Bitcoin for Biginners [Part 1]

So what is Bitcoin? If you look it up today, you get thrown all these words like digital currency, decentralization, blockchain, miners, ledger all of this jargon that makes it seem way too complicated to ever think about or get involved with Bitcoin, and that is just wrong! This technology is really cool and something that we should all at least understand or get engaged in so we know what's going on. Today and over the course of a couple videos, we're going to go through it all. So stick around and let's get into it! 

Welcome back to the channel guys. I'm Brian Logan and I am so thankful that you are here. This is such an important topic and not only because everybody is talking about it and it seems to be a new thing, but also because Bitcoin is bringing brand new technology into our world and it's something that's going to be around for quite a while, and really could change the landscape of how we interact with each other and the businesses that we like. 

 

So my plan to cover Bitcoin involves this video as well as a video series, just because there is so much content to talk about. Today we're really going to be focusing on why Bitcoin was created, as well as what it is at a high level, and we're going to take one step deeper into how it operates. Some future topics include how does Bitcoin have value, and how do I get value from Bitcoin? And I'd also love for you to comment right now about what questions you have for Bitcoin so that I can be sure to include those in future videos. 

 

The last thing I'll say before diving into this is I'm really excited to be talking about this. I've gotten so many questions from friends and families about what is Bitcoin? How do I get involved? This is the perfect time to be talking about it and having this discussion. 

 

Also, if you're here just to learn a little bit more about Bitcoin and you're already involved, or Are you ready to jump in right now? There's a link below so you can get $10 worth of Bitcoin. When you start with Coinbase, I've also created some videos on Coinbase and Coinbase Pro that I'll link above, so be sure to check those out if you're ready to jump in.

Alright with that, sit back, relax and let's learn all about Bitcoin. So what is Bitcoin? Fundamentally, it's a way to transact between two different entities. 

 

But before we get into more details about it, let's step back in history a little bit. As we think about transactions, it used to be way back when - I'll trade you this fish for that piece of wood. Then we created money because that just made a whole lot more sense. But now phones are more prevalent than cash in our pocket and the Internet is everywhere. Cash is becoming less and less prevalent in our society. In fact, a study was done back in 2019 by the Federal Reserve that showed that just 26% of transactions are done in cash. And that's a 4% drop or almost 9 billion transactions less than the year before. So in this digital world, it is more important now than ever to have an easy way to transact between people all over the globe. 

 

And why you think there are some services that exist like PayPal and Venmo and Banks - there's a lot of things with these services that aren't the best. There's a lot of regulation and a lot of personal information that's shared between you and the person that you're transacting with. And at the end of the day, you don't have control of that money, it's PayPal, these companies and banks that are doing this service and taking all of your information and your money and verifying it and making it all happen. It's exactly this control that leads Satoshi Nakamoto in 2008 to create Bitcoin. 

 

Now this was right at the time of the financial crisis, and for those of you who are too young to remember or weren't around, this is when banks essentially took our hard earned money and made risky investments that caused them to end up failing, the stock market crashing, people losing jobs, and their retirements. It was horrible and this is when the distrust of banks in their financial system became more prevalent than ever. 

 

So Satoshi Nakamoto, who is actually an unknown person, it could be a person or an entity of people created this idea of Bitcoin. Now, while there are problems with banks, as my father in law used to say, there are pros and cons to everything. Banks are good in that they provide us the ability to have mortgages and buy homes and for small businesses to get started and finance their dreams. But there's also a lot of problems too, and those problems are what Bitcoin was created to help solve. So now that we know why Bitcoin was created, we're going to start jumping into what it actually is.

Fundamentally it's just a way to transact with another person or business, just as you would a dollar or a euro. 

 

It's another currency that allows this transaction to happen, and just like dollars and euros, it can be exchanged so you can exchange bitcoins for dollars or euros or any other currency that there is. 

 

Let's jump into example. Let's say there's a person named Katie and she wants to send some money to this guy named Brian, and he could be anywhere in the world, and you doesn't have to necessarily share all of her information with companies or banks, or have to pay exorbitant fees or wait for things to be verified. So she chooses to use Bitcoin instead. The first thing she needs to do is exchange her money for Bitcoin? Then she sends that Bitcoin to Brian and this can happen anywhere that there's Internet and it doesn't require a bank, a government, PayPal, or any personal information to be shared between Brian or Katie. 

 

Once Brian receives the Bitcoin, he can either use that Bitcoin directly at a store that accepts Bitcoin, or he could exchange that Bitcoin for dollars or euros or wherever he is, and then use that to buy things at a store. So that's it really. At a high level, it's fairly simple and straightforward, and again, the reason we want to do this is to have full control over your money to have it verified without sending personal information for it to be almost instantaneous and to be extremely safe. 

 

Now that we know what Bitcoin and how it kind of works at a very high service level, let's take one step deeper to really dive into a little bit more about what's happening with the Bitcoin. So we're going to use Katie and Brian again. And the first thing Katie has to do is exchange that money. So let's say she wants to take $1800 and exchange it for Bitcoin. Right now the current rate for Bitcoin that translates to about .05 Bitcoin and she does this on a Bitcoin exchange. There's tons of these out there. 

One of the biggest ones is Coinbase, and actually there's a link below if you're ready to like jump in right now 'cause you can get a free $10. I've also created a bunch of videos on Coinbase on how to get started, how to use the platform, how to save a bunch of money. So go check those out now. 

 

So these exchanges you put up the cash and you get Bitcoin in return. Now getting Bitcoin is an interesting concept because there's no actual physical currency, so what's happening? Bitcoin is actually just a very transparent record or Ledger of all transactions that are happening and have currently happened in the past. 

 

So when Katie exchanges her money for this Bitcoin she gets added to this Ledger or blockchain that says hey, Katie now has .05 Bitcoin and the record will always show until Katie makes another transaction that Katie received. This .05 Bitcoin no matter what and the cool thing is unlike a bank account or PayPal account, everyone who uses Bitcoin can see all of these different transactions and know that Katie has this .05 bit. 

 

Now, this might sound a little crazy, especially because before I said banks and PayPal use all this personal information and wait, now we're sharing our all this information with everybody knows every previous transaction. Well, while I show here the actual names and values on this blockchain below, which again is just a record of all transactions in reality Bitcoin uses pseudonyms to keep track of this. A very secure name that can be used to verify every transaction that that pseudonym has ever made. But it can never be tide back to Katie. And unless Katie wants it to be known now, there's a significant amount of math and theory and computation that ensures that this security remains valid and in place. But for now at service level, just believe that it works because it does so back to the transaction. 

 

Now Katie has .05 Bitcoin and she wants to send .03 Bitcoin to Brian. Now the first thing that might seem a little odd is you're probably not used to seeing currency being traded in less than one 100th of a dollar or euro, right? .01 or a penny. The cool thing about Bitcoin is it's actually divisible all the way up to the 100 millionth of a decimal. So no matter what the future value of Bitcoin is, it can be almost infinitely divided to buy any sort of good or service that would exist. 

 

So now to make this transaction happen, Katie has to set up the transaction and this is really easy. There's a lot of simple apps out there that allow you to do this. 

 

All she has to do is just choose who she wants to transact with, how much she wants to send, and then sign the transaction just as you would sign a check or verify that - Hey, I'm doing this transaction with another person. Very simple, very user friendly. 

 

Now what's happening on the back end? Once Katie hits send this transaction needs to be verified. And instead of Brian having to go through himself, all these previous transactions to ensure that Katie has the money that she intends to send to him, there's a group of people or these computers on this network that does this for him. 

 

You might have heard the term miners and that's the purpose of minors. They essentially all have this exact same record of transactions, and each one of them combs through it all and verifies that -Yep, Katie has those .05 Bitcoin and Yep, it makes sense that she can send those to Brian. We're going to go ahead and verify it and that verification happens on thousands of computers all over the world, 'cause everybody has the exact same record of transactions so they can verify that this transaction is true. There's a lot more math and theory going on here in this verification process. But that is for a much later video, and again, you really don't need to know what's happening in the background to use this service, but for the purposes of using Bitcoin, I feel like it's helpful to know what's going on in the background once the miners or the network verifies their transaction.

 

They also update the Ledger or blockchain to show that Brian has now .03 more Bitcoin than he did. Before and Katie has .003 Bitcoin less than she had before, so that any future transaction that they partake in, they now have an updated value, and fundamentally, that's it. The transactions over now and Brian is free to use his Bitcoin to go to the store or go to Starbucks or Home Depot or Whole Foods. Places that currently accept Bitcoin, or he can exchange his Bitcoin for whatever currency that he's using to make purchases. 

 

Now before we finish this, I want to share some really exciting news. So a lot of these exchange services are actually launching debit and credit cards for cryptocurrency, and what this is going to allow to do is just lower that barrier to entry.

So instead of having to exchange directly in Bitcoin, you can now either one get a debit card, which basically means you have a prepaid account with your cryptocurrency on it. When you swipe that debit card somewhere, Visa or MasterCard is going to automatically exchange those bitcoins for cash and pay that merchant. Or if you have the credit card, you can swipe that credit card just like any other visa or MasterCard and then you can pay your bill in a crypto currency.

If you're interested in learning more about these credit cards and debit cards and how that's going to work, comment below that you're interested in and I'll add it to the video series. Also if you have any other questions or if I didn't cover anything specifically in this video, comment down below so I can add it to my segments of videos on Bitcoin. Next up in this series, we're going to be talking about value. 

 

So how does Bitcoin get its value? How is it worth this? How do I get value from it aside from using it, can I invest in it? All of these questions are going to be answered in the next video, so be sure to subscribe now so you don't miss that.

That's it for this video, I hope it was helpful and you learned something new about why Bitcoin was created a little bit more about what that transaction looked like and what Bitcoin really is. If you did give a thumbs up now and be sure to subscribe below so you don't miss the other videos in this series. I

'm Brian Logan. Remember to stay healthy, love your family and elevate your wealth.