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I am writing an article on Bitcoin for our high school paper. What points do you think are important to include?

I'm writing this article for a high school paper, so please put it into those terms.

  • You might want to take a look at this: bitcoin.stackexchange.com/q/336/5406 – Murch Dec 22 '13 at 18:30
  • Is this for college, high school, etc? – user5107 Dec 23 '13 at 20:47
  • @Gracchus It's for high school – okarin Dec 23 '13 at 20:48
  • Aw man, I'm sorry you got dogpiled! I think when you said "school publication", everyone thought "college" and pounced. Give me a minute, and I'll give you an answer you can work with. – user5107 Dec 23 '13 at 20:51
  • Is this a school publication as in "an article for the school newspaper" or is this homework? – Murch Dec 23 '13 at 23:26
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(NOTE: This answer is meant to be understood at a high school level)

Bitcoin is the first and currently most popular cryptocurrency created by the mysterious Satoshi Nakamoto.

It was designed to allow users to securely and anonymously transmit wealth to each other in a way where no single entity has control.

It is secure because it uses the nearly the same technology that has been used for decades to transmit information securely across the web. It does this somewhat anonymously because nothing about a user is recorded. It is "decentralized" (no one person or group of persons) has control because every transaction is verified by "hashing" it in a very difficult and original way yet can be hashed by anyone. The transactions are hashed into something called the "blockchain" which is essentially a collection of rule-abiding transactions so that a record of all transactions alllll the way back to the very first transaction is available for all to see.

Yes, but what exactly is it?

It's basically a program that everyone uses, originally created by Satoshi Nakamoto. If someone tries to use a different program or change the original code beyond certain parameters, called the "protocol", all other programs will reject anything that the different program will try to do.

Security

Transactions are secure because a user gets a private key/public key pair generated by a program. They have to be generated in such a way so that for every private key there is almost certainly only one public key, so a user can choose a random private key, and an acceptable program will generate a corresponding public key.

Once a user has this pair, they can "sign" a transaction with the private key that the user keeps only to oneself, but anyone can view the true data when using the corresponding public key.

The "private key" is more like a "private lock". A user can create a transaction and lock it with the "private lock" that only the user has while anyone can unlock it with the public key.

The public key is actually the address that all users use to receive coins. So, if I want to send you money, you give me your public key while keeping your private key to yourself, and I sign a transaction that says "give X bitcoins to okarin's public key" and append my public key to the transaction so everyone can use it to decrypt my message which could only have been sent from me (or someone who stole my private key) because I used my private key to encrypt the transaction.

Anonymity

As long as no one knows who owns a public key, that user is anonymous. Bitcoin records no other information.

No one controls it

This is mostly true. Remember, this is all based upon a single program, and someone actually does control the source code to that program. Whenever it's changed, most people adopt the change, but if they don't, one legitimate transaction record can turn into two: one for the people using the old code and one for the people using the new code.

Aside from that, the program itself is decentralized yet unified because after a transaction is sent out, it is verified by someone else on the network.

This has to be done because if, going back to the example above where I've sent you money, only some people see our transaction but others don't, I could send the exact same money that I sent you a second time to someone else who doesn't know about our transaction.

To prevent that problem, all transactions are included into a single record, the blockchain. And the longest rule-abiding blockchain is recognized to be the legitimate one.

A single person or group of persons is prevented from having control over the blockchain because a "block" of transactions are hashed. This requires a computer to do a calculation that costs resources such as a computer strong enough to do this quickly. Since there are many people trying to do this because they get paid in new bitcoins to do so, it's really hard for a single person or group of persons to do all of the hashing themselves.

Not only are the new transactions hashed, but all of the old ones are too. This turns into a very large transaction record constantly reverified and rehashed, called the blockchain. Transactions are verified in batches called "blocks".

Where do bitcoins come from

Remember, they essentially come from the program, but new ones are rewarded to those verifying transactions as payment for doing a good job. If someone tries to cheat, no one will give them new bitcoins.

New bitcoins are created according to the rules in the protocol. And since the protocol says that everyone should award the first to verify transactions properly, users who use the right program do.

If a user uses the right program, this is all done more or less automatically, so a user can simply get coins from someone and send them to someone without having to worry about all of this complexity.

Good luck on your article and feel free to plagiarize this (but only you, okarin)!


If there's anything you still don't understand, send me a comment, and I'll try to help.

If you want the technical outline of what bitcoin is, you can read the original Satoshi Nakamoto paper.


Yes, I know there are a ton of ifs ands or buts, powerusers, but I was trying to outline the basics. Feel free to edit this as necessary into layman's terms.

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If I had to write an article on Bitcoin, these would be the points I would include:

What is Bitcoin?

Bitcoin essentially is a giant public ledger of addresses and their balances. Users can send money to other users by ordering the network to take some of their balance and assign it to a recipient's address instead. The database is stored on many different computers all over the world and is kept synchronized by packing updates into blocks of transactions transmitted over the network approximately every ten minutes. This also ensures that money can only be spent once.

What's new about that?

  1. Much like giving cash to another person payments are directly from one address to another without intermediaries. This makes it a much more private payment method than wire or credit card payments.

  2. Unlike current banking systems Bitcoin is of global scope so that one can send money around the planet with the same effort as paying a person standing next to him. This could be huge for remittances sent back home by itinerant laborers and for international business deals. Today, banking makes it unreasonably hard to move money across borders: It is expensive, unreliable, and fees are often unpredictable.

  3. Bitcoin uses cryptography to separate your secret that allows you to spend your money (your private key) from an order to spend your money (signed transaction). This is an improvement over credit card payments, where you reveal your name, credit card number and security code in order to make a payment. This means that it prevents many kinds of identity theft and fraud that are possible due to credit card payments.

  4. Nobody can stop you from using it. The Bitcoin network is not centrally organized, so there is nobody that asks you for a credit check to open an account. Anyone, anywhere, anytime with Internet access can start using it. This is unlike payment services such as Pay-Pal which have a history of blocking user accounts for questionable reasons.

  5. The Bitcoin network pays for itself. The Bitcoin protocol follows a schedule that gives out rewards to users that contribute computing power to the network. The computing power is used to validate transactions and to secure the network from hostile take-overs. This doubles as the mechanism to dispense new bitcoins.

What implications does that have?

Bitcoin could be huge for internet commerce, because it is less traceable, less risky and cheaper than Credit Cards or Pay-Pal. It could be very beneficial for people that regularly have to send money abroad, because it is much faster, cheaper and more reliable than international wire-transfers. It is great for brick-and-mortar shops, because it is cash-less, but much faster and cheaper than Credit Card payments.

Why don't we have it today?

Bitcoin is still an emerging technology, an experiment. There are some issues that remain unsolved such as its price swings and some technological issues with the scalability to cater to a much higher number of transactions. There are ongoing efforts to resolve the technological obstacles, and hopefully, the volatility will decrease with adoption.

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