Bitcoin: How to Explain Bitcoin to Your Family
Bitcoin has been in the news a lot lately. By now even your mom has probably heard of it. She’s likely going to have a lot of questions.
Discussing digital currency with family usually goes one of two ways. Either they don’t understand it, or they think it’s too good to be true.
Here are some practical ways to communicate your point effectively to people who aren’t going to grasp the more technical side of the blockchain.
Concern one: Bitcoin isn’t real money
This is one we all hear a lot. “But it’s not real money. It’s not backed by anyone”.
It’s probably best to stick to the basics first. Bitcoin has value and can be used to buy and sell goods because people believe in its value, similar to the dollar.
If that’s not enough you can always add that Bitcoin has divisibility, durability, transferability and is standardized. All these factors are the properties used to define what is or is not a currency.
If they still don’t understand how money can be digital, you could remind them that debit and credit cards are digital.
Lastly, if you need some added credibility, you could tell them that the Central Bank of Canada released a white paper outlining their research into the possibility of creating a central bank digital currency (CBDC).
Concern two: Security on the blockchain
The security of the blockchain is one of its biggest selling points, but can also be one of the hardest concepts to articulate. When explaining blockchain security, it’s best to stay away from jargon like “cryptographic hash functions” and instead keep it simple.
When in doubt, use a real-world example.
If you need some money for textbooks, for instance, your parents send you some digital currency. The amount they send is debited from their account and credited to your account, and the transaction is stored Bitcoin’s ledger. The ledger cannot be altered because many people across the whole network have a copy of the ledger.
The first half the example sounds like an e-transfer. The blockchain comes in the second half, the ledger transaction record that can never be altered. If they’re not getting the ledger part, consider it like a spread-out traditional database.
A traditional database is like a single house, full of valuables. Once the thief enters that house, they can get to the goods inside it. In a blockchain world, there is only one valuable item per house. Thus, the thief would have to break into every house in the entire neighbourhood to steal all your valuables. Add in that each house has its own unique security, and it makes stealing nearly impossible to accomplish.
If they still do not believe that Bitcoin is secure, remind them the Bitcoin ledger has never been successfully hacked since it started in 2009. You could also mention that attempted hacks actually make digital currencies stronger.
If heads are nodding in understanding, you can add that the information stored on the ledger is not limited to just financial transactions. The ledger can store multiple types of data, like car ownership or tracking a product around the world.
Concern three: Bitcoin is in a bubble
Congratulations if you’ve made it this far, you have a lot of patience. The last thing you’re probably going to hear is “isn’t this a bubble? It’s too volatile”. This is a fair point, Bitcoin has seen a staggering run-up in price, hitting new all-time highs almost weekly.
At this stage, no one can predict where Bitcoin’s price may swing.
Everyone has a story about a guy, who knows a guy, who invested $1,000 in Bitcoin and is now a millionaire. Stories like these, however, are sensational and should raise red flags for most people.
What is important is not to focus on the price of Bitcoin, but instead on how the blockchain can change the world.
Tell them about coins like Stellar Lumens, that are making it easier for people to send remittances to underdeveloped countries. Or talk about how Ethereum was developed to run applications on the blockchain.
Comparison: Bitcoin is like the internet
The internet is a great way explain that the hype behind digital currency is actually just a sign of adoption.
In the early 90s, the internet became a household word. The dot com craze created a big buzz in the market. Today many of these early dot com companies behind all this buzz do not exist, but this doesn’t mean the internet was a failure. The internet has had a massive effect on our lives.
Digital currencies are at a moment when things are a bit hectic, and the hype is palpable, but we are also at a moment of mass adoption. It is clear the blockchain and digital currencies will have a positive impact on our lives in ways only the future can tell.
Image credit: maxpixel.net
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