I ran into some old friends at Sauble Beach yesterday and within all the catching-up someone mentioned cryptocurrency.1
Another friend chimed in: “What even is it? I just don’t get it.”
Someone started: “It's a decentralized ledger that… I'm not even sure where to start.”
This is when I took a crack at it:
“If I want to send you money, I put a request in at my bank, my bank talks to your bank, they transfer the funds and then your bank deposits the money into your account. In this process, I trust my bank, you trust yours and our banks have to agree to trust each other. Yet here we are, already trusting each other!
Why the need for added complexity? I have money. You have money. Is there a secure way for us to send it directly between each other?
Bitcoin, cryptocurrency, blockchain, all that stuff you’ve heard about asks a basic question: can we use computer science and all this awesome technology we have to get rid of middlemen?
You’ve also probably heard of NFTs and it’s the same idea. I have artwork or a collectible item, you want to buy it. Rather than go through an auction house, let’s try to build a secure system where artists can sell their work directly to buyers.”
The final bit on NFTs may have been overkill. The main goal of all of this stuff is to empower individuals and their peers to exchange items of value (money, art, etc.) directly between themselves.2
If you don’t have time or simply don’t care to go down the rabbit hole, this post provides an intuitive way to think about the point of cryptocurrency that (hopefully) your friends and family will be able to relate to.
Thank you for reading! If you enjoyed, please consider sharing with a friend who may also enjoy, or subscribe to keep the knowledge coming:
Please contact me at justin@nojargon.org if you have any questions, comments or suggestions for future topics: I’d love to hear them!
I am always looking to learn new things, refine my understanding, correct any errors and expand on the sources that influenced my thinking and inspired this post:
Bankless Podcast, Ryan Sean Adams and David Hoffman
Bitcoin and Cryptocurrencies, BerkeleyX
Blockchain Technology, BerkeleyX
Bitcoin: A Peer-to-Peer Electronic Cash System, Satoshi Nakamoto
Cryptoassets: The Guide to Bitcoin, Blockchain, and Cryptocurrency for Investment Professionals, Matt Hougan and David Lawant, CFA Institute
Ethereum Development Documentation, Ethereum Community
Own the Internet: A Bull Case for Ethereum, Packy McCormick
and many others.
It wasn’t me, I swear.
When reviewing this piece, my father brought up a crucial point I addressed in my first post on cryptocurrencies that I will quote here for the avid reader:
“[Cryptocurrencies] do not remove the need for trust in society, they shift it. Rather than trust central institutions, a community agrees to trust a protocol, a cleverly designed system of computer science and incentives.”