Crypto-Currencies explained in 1 minute.
*We begin by giving all the credit to this post to it’s originator and the original article. I still believe that the information is vital to Eliminate the Confusion that surrounds this topic. My thanks goes out to Scott Maxwell for his time and expertise.
But, before the article watch this short video to set the stage:
Crypto-currencies explained in 60 seconds – The Basics of Bitcoin
Posted May 9, 2014 by Scott Maxwell
This entry is part 1 of 8 in the series Crypto-currency Basics. I will post the first 4. After that it gets a little more technical. At that point you can feel free to do your own research. Hopefully this will prime the pump and get the crypto juices flowing.
Crypto-currencies like Bitcoin are often described as complicated and technical. They’re not: the core concept is simple.
If you have 60 seconds to spare read the explanation below and ‘own’ that concept forever.
First of all we start with an analogy. Until just over 100 years ago the people of Yap, a Pacific island, used large stone disks as coins.
Yap Island, Yappians used these stones for large expenses such as dowries. Because the stones were large the islanders didn’t bother moving them about.
They just transferred ownership. People knew who the current owner was because it was public knowledge.
This made it difficult to commit fraud.
You couldn’t spend someone else’s stone, because everyone knew who owned the stone.
You couldn’t spend the same stone twice because everyone would know.
You couldn’t fake the currency, because to do that you’d need to carve a new stone – which anyone could do anyway.
It was a great system. It just didn’t scale up well.
But crypto-currencies, like Bitcoin work in exactly the same way, and do scale up.
Here’s why they’re the same.
Bitcoins don’t move around. They stay fixed on a public ledger, the “block chain”. Anyone can check ownership by checking this ledger.
This makes it difficult to commit fraud:
You can’t spend someone else’s bitcoin, because everyone knows who owns them (from the ledger.)
You can’t spend the same coin twice, because the network keeps the ledger up to date and there’s only one ledger.
If you did try to spend it twice, everyone would know.
You can’t fake the currency, because to create a bitcoin you need to break a difficult math problem. A new problem is set every 10 minutes, and the winner gets a brand new bitcoin as a ‘prize’.
There’s no way to fake the answer – you’re either right or you’re not, so there’s no way to fake a bitcoin.
Openness is at the heart of both the Yap stones and crypto-currencies. Everything is there for anyone to scrutinize, and so anyone can check if a payment comes from the rightful owner.
There’s no need for trust between two people in a transaction, because the system removes the possibility of fraud.
That’s it, that’s the basic core of crypto-currencies explained in 60 seconds.
Of course there’s a great deal more to it. Technology changes rapidly. if you’d like to stay informed I would stay tuned to these upcoming blogs.
If you are so inclined, Maybe even plug into a good group of motivated entrepreneurs on the cutting edge of this explosion.
More questions answered in upcoming blogs so be sure to FOLLOW over in the lower right corner.