2.1 Defining Bitcoin - Video Tutorials & Practice Problems

In this lesson, we gonna dive into Bitcoin. And as you will learn, bitcoin is a very important part of Blockchain. Because without Bitcoin, we would not have Blockchain. So in order to understand that, we need to define what Bitcoin is. Now let's first look at a definition of a Bitcoin. A Bitcoin is an asset of value that can be exchanged securely between two parties over the Internet, without needing a centralized third-party like a bank, credit card, or other organization. This is gonna be very important, because you're gonna understand that prior to Bitcoin, is impossible to transfer an asset of value over the Internet, without using the services of a third-party. Let me explain further what the Big Idea is. If you have two parties, that want to transfer some money over the Internet. So using the World Wide Web, you want to send some money from party A to party B. You need a third-party agent, something like a bank, a credit card, or some sort of service like PayPal. You can't simply just take some money, attach it to an email, and send it to someone else. You have to literally use a bank , and be able to send that money to someone else. Now that bank controls that transaction. You need that third-party, to be able to do that transfer of that asset. In the case of Bitcoin, that transfer is done Peer to Peer. That is you can take a Bitcoin, and send it directly to another party over the Internet, without needing that third-party. The way you do that, is over what is known as the Bitcoin network. Now, this is not a centralized entity. It's actually a network of thousands of computers all over the world. And there's no single centralized entity, that could stop the transfer. It's actually a decentralized network, that you're transferring over. So you can literally send that Bitcoin directly, from Peer to Peer over the Internet. Over the Bitcoin Network. And what enables that to happen is Blockchain Technology. We're talking about further how Blockchain ties into whole equation. But what you really need to understand is that in the case of a Bitcoin, you can do, a Peer to Peer transfer, by sending over the Internet through the Bitcoin Network, and use Blockchain to be able to certify that that transfer took place. As a result, the transaction is disintermediated. That is, you don't need a third-party. There's no intermediation, in that transfer. It's directly Peer to Peer between both parties. The whole transaction is decentralized. That is, there's no centralized entity in the middle that could stop that transfer. For example, a bank could actually, put a stop payment on this, or it could basically, not enable somebody to do that transfer. Now, Furthermore, the whole transaction is what's known as Trustless. You do not need to trust the other party, or you don't even need to trust the network. You don't need to trust a bank to be able to do that. The whole process is built trustless. Because what enables this is actually the Bitcoin Protocol. And the whole protocol is trustless. You don't need to trust the Miners. You don't need to trust the Bitcoin Network. And I mentioned a term Miners, which we will talk more further in this course. But the point is a Bitcoin transaction is trustless. Because you don't need to bring in trust from outside, to make sure that that transfer took place.