Strategies for explaining cryptocurrency to your parents after MtGox

The money is better on the top layers... (By Zach Copley)
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If you ever have to invoke the phrase “what is required is a decentralized intermediary!” then you have failed to explain what cryptocurrency (i.e. Bitcoin) is to the average consumer (i.e. your parents). This is why the Bitcoin trolls are winning.

Have you ever been on the receiving end of a “so much potential” rant from a teacher, parent or boss? If you have a reasonably solid understanding of what cryptocurrencies are and how they work, odds are pretty good that you’ve been on the receiving end of a conversation like that. If you can grasp and understand how Bitcoin is a lot like a kid with potential hanging out with the wrong crowd doing the wrong kinds of things, then odds are you’re in a pretty good position to explain to the average person why cryptocurrencies are the future of money.

With the MtGox bankruptcy, Bitcoin is now commonly thought of as not only a mysterious tool used to pay for drugs, but also as a huge “ponzi scheme” that screws innocent people out of their hard earned cash. You’re not going to counter those conclusions of Fox News and Daily Show viewers with an eloquent Austrian-school-inspired description of fiat currency. You have to keep it real…as in real dumb simple.

Brett Scott was on the right track with steps 1-3 of How to explain Bitcoin to your grandmother. However, he got too enamored of his own explanation and forgot about his audience. Your parents probably couldn’t explain to you what the Fed does beyond, “they print the money”. Therefore, they’re really not going to give a flying fsck about trusted intermediaries, secret keys, hashrates, mining or the blockchain…and they don’t need to.

Your parents know what cash is, they know what bank accounts are, they’re probably familiar with online banking and they know how to pay bills and buy things with money. Armed with just these analogies, you can explain to them what Bitcoin is, why it’s no more evil than any other kind of money and why it’s the future.

1. Start by explaining that “digital currency” is how banks keep track of your money. Everyone familiar with online banking can grasp the concept of “digital currency”. You can see the amount in your checking account when you log in to your bank and you can explain that money represented in that balance on the screen exists in digital form. The bank doesn’t move bills and coins from one envelope marked “Mom’s Savings Account” to “Mom’s Checking Account” when she clicks “transfer”. They issue instructions from one part of a computer to another. Same thing goes for paying off credit cards and bills, it’s just “1s and 0s as digital currency moving from one bank’s computer to another.”

2. Explain that digital currencies in banks are not “money in your wallet”. You actually have to go to the bank or an ATM to get paper cash. You have to log into online banking or link your bank account in order to pay bills with “digital currency”. You can’t pull that digital currency away from your bank and onto a USB stick, it’s not “money in your wallet” until you convert it to paper by going to the bank or an ATM.

3. Explain that Bitcoin is both “digital currency” and “money in your wallet” at the same time. Here’s where you want to keep it really, really simple. If whatever you’re saying can’t be said of paper money, then you shouldn’t be saying it. Just say that Bitcoin is true digital cash. Yes, it exists “as 1s and 0s” but it works just like cash. You can put your wallet on your computer, on a USB stick or any other thing capable of holding 1s and 0s just like you can put your cash in anything that can hold paper. You can pay people with it and not reveal your identity. You don’t need to have a bank account to hold cash, you don’t need a bank account to hold Bitcoin. Invent your own analogies to suit your particular audience, but you get the idea.

4. Explain that Bitcoin became popular with drug dealers because they could send money anonymously, like cash, through computers, like digital currency. Even if you’re naive enough to believe that Bitcoin doesn’t owe a lot of its success to Silk Road, it’s hard to argue against the power of this analogy to explain how Bitcoin is (supposed to be) used.

5. Explain that MtGox was a bank where people could convert their Bitcoin to Dollars and vice versa. For the love of everything holy, do not even think about attempting to explain transaction malleability. All your parents need to know about MtGox is “bank” and “Bitcoin to Dollars and back again.”

6. Explain that MtGox got greedy, didn’t really know what they were doing and lost their customer’s Bitcoins. Yes, yes, I know, the implication here is essentially incorrect. We also don’t (as of the time of this post) really know what happened to MtGox, other than they closed up and filed for bankruptcy in Japan and their customers are probably screwed. Your parents probably don’t like or trust banks. They’re greedy. They fail. Use those prejudices to demonstrate that what happened to MtGox is a “bank problem”, not a Bitcoin problem.

7. Reiterate points 3 and 4. Bitcoin is “digital cash”.

Is this a massive oversimplification? Yes. Then again, do you really need to know the interrelation between mortgage-backed securities on the books of the Federal Reserve as a strategy for increasing liquidity in a fractional reserve banking system to understand that a latte still costs $5? No.

If you’re feeling really good at this point, you can attempt to explain why the value of Bitcoin fluctuates so much relative to paper currencies.

Then again, if your parents don’t get it, but they love animals…well, you can go on to explain Dogecoin.

As always, please leave your trolls comments over at HN.

(Thanks to Zach Copley for sharing his photo “The money is better on the top layers…” under a Creative Commons Attribution-ShareAlike 2.0 Generic license.)