Bitcoin, explained by someone who knows nothing about Bitcoin

Of all the miracles of the modern age, none of them are nearly as esoteric to the layman as the over-glorified, and perhaps overhyped, bitcoin. But what is it exactly?

Simply put, Bitcoin is a cryptocurrency: a decentralized, digital currency that connects buyers and sellers through encryption keys. There’s no authority that controls it, no government to regulate it, Bitcoin is a strictly unregulated currency with no means of regulation. And to top it off, Bitcoin is a completely digital currency that requires computers to “mine” it.

“Mining” is just jargon for the discovery of new bitcoins, but mining for bitcoins is not anything like mining for gold. In reality, it’s simply finding the correct verification of bitcoin transactions.

Bitcoins are mined by advanced math and record-keeping. Using specialized software and immensely powerful computers, miners convert recorded transactions called “blocks” into code then inscribe these transactions in a digital ledger. Collectively, these blocks are known as the “blockchain”: an openly accessible record of all the bitcoin transactions that have ever been made.

When a new bitcoin is mined, it’s placed at the end of the blockchain, which is then publicly updated and propagated. Thousands of computers are competing to mine these bitcoins, so publicising their discovery is crucial.

In addition, because there is a set amount of Bitcoins in circulation, the value of a Bitcoin is determined by what people will pay for it. In this way, there’s a similarity to how stocks are priced.

Without a proper authority controlling supply, bitcoin’s value is completely open to interpretation. This process lies at the root of bitcoin’s notorious price volatility.

In 2017, the value of Bitcoin went from around $800 to around $19,000, and now bounces around $14,000. It is clear, that Bitcoin is an immensely lucrative cryptocurrency, but an immensely risky financial venture.