Explain clearly to new investors what Bitcoin is

If you still can’t figure out what Bitcoin actually is ……
Imagine we are sitting on a park bench on a sunny afternoon.
I’m holding an apple in my hand and I hand it to you.
Now, you have the apple and I don’t have a single one left in my hand.
It’s simple, isn’t it?
Let’s take a closer look at what happened: my apple was literally handed over to you.
We’re both aware that this happened. I was there, you were there, and you took the apple in your own hands.

We didn’t need a third party to do it, and we didn’t need to have Uncle Tommy, the famous judge, sitting on the sidelines to make sure that the apple actually made it from me to you.
This apple is now yours! I can’t give you another apple, because I don’t have one anymore. I have no control over this apple, it’s completely out of my hands. Now you have absolute control over this apple. You can give it to a friend if you want, and then your friend can give it to other friends, and so on.
It’s a simple face-to-face exchange. It doesn’t really matter if I give you a banana, a book, a coin, or a dollar bill, the process is much the same.

Return to Apple

Now suppose I have a digital apple. Here, I’ll transfer this digital apple to you.

Things are starting to get interesting.

How can you be sure that this digital apple that was mine is now yours and yours alone? Might as well mull it over.

It’s not quite as simple as it was earlier, is it? How can you know that I didn’t first send this digital apple as an e-mail attachment to Uncle Tommy? Or send it to your friend Joe? Or even to my friend Lisa?

Maybe I made several copies of the exact same digital apple on my computer, or even uploaded it to the Internet where millions of people downloaded it.

That’s the problem with digital exchange; sending a digital apple isn’t as straightforward and reliable as sending a physical one.

Some clever computer scientists have actually given this problem a name: the double – spending problem. But don’t worry about the terminology, all you need to know is that it’s a problem they’ve had for a long time, and they’ve never found a solution that really works.

Let’s try to figure out for ourselves if there is a solution.

Ledger

We can record these digital apples in a ledger. A ledger is a book that is used to keep track of all the transactions, just like an accounting book.

Since this ledger is digital, it would have to exist in an exclusive digital world, and someone would have to be responsible for managing it.

Like World of Warcraft, for example. Blizzard, the developer of the online game, has a “digital ledger” that keeps track of all the rare flaming swords in the system. So it seems like someone like Blizzard would be able to keep track of these digital apples for us. Great – problem solved!

Problem.

There’s still something of a snag here, though.

What if someone at Blizzard wants to sneak in a few more digital apples? He could totally add a few digital apples to his account at any time!

That’s a very different scenario than the one we were trading on the bench earlier. Back then it was just you and me. And trading through Blizzard would be like calling Uncle Tommy from the courthouse to participate in our bench trading every time.

So how do I get my digital apples straight to you like I used to – you know, in the usual simple, straightforward way? Is there any way to recreate as much of our “just you and me” approach in the digital world as possible?

It sounds like …… is pretty hard.

Solution.

What if we gave this ledger …… to everyone? Instead of having it stored only on Blizzard’s servers, it would be stored on everyone’s computer. All digital apple transactions that ever happened would be recorded in this ledger.

That way, no one can cheat. There’s no way for me to send you digital apples that I don’t have, because then my records wouldn’t match the records of everyone else in the system.

It’s a very difficult system to tamper with, especially once it gets big enough.

Also, the system isn’t controlled by any one person, so I can rest assured that no one can just add digital apples to themselves. The rules of the system are set at the beginning, the code and the rules are open source and can be viewed by anyone, and smart people can participate together to maintain it, protect it, improve it, and audit it.

You can also join the network and participate in updating the ledger to make sure every entry is accurate. In return, you might be rewarded with, say, 25 digital apples. In fact, this is the only way to generate more digital apples in the system.

I actually made quite a few simplified descriptions

The system described earlier at …… is indeed real. It’s called the Bitcoin protocol. And those digital apples are the “bitcoins” in this system. Isn’t that amazing?

So, did you find out what this public ledger implements?

1, Remember? It’s open source. The system has defined the total number of apples (a.k.a. bitcoins) in the public ledger at the very beginning. I can know exactly how many bitcoins exist. In this system, I know they are limited (i.e. scarce).
2, When I make an exchange, I can now be sure that the digital apple has indeed been transferred out of my account and is fully yours. There used to be no way for me to be so certain about digital items. And now, it’s all recorded and verified by the public ledger.
3, Because it’s a public ledger, I no longer need Uncle Tommy (a third party) to help me verify that I haven’t cheated, secretly copied more than a few apples, or sent the same apple to two or three people ……
In this system, the exchange of digital apples is now as real and reliable as the exchange of physical apples. It’s as if you witnessed an apple slip out of my hand and fall into your pocket.

And just like that transaction we made on the bench, this exchange involves just the two of us – you and me. We don’t need Uncle Tommy to be present to validate this exchange.

I can even have other digital content “piggyback” on these digital apples! After all, it is digital. Maybe I could attach a text – a digital note. Or I could attach something more important, like a contract, a stock certificate, or an ID card. ……

So that’s really great! How should we think about or evaluate these “digital apples”? Are they very useful?

Well, a lot of people are arguing about that right now. Different schools of economics are arguing, politicians are arguing, programmers are arguing.

But you don’t have to listen to them all. Some of them are really smart, some of them are misinformed.

Some say the system is worth a lot, others say it’s worthless. Some even give a specific number: $1,300 per apple.

Some say it’s “digital gold”, others say it’s a currency; still others say it’s nothing more than an “electronic tulip”.

Some think it will change the world, while others think it’s just a flash in the pan.