of money.Not with bitcoin.
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As of August 2014 there are over thirteen million bitcoins in circulation.
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So now we know how many bitcoins are being created and how the supply is limited , but now the big question is who get's this new created bitcoin , do the creator of bitcoin get them and are they scamming us all ? No those newly created coin are distributed to the miners.
Miners are Persons who try to solve ongoing mathematical problems which are building on the top of each other , this problems can only be solved with enourmous computing power , this computing power helps to maintain the ledger securely , because in some way alt the past computing power ist in the ledger. The miner who solves the mathematical problem is allowed to send himself 25 Bitcoin out of thin air , as a reward the entire bitcoin network accepts that.These mathematical puzzles are so designed that it takes the entire network on average 10 minutes to solve them. Now you can see the connection between mining and the creation of bitcoin.
Therfore the way money is created is clear and fair.You can also be a miner if you want to , but it's a
a hardcore business today.
Oh , and just to point out the most common misconception about mining , you DO NOT CALCULATE bitcoins , i've read it so many times on the newspaper it's driving me crazy.
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So after explaing the theoritical part we are now getting to the question - Do we even need bitcoin ?
You definitly don't need bitcoin. But actually you need only very few , therfore - Do we even need bitcoin is the wrong question. Do you need a car , no you can walk , do you need a TV or Online Banking ? Actually the only things you need are a place to sleep , water and food.
Therefore the actual question is : What advantages and disadvantages does bitcoin have ?
Let's take a look on it.
Advantages :
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Bitcoin is'nt created out of debt like any other fiat currency.The money supply is ruled by the people and can't be manipulated by banks.There is no possible way that banks or the government can controll or manipulate the bitcoin system.Due to the limitation of the money supply on 21 Million Bitcoin , you are save from inflation.
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The Bitcoin Code is open source.So the source code can be peer reviewed , mistakes can be found easily , and you can be sure that the system works really like it is advertised , and that you aren't being scammed. It also allowed a lot of experts in the field of cryptography to prove that bitcoin better said , the blockchain technology is secure.
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If you do it cleverly , you can be anonymous with bitcoin.
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Donations can be sent directly to people in need without going through corrupt organisations.
Accounts can not be frozen.
The case of wikileaks showed us how important that is.In December 2010 , Paypal , Mastercard , the Bank of America , Visa and a lot more , froze donations to wikileaks.
As a response wikileaks now aksed for donations in bitcoin.
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Everybody can use Bitcoin without revealing any personal data.
A lot of people don't have access to a bank or can't get a bank account especially in africa , so now they can use bitcoin.
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The use of the system is free , Merchants don't have to pay big margins to credit card companys.
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The are no Chargebacks with Bitcoin , once you receive money it's yours the sender can't get it back , unless you send it back to him.
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A bitcoin transaction takes on average 10 minutes not 2 days like a bank transaction . A lot of Restaurant and Bar owner even accept zero
confirmations transactions therefore a bitcoin transaction takes only a few seconds.
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You can access your bitcoins from anywhere in the world.You can store you're Private Keys on an USB Stick , remember them , or print them on paper.You can travel with as much bitcoins as you want you can't get
problems on the airport with the custom.
Now i wanna discuss some arguments which are often used against bitcoin.
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Bitcoin is used to buy drugs. That's true but you can buy drugs with every currency. The number 1 currency for buying drugs is the Dollar. Next time when you're at you local dealer try to pay him with Bitcoin
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If my computer crashes my bitcoins will be gone. That's not really true you only have to backup your wallet , which holds your private keys . You can copy it on an USB Stick , an
external hard drive or just print them out.
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The volatility diqualifes Bitcoin as a currency . The volatility is not beneficial for it's use as a currency , but there a lot of services like for example bitpay which eliminates the exchange rate risk.Another thing you have to keep in mind is that bitcoin is still very young and as time goes by and the marketcap grows the volatility will go down.
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If bitcoin is going to establish as a commonly used currency the economy is going to break down beacuse of it's deflationary character.Nobody would buy anything with bitcoin , because later they would get more goods for the same amount of btc , so everybody keeps
holding their bitcoin.
But look what happens if i apply the same logic on inflation. Nobody want's to sell anything because if they sell it later they would get more money.
That this argument isn't really true can be observated on technical deflation. Even though nearly all electronics are getting cheaper and better you don't wait forever to buy them.
Let's say you wan't a new big Flat TV , if you wait you will get them cheaper , but you can't and won't wait forever.Maybe you will wait one year but in the end you are still buying one.
Furthermore isn't it better when people buy things because they wan't them instead of having
to buy them because there money won't be as valueable in the future as it is right now ?
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If i buy bitcoins now and i want to sell them later but nobody wants to buy my bitcoins I'm screwed.
That's one thing you really don't have to worry about because every exchange has a lot of buy orders which you just have to click on and then you can sell your bitcoins.
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In order to use bitcoin you have to have an internet connection.
That's not even true either , the internet plays a very important part for bitcoin , but you can use bitcoin even without an internet connection. For example you can use caucasius coins. This are physical coins which carry a private key inside which is related to a certain bitcoin address which has a definined amount on bitcoins on it.On the outside of the coin is the bitcoin address. When you pay with physical bitcoins you actually change a private key with a product.
The best thing about Bitcoin is if you don't like it you don't have to use it it's a free system whrere nobody is forced to use it.
I hope now you got an idea what Bitcoin actually is and if you decide to use it , i wish you a lot of fun using the best currency in the world.