Bob, Bank and Bitcoin-Part 1 🍔🍕🍟
Tags: blockchain, bitcoin
Published: 2019-06-01 20:59:11

---
title: Bob, Bank and Bitcoin-Part 1 🍔🍕🍟
published: true
description: The play between Bob, bank and the Bitcoin.Why it makes sense ?
tags: blockchain,bitcoin
cover_image: https://thepracticaldev.s3.amazonaws.com/i/wsh0v6p4mcqgi1wk8jw7.png 
---

Bro : Explain me Bitcoins 🧐🧐

Me : Bitcoins Huh !! This is complicated 🤦‍♀️🤦‍♀️

Bro : Then Simplify it for me ! Duh 😎😎

Me: Alright !! 🥱

Bob buys a Meal for 10 EUR from McDonald’s and Pays the Bill using his Bank Card.

The Payment got through successfully because the bank authorized Bob’s transaction.

Ah forgot to mention…, Bob’s Bank balance is exactly 10 EUR.

Now What do you think would happen if Bob tries to buy another Meal for his friend using the same Bank Card.

The transaction will be declined considering the fact that Bob’s Bank Balance is now 0 EUR.

Therefore Bob cannot spend the money which he doesn’t have in the first place.

So the Bank happens to be the Big Brother keeping a watch on Bob’s finance and determines the success of his transactions

And the Big Brother’s watch on Bob’s and Everybody’s accounts does not come for free.

The bank ends up processing Hundreds and thousands of McDonald’s like transactions every minute and sure there’s a huge cost involved in calculating Who pays Who and What remains Where.

Imagine a Global System of Private Banking Networks, Equipments, Software, Security, Engineers, Bankers, etc..,involved in Who, What and Where Calculations. Quite Expensive Huh ?

There’s always somebody or everybody paying the Bank for these compute costs and this further rises when the payment needs to be processed across borders.

In Bob’s Story, the Bank Applies a fee to McDonald’s for every transaction made at their counter and the Merchant might factor this fee into the cost of Hamburger or elsewhere in Operations to make sure this expense is covered and runs a fair trade

Note : These are Called InterChange Charges and is based on complex taxation formulas and governed differently in every Jurisdiction. Whether or not these costs can be passed on to the customer is debatable but there are no strong reasons to believe why it cannot be passed over :(

In principle Bob pays his own money to use his money.. Sounds Fair ? 
Perhaps Not !!!

# There are few economics to consider in Bob’s Story

The value of EUR is a legal tender and mutually accepted between Bob, McDonalds and of-course the Bank.

What If Bob hands out a plain paper and says that’s his new 10 EUR Bill. It would end up in a contention at the counter for obvious reasons. It takes no genius to fight Bob’s Claims.

Or … What if Bob wants to give away something from his antique collection to pay for the meal. That’s still a problem even if the antique is more valuable than the Meal. The guy at the counter can simply decline since the antique is no legal tender and cannot be exchanged for anything lawfully.

But if Bob presents a counterfeit 10 EUR bill, then Chances are that the other party would accept his transaction and present him with the meal he wanted.
Bro : Now What does this story have to do anything at all with Bitcoins ?

Me : It has everything to do with Bitcoins. Before getting to understand How Bitcoins Work, it’s rather better to take a closer look on How Regular Banking System Works.

By the way, You gotta be aware that…

Traditional Currency Notes are Printed, Coins are Minted but Bitcoins are Mined
Bro : Mining applies to Gold, Diamond and Precious Stones, What does it have to do with Bitcoins anyways ?

Me : See you in Part 2