Bitcoin Forum

older people. Tried to explain to my parents, they just don't get it. Let alone grandparents. It's a waste of time it seems.
But that's not the problem. Even regular joes just don't get it. "Where does the money come from?", "whats the intrinsic value?", and so on and so on.
What's your experience with this?

Just tell them it's magic internet money and it comes from pixie dust and unicorns.

In all seriousness, I've had success explaining it in terms of accounting and ledger processing.  People seem to understand, at least in general, how credit cards work.  In terms of storage and usage of the money, the concept of safety deposit boxes, account passbooks and wallets works well, too.  I've also been successful in just explaining it as a foreign currency.  If you go to Japan, you convert USD into JPY.  BTC is just another currency into which you can convert your dollars.  Finally, talk to them about investment vehicles, and stocks.

If you can relate BTC to things they know and understand already, they'll get it.

Trick them by asking them the same questions about fiat.

The purpose of mining is to process transactions.  Since there is no centralized authority with control over the ledger (i.e. the Blockchain), there needs to be a way for transactions to be processed in a decentralized way.  Miners take upon this responsibility by using their hardware to process transactions, but of course, this comes with a cost (i.e. time + cost of hardware + electrical costs).  Accordingly, there needs to be an incentive for people to do this, and that's why miners are compensated with the block subsidy (currently at 25 BTC every ~10 minutes on average).

When the block subsidy runs out, there still needs to be an incentive for miners to keep processing transactions.  This is where transaction fees come into play.  Assuming BTC still exists when the block subsidy approaches zero, it is likely that the both the number of users and the daily volume of BTC transacted will be many times greater than what it is today, and so miners will receive the fees attached to each user transaction (by this point, it's possible that the sum of fees per block may be greater than the original 50 BTC subsidy).

"Old people" need to understand why mining is valuable and why it should be rewarded.  Don't explain it as something akin to "creating money out of thin air," but instead explain that miners are providing a useful service to the network by processing transactions, and this is a very valuable service.  Because this service supports every single user of the Bitcoin economy, it makes sense that the users pay something for this service (i.e. by paying a small transaction fee).  The beauty of the decentralized system is that this fee can be greatly reduced compared to other methods of payment like credit cards because the network itself only requires minimum infrastructure and therefore doesn't come with the insane overhead costs you can expect from a corporate entity like PayPal or a bank.  

Thanks, i'll try again my best. You would be surprised tho, to find out how iliterate most people is about finances. Even with credit cards, they don't really know the ins and outs, is just some place to store dollars or euro, it still works within the known (that is fiat). The hard concept to grasp for them is the fact there isn't fiat involved, so they see it as something non serious. Also Bitcoin isn't backed up by armies, fiat is. Most don't believe something that isn't backed up by guns and instituntions will work :(
I've gotten a lot of people into bitcoin and this forum tho, and I have a mate that did a presentation about Bitcoin and lots of them seem interested, but that was easy since it's mostly math and physicists, the hard task is talking about this to the average joe.

Like I said before, they will simply say that fiat is backed up by entire countries and armies and that comparing BTC to the euro and dollar supremacy is somewhat ridiculous. Can't really find a counter argument against the "backed by armies" argument. If you think about it, there's lots of powerful people with big interests in fiat not crashing to perpetuate their monopoly.

That's a bit different than your original query, which was how to explain mining.  As I originally stated, and then the joint detailed, mining is nothing more than processing transactions in the ledger (the blockchain).  Expanding the credit card analogy, you can state that credit card transactions are "mined" as well, just that the mining process is wholly owned and controlled by the credit card provider (Visa, MC, etc).  You have to trust that provider to accurately and truthfully manage everything for you.  Want to make a purchase?  You have to trust that the company will properly authorize and settle that transaction.  Since nobody owns Bitcoin, there is no centralized entity you have to trust.

I've heard that the analogy to a universally distributed excel sheet is a rather good one. I don't quite recall who made that one up, but it goes something like this: Imagine a large excel file with all accounts in existence (bitcoin addresses). Everyone who's in possession of a key to an address may transfer money from that address to another one. To avoid double spends or the 'who came first' problem, in order to have a new definitive version of the excel sheet, people solve mathematical puzzles that are difficult to solve, but once someone found another solution, his version gets accepted. He is being rewarded for that by receiving new bitcoins.

Bitcoin is backed by the support of its users though. It may not have an army enforcing its legality, but it is just as useful, if not more, in facilitating trade among a community, namely the Bitcoin community. If I wanted to trade 10 bottlecaps for my friend's handmade sandwich, then that's between the two of us and no army should have any say in that. The same goes for Bitcoin. You don't have to call it money, but it would be completely totalitarian for any government to forbid you from using it as an agent of trade.

So how should you explain mining? Keep it simple. Mining is a techno-way of adding stuff to the database of the Bitcoin network, and the one who mines a block gets some Bitcoins. Oversimplified, but enough for anyone who wouldn't understand the technical explanation anyway.

Hahahaha that's why I never tell my parents about bitcoin. It's hard to explain about new inovation to older people. they just know me playing games if I'm in front of computer  ;D

Well think about it....

Bitcoin is 100% made up.

To use a terrible Simpson analogy:

When the Simpsons travel to Itchy and Scratchy land they can purchase Itchy and Scratchy money for real dollars.. They purchase a lot of it, walk in and see that it is accepted no where, jokes on them!

When young people or anyone knowledgeable try to explain how bitcoins work, most people will see it as an attempt to scam them!  I mean imagine if a guy on the street was selling "Fun" money or something and he said you could give him 20 bucks and he will give you 100 Fun monies.  Most people would not do this at all...

One idea people seem to instantly get is that bitcoin wants to replace their money. It does not.
Bitcoin is and should be presented as an alternative. You are not forced to use it, but you can.
As soon as people start to realise what it really represents, their interest grows, they give it a shot... and it's like taking the red pill.

Usually when someone comes to you trying to convince you to give them your money for something,
it's because your money worths more than what they're giving you. But this time, find out for yourself.  ;)

Good luck with that, even explaining how PC works is hard.

When explaining mining to people, I liken it to gold mining. It was obviously modeled similarly.
A very obvious and key difference though...
While mining Bitcoin serves to bring new bitcoin into supply, like gold.
Bitcoin mining further functions to secure the network & process the transactions etc... (if you want to go into how that works from there w/ ledger etc... so be it) - gold mining in no way functions to secure gold.

After laying out the above, it usually starts to click to people.

There are obviously more differences but it covers things pretty well.

Right, but what happens when all gold (BTC) is mined? How is it planned that miners are incentived enough to the point they keep mining? Will the rewards be relevant? Also, what kind of processing power in terms of hashing are we going to need may Bitcoin be accepted at mainstream tier levels of adoption, with shitloads of transactions every second? How is it guaranteed that there will be enough processing power on there in such scenareo?

This

Some good questions but I don't even try getting into this when I'm explaining it to people.  The idea that eventually only the transaction fees are going to be "mined"  is an advanced concept I think.  Hey I used to have trouble explaining AOL IM to my parents but they do Facetime etc. now so they can get it.  Maybe you could set up their gpu or something to mine so they can understand it better.

I think the main problem with the gold analogy is that the value of gold is self-explanatory whereas the value of BTC is not.  I can do a bunch of hard work and dig a huge hole in my backyard but that doesn't mean that either the work or the hole itself is valuable.  If I get lucky and find gold in my backyard, it's obvious that I've found something valuable, but it's not so obvious that the BTC I generate by getting lucky and solving a block has value.

https://www.youtube.com/watch?v=GmOzih6I1zs
What is Bitcoin Mining? Have you ever wondered how Bitcoin is generated? This short video is an animated introduction to Bitcoin Mining.

Might help, more people should watch it :)

Cute video - although at this stage, I'm not sure I'd want BFL products to be representative of the ASICs :)

It does a fair enough job explaining mining, and even how coins are generated.  It would be nice if it discussed the transaction fees, and the limited total number of coins to ever be produced - unlike governments who can print fiat at will.