10 Considerations when explaining cryptocurrency to a complete beginner (newbie)
Explaining cryptocurrency to a novice can be challenging, but breaking it down into simple terms can make the concept more understandable. Here’s a basic explanation:
1. Start with the Basics
Digital Currency: Explain that cryptocurrency is a form of digital or virtual currency. Unlike traditional currencies issued by governments (fiat currencies), cryptocurrencies exist only in electronic form.
2. Blockchain Technology
Decentralized Ledger: Introduce the concept of blockchain, which is a decentralized and distributed ledger. This means that instead of a central authority (like a bank), the information about transactions is spread across a network of computers.
3. Cryptography
Secure Transactions: Emphasize the use of cryptography to secure transactions and control the creation of new units. This makes cryptocurrencies resistant to fraud and counterfeiting.
4. Bitcoin as an Example
First Cryptocurrency: Use Bitcoin as an example since it was the first and is the most well-known cryptocurrency.
Mining: Explain briefly how new bitcoins are created through a process called mining, where powerful computers solve complex mathematical problems to validate and add transactions to the blockchain.
5. Decentralization
No Central Authority: Highlight that cryptocurrencies operate on a decentralized network, meaning there is no central authority (like a government or bank) controlling or regulating it. This issue is one of the most highly litigated issues before the courts and the public now. The SEC wishes to regulate crypto by considering it a security. If it’s considered a security then all crypto transaccted in the USA would have to be registered.
