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What is bitcoin – and should you care?

By November 5, 2021No Comments

Have you ever played the free online video game called Fornite?

No?

Me neither. But my sons have for hours on end, along with 350 million other registered players. According to documents released by its maker Epic Games, Fortnite generated over $5 Billion in profit in 2018. (1)

At this point, you may be scratching your head. How does a free game generate $5 Billion in profit in one year?

It’s because downloading and playing the game is free but players can purchase digital assets, sometimes called ‘skins.’ A skin is a graphic or audio download which changes the appearance of characters in video games. They’re purely aesthetic – they don’t increase the character’s abilities or impact the outcome of the game.

So let’s review what we know so far. Players download a free game online. They then use their parent’s credit cards (the voice of experience speaking) to purchase digital clothing and other items within the game. These are items that can only be used in the game. They can’t be worn to school or out to dinner. Sometimes, players buy dance moves. They sometimes use these dance moves to ‘warm up’ their digital characters before a game. Yep, that’s how it works.

Does any of this make sense to you?

Here is the key to understanding digital assets: It doesn’t matter whether it makes sense. It is happening anyway.

Young people have grown up in a world where digital assets have the same value as tangible assets and are willing to pay for them. To a person who grew up with the internet a digital playing card has the same value as an old-fashioned playing card, the kind made of paper with the picture of an athlete on it.

So… what is bitcoin?

  1. Bitcoin is a digital asset.
  2. Bitcoin is considered by many to be a form of currency that only exists in the digital world. Its original purpose was to allow people to send money to each other over the internet with no middleman, such as a fee-charging bank, involved. It’s called ‘cryptocurrency’ because it uses cryptography, a secure form of computer communication, to operate.

At this moment you can’t pay for most things with Bitcoin in the United States but that is changing. Companies such as Microsoft, AT&T, and AMC Theaters have announced plans to accept Bitcoin as payment. The list of who accepts Bitcoin changes constantly but is getting longer. One country, El Salvador, has declared Bitcoin a legal tender, meaning you can use Bitcoin just like cash. You simply display an app on your phone at the counter to pay for your purchase. Brazil is also making noises about allowing bitcoin to be used as legal tender.

  1. Bitcoin is also considered by many to be a store of value. What does that mean? It means that some people buy Bitcoin and store it digitally. This is similar to the way a person might buy gold and bury it in their yard so they know they have it available if they should need to trade for goods and services. That’s why you may have heard Bitcoin referred to as ‘digital gold.’
  2. Bitcoin is viewed by many as an investment. A very speculative investment. Many consider Bitcoin to be the best performing investment in the history of mankind. It has also been incredibly volatile.

Should you care?

I am incredibly curious about everything. Rather than being a ‘know-it-all,’ I like to think of myself as a ‘learn-it-all.’ To me, this is fascinating.

But going beyond just being a curiosity, do you need to care about bitcoin and what it represents? In the early 1990s, this thing called the internet was introduced to the general public and WOW, did it change our lives. Bitcoin, and more importantly the technology behind it, is going to similarly change everything. Ten years from now, Bitcoin may or may not be a thing (AOL anyone?) but the technology that is being developed behind Bitcoin will change our lives.

I think it’s worth knowing about.

There is much to learn about digital assets and the technology behind them. Blockchain? NFTs? Altcoins? In future newsletters I’ll address these and other various topics.

 

  1. https://www.theverge.com/2021/5/3/22417447/fortnite-revenue-9-billion-epic-games-apple-antitrust-case

 

Originally published on 10/27/2021