Crypto 101 for 9 year olds. Or 99 year olds. And every age in between.
1/ What are cryptocurrencies?
Cryptocurrencies are digital currencies. They can be used to buy things, but there are no bills or coins.
Bitcoin emerged in 2008 as the first cryptocurrency, but there are others like Ethereum, Ripple etc.
Bitcoin is still the most popular.
2/ How do cryptocurrencies work?
Currencies like the euro or the US dollar are controlled by governments and central banks.
Let’s use Bitcoin to understand how cryptocurrencies work.
Bitcoin is a form of digital money which operates outside the control of governments.
3/ What’s blockchain?
Bitcoin is built on blockchain, a public ledger (a big, electronic exercise book) that records bitcoin transactions.
Blockchain is made up of a network of computers connected to one another through the internet that all store a copy of the ledger.
4/ What does blockchain do?
Blockchain allows everyone to see everything that happens on the network.
E.g. when mum sends little Julia a bitcoin, the transaction is saved on every individual computer, so everyone knows little Julia received a bitcoin from her mum.
5/ How does blockchain prevent cheating?
Everyone on the network keeps a record of every transaction, and everyone has the same copy of the ledger.
All of the users record all of the transactions at the same time.
No one user can manipulate a transaction in any way.
6/ Why do some people prefer cryptocurrencies?
Cryptocurrencies are rule-based and require the consensus of network participants to change.
This protects cryptocurrencies from abuse or manipulation by any one person or central authority
7/ Who determines the value of cryptocurrencies?
Cryptocurrencies can be traded, like stocks and pokemon cards.
Price is determined by demand (how much interest there is to buy) and supply (how much is available).
Rare pokemon cards are expensive because demand > supply.
8/ Why isn’t everyone using cryptocurrencies already?
There are too many (> 8,000)!
Bitcoin is the most popular, but the price of bitcoin goes up and down too fast.
9/ How do I store cryptocurrencies?
You need crypto wallets that are either software (app) or hardware (gadget).
Crypto wallets store two keys.
A public key links to an address that lets you send and receive transactions. Think of it as your email address.
A private key proves that you own the cryptocurrencies associated with your public address. Think of it as your email password.
You can share your public key with others to send and receive transactions.
You must never share your private key.
10/ Anything else I should know?
It takes a lot of electricity to power the computers that maintain cryptocurrencies. Not good for the planet!
Some people think cryptocurrencies are the money of the future. Others think not.
Read up. Question everything. Decide for yourself.
Nobel laureate and long time crypto skeptic Paul Krugman recently said this about bitcoin:
“I’ve given up predicting imminent demise. There always seems to be a new crop of believers. Maybe just think of it as a cult that can survive indefinitely.”
Thanks @hey_bernie for working with me on this thread.
h/t @petergyang for the excellent explanation of wallets and keys.
Follow both of them on Twitter to learn more about web3 and crypto.
This post was created with Typeshare
