Explaining Bitcoin is always a bit tricky, but especially so when you are trying to explain it to your parents, or any other people from generations who may less digitally inclined.
Yes, crypto has a special appeal for Millennials and Gen Z but that doesn’t mean it has no appeal for the generations before them.
The problem with explaining Bitcoin to the ‘old guard’ is that you often end up using terms that are equally confusing and need additional explanations on their own. Bitcoin lives in the digital world, but your folks may not. At least not to the extent that lends itself to talking about virtual currencies, nodes and cryptography.
Here’s the script you need to explain Bitcoin in simple terms, that will at least give your audience a grasp on the subject – enough to understand why you are into it.
It’s like digital money and stocks combined
“So, what’s this Bitcoin stuff you’re always on about?”
Avoid the word cryptocurrency when you begin to explain Bitcoin. For them, “Bitcoin is a cryptocurrency” means nothing at all. Instead, say “Bitcoin is digital money, and in a way it’s similar to stocks”.
Two concepts that can easily be understood: digital money and stocks.
How is it both? It’s like money because it has value and you can spend it to buy things or services. You can pay other people or companies with it. Similar to stocks, the value goes up and down based on how people value it – Bitcoin’s price changes all the time.
Bitcoin is only digital
“Do you have Bitcoins on you right now?” they might ask.
While tempting, don’t say it’s a virtual currency, stick to the easy concept of digital money. In fact, they deal in digital money all the time.
“Bitcoin is digital money the same way your paycheck is digital money.”
When you get paid, the money is transferred from your employer’s bank account to your own bank account. If you buy shoes at a shop with that money using a debit card, that money stays digital as it is transferred to the shoe store owner. The money is never physical during this cycle. Bitcoin is always like that: it stays digital as it moves between people and companies.
Where Bitcoin comes from
“Okay, so normal money comes from the bank, who gets it from the government that prints it. Who is printing the Bitcoins?”
This will be the hardest part to explain. Never mind the specifics of cryptography, or hash rates. Just go for another simple analogy that is easy to follow, like mining gold.
“Similar to gold, imagine there is a mine of Bitcoin. In this mine, there are exactly 21 million Bitcoins. To get this Bitcoin, you need powerful computers – the same way you need special equipment to mine gold.”
If they ask about the 21 million, stay with the gold analogy and simply say that just like gold, there is a finite amount of Bitcoin available in the world. As time goes on, miners find more of this Bitcoin and sell it off hoping to make a profit. Yes, one day there will be no more new Bitcoin available, but that’s only going to happen after several decades and by that time the idea is that many people will have a piece of Bitcoin.
“A piece? How can you only have a piece of Bitcoin?”
Well, just like you can “break” a dollar bill into cents and smaller cents, Bitcoin can be broken down into usable pieces of a full Bitcoin. You can own 0.01 of a Bitcoin. That’s why the price for a full Bitcoin can be as high as $9000 right now. You don’t need to pay the full amount to own some Bitcoin.
Bitcoins are kept in wallets
“Where do you keep the Bitcoin after buying it?”
Thankfully, we can use the regular terms for once.
“The Bitcoin you own is stored in your digital wallet. Only you have access to this wallet, using your private key. You can see how much you have and spend it by sending it to another wallet.”
You can try to dig a little deeper and explain how transactions work, and how all of this is secured. Play it by ear but keep it minimal on the blockchain, and just talk about records being kept.
“All the transactions made with Bitcoin are recorded on a shared balance sheet. Everyone has a copy of this record that keeps updating with new transactions, so that’s how we can keep track of individual Bitcoins. No one can see who you are or what you have spent the Bitcoin on, but the transaction itself is visible. Because everyone has access to the same records at the same time, we can be safe that the information is correct.”
What’s the point?
“Limited supply, special mining equipment, super high prices, maybe selling them to the next person…what’s the point of all this?”
There are many things you could say here, but let’s
keep it simple.
“Bitcoin is handled directly between people, there are no banks involved. That means no one can stop you from spending money or freeze your accounts. You can do whatever you want with it. For a transaction, all you need is your own private key and the wallet address of the person you want to send it to.”
If that last part trips anyone up, just remind them that they have probably been able to remember their PIN code – private key – for their debit card this whole time. And wallet addresses are just like email addresses, everyone has their own unique one and that’s what you use to send Bitcoin. You can make this a lot more detailed and closer to reality, but then nobody wins. Keep it simple.
“Also, Bitcoin is a global currency. Anyone in the world can use it, and no central government can inflate it by making more. We are bound by the 21 million Bitcoin left in the mine, and the price is determined by everyone that is buying and selling Bitcoin – like stocks remember?”
“So where can we spend this digital money?”
Getting into calmer waters now.
“15 years ago, you couldn’t use your credit card in every store, but today you have a lot more options right? It’s the same with Bitcoin. You can already spend it in some online stores that accept Bitcoin, and some people have agreed to pay each other in Bitcoin. This will take some time to grow, and that’s part of the reason why some people are buying Bitcoin now, and holding on to it until later when Bitcoin is more used and worth more because of that usage.”
Take a break
This script should suffice for the first time you try to explain Bitcoin to your parents. There’s no need to go into detail to explain how things actually work. The point is that you want to get the main concepts across, without using complex terms to explain complex concepts.
Maybe the next time you revisit Bitcoin with your folks, you can create an account for them and send them a few Sats to see how this works.
“Sats? I thought you said it was Bitcoin?!”