Bitcoin! You must have heard about it or have even traded with it before now, If you don't understand the concept of money, banks, financial institutions or governance then it might be difficult for you to understand bitcoin and why it was created

Money

Money is basically anything that is accepted by a large group of people as a means of exchange for goods and services. It was created to solve the problem of double coincidence of in the barter system ( Mr. A is a musician who gets paid in a bar with liquor and food, let say Mr. A want to rent an house, he has to look for a landlord who will be willing to take  part of his food and liquor he got as payment from the bar for his services. What if he doesn't finds any?). Money was created so that, Mr. A can get paid in something that is generally acceptable by the public and use part of the something paid to secure his house rent from anywhere. 

Government/ Banks/ Financial Institutions

In the case of Government Banks and financial institutions, they create money out of t he air depending on the nature of the economy. To know more about how money is created watch this video=- https://youtu.be/CvH66fz9nyU

What I want you to understand about these institutions is that we as a community of people trust them to do the needful so that our society will not be destroyed financially or economically. Banks need to run their operations diligently and government need to mint money responsibly but what happens if our trust is broken? What happens if the management of the bank makes poor judgment that ruin the bank? How do people get their money back? Or what happens if a government of a country produces money irresponsible? Inflation will happen and things gets and more expensive.

Cryptocurrency

Cryptocurrency is a digital or virtual currency that can be used as a means of exchange for goods and services. What differentiate this from our local currency is cryptocurrency are meant to be decentralized and free from a central authority like banks and government.(we will look at Decentralization in another article).

Bitcoin

Bitcoin is basically a type of cryptocurrency created by Satoshi Nakamoto that can be used as a means of exchange for services and goods, also without going through a financial institution .

Why was it created?

Bitcoin was basically created because of a lack of trust! Yes, you heard it, lack of trust. The reason for third parties like banks and financial institutions is to ensure that people funds are safe. Since humans cannot trust each other, we decided to trust a group of people who ensures that when people transact money, they record the transaction on a storage device called a database and this storage device keep track of  who transacted money, who have what and who doesn't. But what happens when a bank  we put our trust in makes mistake? the public suffers. 

Bitcoin was created to eradicate the middle men called bank and in replace  empowers the public with the Ability to keep track of financial records so instead of just one-third party called the bank keeping a database of financial transactions, everyone does.

 Bitcoin allows everyone who owns bitcoin to keep track of the database which is called a ledger. Think of ledgers as a record of anything but in bitcoins case, it's a distributed record of financial statements of people who own and transact with bitcoin. This means, if  Musa, Ayo and Chichi owns bitcoin, they also collectively own a ledger each detailing each transaction, if  Ayo sent money to Chichi, its will be recorded on all the ledgers owned by three of them.

Pros

A major problem bitcoin is solving is transaction cost and time. Basically to send money from one country to another is very difficult and expensive, why? Because there is a third party that's in charge of this. They place exuberant percentages on transfer fees and also it takes days to verify who you are transferring. Bitcoin takes an average of 10mins for you to transfer from one person to another and the transactional fee is much more cheaper compared to traditional banking.

It's also noteworthy that bitcoins creates user anonymity,  No interruptions from intermediaries eg(Banks freezing your account or keeping a limit on your transactions) and most especially Freedom.

Cons

There is also a pro to Bitcoin, while banks help people to reverse a fraudulent transaction,  in bitcoin you cannot reverse a transaction, this means if you mistakenly sent money to the wrong person, you can not get it back.

I believe Bitcoin is still in its phase and will be fully accepted by more countries soon, although lots of third-party banks and governments are working hard to ensure a ban of cryptocurrency, but the math, and innovation behind crypto will prevail.

Watch out for my next article on Blockchain