How do you explain cryptocurrency and the blockchain?

in Banking and Finance10 months ago (edited)

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I explained to my wife today, that cryptocurrency was really currency, like dollars in the bank, but that only the owners of the currency entered numbers in the bank ledger as they made deposits, and withdrawals to move their cryptocurrency to buy things or pay bills. And these transactions only occur if the owner authorized them by signing those transactions with a secret password called a “private key”and only then did the money move and the transaction is entered into the ledger.

The secret password is 23 letters and numbers and they are made by special computer software programs. The people who specialize in making and breaking secret codes are called cryptographers. And the passwords are a form of cryptography, so the money or currency is protected by this cryptography, so the currency is called cryptocurrency.

The bank ledger is kept on computers running a special software which doesn’t allow anyone to tamper or alter the ledger unless they somehow get control of 51 % of all the computers in the world running the program keeping copies of the ledger documenting the transactions signed by owners all over the world. The computer programs are also protected by cryptography and adding transactions to the ledger requires the solving of complex math problems called algorithms.

The idea is that your cryptocurrency is controlled by you because of your 23 digit Secret password. No one, not even the banks or the government can take your money or move your money with out your password. As long as you keep your cryptocurrency in your cryptocurrency wallet. You can send it to anyone you want over the Internet yo buy things or settle debts and the transaction only takes a few minutes no matter where you send it in the world. Some cryptocurrencies charge a small fee to fix this and done fo not. But in order to sell or trade your cryptocurrency for your countries currency, dollars, euros or other cryptocurrency you have to transfer it to an online, web page based exchange, where it’s under your control, but also under the control of the exchange. So if ordered by the government they could freeze your account and surrender your cryptocurrency to the government.

The interesting thing is when you deposit your paycheck in a bank, you have to follow their rules about when you can withdrawal any of it and how much. If you want to pay a bill or send money to someone, you have to follow their rules about how much you can send, how much it costs and how long it will take.

Because of the ways the bank controls your money, it sometimes feels like they have more control over your money then you do. This is one of the reasons many cryptocurrency enthusiast started buying cryptocurrency. They wanted more control over their money.

That’s my explanation. How do you explain it?

@shortsegments

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I explain cryptocurrency as stores of value used as loyalty tokens that are verified by a randomized computer system spread out around the world. It also doesn't have the drawbacks of centralized clearing as the "crowdsourced" blockchain verifies transactions through confirmation algorithms and transparent a ledger. There have been many social problems that have kept the difficulty in explaining such a valuable tool. My blogging project this year is about a similar social blockage. This article can give you a lot of background. 'Dusty Ol' Coody' by @jakedavis224

I think that’s a good explanation. I will check out your post.

I think you did a very good job explaining cryptocurrency and the blockchain. I want to borrow this explanation.

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The raccoon is so cute.

I think you did a real good job explaining cryptocurrency and the blockchain. If your wife listened to the whole thing and didn’t fall asleep or anything but her some Bitcoin ;)
Or maybe a nice dinner...or both.
😂🤣👏👏👏

This is a very good explanation @shortsegments.
Perhaps I would explain like this.
It is a monetary system that...

  1. cuts out the middleman to cut out the politics of money,
  2. gives you control over your own money to give yourself privacy and freedom, and
  3. has a blockchain that shows proof of transactions to avoid criminal acts such as money laundering and other crimes.

And while it is still currently mostly centralized, in the future, eventually this monetary system will be full functional on a decentralized system to avoid corruption.

I just want to let you know, I am going to borrow this explanation, with a full citation to you as the author.

So cute and huggable 🤗🥰

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