Explain crypto like I'm five-years-old
Just me trying to understand cryptocurrency.
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A few months ago, I mentioned to one of my kids that I was interviewing someone and talking about crypto. “What’s crypto?” the kid asked. My reply, although I had done the interview and it was explained to me, was… well… a bit confusing. The kid had follow-up questions and I stumbled through, quickly realizing that while I understood the concept, I didn’t really know what I was talking about.
Sound familiar? For us non-experts, cryptocurrency in all its foreign-slang-techy glory is hard. I’m a fairly tactile person–my left brain handles the words, but my right brain loves something I can see and hold. I mean, I can’t even do grocery pickup because I have a hard time letting someone else pick out my stuff. I want to see all my options–I want to peruse the store, pick my apples, check my own avocados for ripeness, and select the crustiest, most delicious-looking loaf of sourdough. I really like tangible things, so sue me.
Because of this personality trait, crypto, for me, has felt a bit sketchy. But it keeps creeping around, and folks, crypto is here to stay. So let’s learn together because we don’t want to be the ones left in the dust. Soon enough our friends and kids are going to start using it and likely we’ll have to start teaching our boomer parents how to use it.
I’ve done the homework for you, and there are so many crypto-nuggets that I’m breaking it up into a three-part series to get us through it. Today’s topic: What is crypto? But really, really, what the heck is crypto?
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We’re going to start with some vocabulary because it’s tech and we love ourselves some freaky terms and acronyms.
Cryptocurrency: Digital currency used to buy and sell things. Note: This definition does not actually tell you what crypto is. For that, see Bitcoin.
Bitcoin: This is the first type of crypto and likely the one you’ll hear about the most. This baby was hatched in 2009 when we were all reeling from recession and sick of financial institutions telling us what to do and charging us to do it. It was created as a “skip the middleman bank stuff” and go directly peer-to-peer form of currency. Bitcoin is associated with a white paper published by an anonymous person or people under the pseudonym Satoshi Nakamoto in 2008.
Blockchain: A record of transactions, the crypto ledger.
Node: When I read the white paper for the first time I was a little hazy on what a node is, which made reading it confusing. Nodes are the crypto gatekeepers. A node is a computer connected to a network of other computers and they’re all monitoring the Bitcoin blockchain trying to keep the bad guys from stealing our money. Bless the nodes. There are a lot of different types of nodes–full nodes, light nodes, masternodes, etc. but all you really need to know is that nodes are great.
Decentralized: Taking away from the central point. With crypto this refers to the fact that everyone knows everything rather than one authority.
DeFi: This is a cute little shortened term for Decentralized Finance, which is money things without bank things.
Mining: This one had me stumped until I saw this visual. Yes, a visual gave me understanding, shocking I know.
Private/public key: Keys are basically passwords. Your private key is used to send money, your public key is used to receive it. Think of it like this: You can give someone your account number and they can put money in your account, but you wouldn’t want to give anyone your account number and your password. Keep it secret, keep it safe.
Wallet: As many weird terms as there are here, some of them are just super simple, like wallet. You keep your stuff in here, and yes it can be encrypted and fancy and take all sorts of authentication, but it’s just where you store your keys and things.
So now we’ve got the basics. I highly encourage you to read the white paper, linked again because while some of it feels like it’s in another language, it’s also very informative and super important. Don’t worry if you had to read it multiple times and google some things, it’s fiiiiiine.
Alright, we’ve got the vocab, we’ve read the white paper. Now what? That’s up to you. As I have delved deeper into the world of crypto, I’ve felt more and more that it’s a revolutionary thing. When I use the word revolutionary, I do mean a dramatic and wonderful change, but I also mean the rebellious nature of it.
I talked to a few experts in preparation for this series, and I asked them about the effect on big banks, governments, and other authoritative bodies, and their responses were that yes, it’s a bit rebellious. While banks are catching on and doing things to work with crypto, doesn’t it still feel like it’s a declaration of independence of sorts? We’re really super smart, and we’ve figured out a way to conduct business on a really super smart network. It crosses oceans, doesn’t depend on a big central brain somewhere, and keeps transactions honest by fact-checking, not accusations and laws. Pretty amazing.
Next week we’ll explore how we can use crypto in our everyday lives–practical applications and things, like can I buy Diet Coke with that?
Thanks for reading,
Interest in the 21 States of Bitcoin and Blockchain Basics, formerly taught at UVU by Charlene the Crypto Queen.