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I know that last episode may not be so beginner friendly but bear with me it’s a lot easier and once it clicks it clicks! I’m going to go through some questions that someone may have who is completely foreign to bitcoin or cryptocurrency… Basically what my mother asked me!

Why should I trust Bitcoin?

Like i just said, this is a common question that is throw about. So the question that I ask in return is “Why should you trust a bank?”.

Well, the bank is insured for one, and that I can not argue with, most banks are insured. But, that is if something was to happen to that bank. Imagine that everyone wanted to withdraw their money out of the bank, for example, we had another pandemic and everyone was worried about their money. What would they do? They would want to keep it themselves. This is where the bank would fall short. The majority of banks partake in something that is called fractional-reserve banking.

Now fractional-reserve banking is a is a system of banking where the banks lend out your money in the form of loans, but they have to keep a portion for liquidity (liquidity just means how easily an asset can be exchanged for cash, for example a stock is more liquid than a house).

So you deposit £100 into the bank, that bank takes your money no problem at all. They then update your account balance to reflect the added money. They then take 90% of what you deposited (£90) for example, and keep the remaining 10% (£10) as liquid cash. They then give that £90 out as a loan. That loan is then spent and eventually it arrives in another bank account, that bank will take 90% of that new money (£81) lend that out and keep 10% as liquid cash (£9).

So in this example, the £100 that you’ve deposited, the banks have turned that into a £90 loan and an £81 loan, which means there has been £271 added to the system in two quick steps just from your £100 deposit.

In this example if 90% keeps getting lent out, after 100 loans your initial £100 deposit would have injected £999.97 into the system.

Because the banks only have to keep, for example, 10% of the money they have, if everyone wanted to withdraw their cash at once, they physically wouldn't be able to, because the money is not there.

I would rather hold my worth in an asses which can’t be manipulated an I am in full control of where it goes. By giving your hard earned cash to the bank, you are effectively giving up you sovereignty of your time. If the banks don’t want you to spend your money on something, they can. If the banks don’t want you to withdraw your money, they can. And what do you get in return a measly 1% interest rate if you’re lucky.

Bitcoin is code, it is math. You can’t change it! You can trust it!

Can’t people just make more bitcoin?

No! People can’t make more bitcoin. The only way more bitcoin is added to the system is through whats called mining which I spoke about in the last episode here.

For there is a fixed supply of bitcoin embedded in the code, that code says there will only ever be approximately 21,000,000 bitcoin in existence. Now if you are like me and thought that isn’t an awful lot, then yes you’d be right. That basically means that there isn’t ever going to be enough bitcoin for each millionaire in the world to even have one full bitcoin!

This is where the beauty of the code comes in. Each bitcoin is currently divisible up to 100,000,000 pieces, and those are called Satoshis (Sats for short), after the pseudonymous creator Satoshi Nakamoto. Similar to a dollar is divisible by 100 pennies, but this is where bitcoin has an edge over normal fiat money. If bitcoin needed to be divided further, for example so that one bitcoin was made up of 500,000,000 sats, then the code can be implemented with ease, as long as there was a majority vote by the miners and nodes.

Isn’t this the same as the government printing money? No. Time for another analogy, think of a pizza, that pizza resembles 1 bitcoin, now you cut that into 4 slices, those are sats, if you wanted to you can divide it further by cutting the pizza into eight slices. There is the same amount of pizza, but there are more slices. Thats what you can do with bitcoin. You can keep making smaller and smaller segments if needed.

Can I get bitcoin without a computer?

Short answer is no, the Bitcoin protocol is conducted over the internet. But, after your initial wallet set up, you could send and receive bitcoin without using a computer per se.

When you have your bitcoin wallet all set up, you can go as far as printing out a QR code of your wallet address. Now this wallet is basically like a safe, and your address allows things to be put into this safe, but not taken out. Now you have your QR code, you can go up to a bitcoin ATM and put in your fiat currency. Fiat currency is a currency which is your normal day to day currency of your nation. GBP, USD, EUR etc.

Now that the ATM has taken your fiat money it will ask you to present your QR code, which is when you hold it up to the scanner and you’re done!

This isn’t only limited to your own bitcoin address though, you can do this with anyones address. I have a cousin in Australia and I currently like in the UK. If my cousin in Australia wanted me to send them bitcoin and I didn’t have a bitcoin wallet, like my mother, they could send a QR code through of their bitcoin address, my mother can then do the same process and deposit fiat money into the bitcoin ATM but hold up my cousins QR code and the money will be transferred to them! Now that’s my little tangent of bitcoin ATMs over.

Can I use bitcoin in shops?

Yes! Bit, also no. You can use bitcoin directly in places that are set up to take bitcoin transactions via a service such as BTCPay Server or equivalent. But it is a no in shops such as Tesco, which currently only support fiat transactions, and not bitcoin directly… Yet!

But there is a work around if you were hell bent on spending your bitcoin. If you had something such as the Crypto.com Visa card, you can use that card, as a normal card, in shops which only take fiat money, but instead you will use your bitcoin assets which are on your account tied to card. I assume Crypto.com get debited in fiat and then debit you the equivalent from your account using your bitcoin.