Bitcoin Forum

I’ve been explaining how Bitcoins work since 2010. Here is the simplest analogy I’ve discovered that explains transactions, anonymity, and coin production.

There’s a room that anyone can access. The room has security cameras that anyone can view, and every second of recorded footage is available online forever.

The room is filled with indestructible piggy banks made of transparent plastic. Naturally, these piggy banks have coin slots, and everyone can see which coins are in which piggy bank. These piggy banks can never leave the room.


Each person has a key that can open their piggy bank. Let’s say I want to buy a pair of alpaca socks, and you want to sell them.

First, you tell me which piggy bank is yours. Then, I walk into the room with a ski mask on. Anyone in the world can see me on the security cameras, but not my face.

Next, I unlock my piggy bank, take some coins out, then put them into your locked piggy bank. I leave the room.

Now, everyone in the world knows that your piggy bank has coins that were previously in my piggy bank. This is the case with every transaction, so everyone knows the history of every coin.

“So where do the coins come from? How did it start? Who got the first coins?”

There’s a robot in the room that runs lotteries. Every so often, this robot randomly chooses a piggy bank in the room, and puts 50 coins in it. When it first started, there weren’t many piggy banks in the room since nobody knew about it. Back then, it was easy to win the lottery. Today, there are millions of piggy banks in the room, so your odds aren’t very good.

“Ok, couldn’t someone make their own fake coins?”

No,because everyone has records of every coin in the room, and they know when the robot hands new coins out. If a fraud were to put fake coins into his own piggy bank, everyone would know that those coins were never handed out by the robot, and wouldn’t accept them.

“Who made the robot..?”

Supposedly it was a super genius Japanese man named Satoshi Nakamoto, but nobody knows for certain. Since the security camera footage is available from 2009, we can see that the robot was putting coins into a piggy bank since day 1. We assume it’s Satoshi, but that’s about all we know.

“… Crazy.”

Our trouble isn't explaining this to children, they'll be able to learn about it on their own, the trouble is the grown adults who are in total denial about it.

Good illustration for children. Children learnt bitcoin then will adopt bitcoin easily when grown up.

Hmm its more difficult to explain for old people who dont know or not understand about internet world.
Even some guys in 3rd country do not understand how to use computer.
The only i can explain to them is Bitcoin = Money , the more i explain about bitcoin to them it will only bring more confused.

If this is the best way to explain bitcoin, we are all screwed.

 :D true.

the children of today will use BTC like we use credit cards or cash today. boring BTC  ;)

People dont even need to know. Ask around how the federal reserve works. Exactly, no one even knows. All that matters is people using it and feeling good using it.

A fun read though, and you seem to sum it up lol ;)

Good point. But it's a bit different with bitcoins. You need to know the basics to stay secure and know how it works in general (to feel good using it). Otherwise, you'd need to have a popular/trusted 3rd party wallet/service providers, who will take care of security of your coins etc.

That will come with time and popularity.. Easy to use and safe tools - this is the key :)

This should be a sticky post.

Most people believe they know what a bitcoin is... specially since people talk about mining... as if mining creates coins.. instead of rewarding mining with coins... which is nothing like mining at all.

Care to explain double spending? Using the same scenario?

While at it, it wouldn't hurt to explain "mining" too.

Thanks OP!

The first thing that should be explained to know is how to use the internet bitcoin, knowledge about the internet is becoming a more familiar basis for bitcoin, because bitcoin transactions require a stable internet connection, if it is already fulfilled it will be easier later to learn more bitcoin ...  ::)

A good explaination, but it looks like it was written for kids.

That's the best way to learn. The core idea sticks better...

"How to Explain Bitcoin to a 7-Year-Old"

because it was written for kids..  ;D

it wont be that complicated, just the other day my nephew asked me why the transaction cost of fiat currency are so high. He was just doing a report on traditional currency transaction and modern day transaction. And when he heard about Bitcoin, got pretty excited about it.

Situations like this maintain my faith in future of humanity!  :D

people just dont like changes. Show them some changes that changed their world on better already.

I tried this method of explaining to my mom .. It seems that works !!! So not only for kids .. ;D

The robot/miner part is just wrong. The piggy bank is not chosen randomly.

always has to come someone who will f$$k up party..  >:(

it's simple to understand ,but cant learn that your notice.

Yes it is. That is why most mine on pools if they solo mine, might never get a reward.

Nice! So I can win the lottery that'll pay me 25BTC?!?! This is better than I thought!

Solo if think is impossible now.. So here we need some story about farm (mining) ..  ;)

If you are trying to explain mining to a kid, you might as well explain the real thing, and not think about analogies.

I really don't know, what your problem is. The explanation is just wrong, because miners get their money, because they secure the system. There is no money randomly send to a address. I don't get block rewards, since I am not mining, even though I have multiple addresses. You can use that analogy for POS not for POW.

This example is just to facilitate understanding of this subject. Can you understand that?

I really don't like to play that card, but I understand, that the people who are hating against my critic are pretty much n00bs.
The concept, that you have to work for the system to get the block reward and it is not given out randomly is pretty essential for bitcoin. Not just that, it is what made Bitcoin special, when it was invented. It is too important to drop, even when you want to simplify the concept.

Kids these days are all over technology. We don't have to explain to them, they'll figure it out once they grow up. It's the old people we need to explain to, they lack technology experience. Business rely on technology now.

graet way to explain:) i like it!

Haha yes. I applied it as well to my sister. And it helped her to understand more after listening my shallow explanation  ;D

well it really helps. thanks.. but i dont see the fact why should i explain this to 7 yr. old kid.
1st of all when i teach them about btc.. it not impossible that they will learn also about the gambling,
and it will be bad for them..
it is better to explain them to adults that will know what is good and bad for them...
well your advice is still good for adults so thanks.. :P

yeah that's good explain
maybe i'll show it to my father and my sister.. they're very begginer to btc and very difficult to learn  ??? ???

Give a bitcoin explanation with like lotery system to the kids who 7 years old is very awesome :D well although that, this is pretty good explanation.

if this can be change to illustration graphic will be awesome.

lol this makes it sound like everyone who owns a wallet has a random chance of winning bitcoin. i wish it were that way.
i had no idea that a man named satoshi started bitcoin, thats really interesting

nah i prefer the approach with the safebox-chain, where each block is a safe box with its combination, miners try to resolve the conbination to earn the coins inside it(25)

if more miners try to resolve it the coins inside will be splitted for everyone, in the right measures

and all this, started from the first safe block, and everytime you resolve a safebox, another one appear to be resolved

20+ year adults have the mentality of 7 year old children so you might have to explain to them in this way  :D

Sorry but some people are just so ignorant or dumb that this way of explaining it to them could be the only one.

A person with the knowledge to drive a car also has the potential to cause accidents, destroy lives and create a huge mess, only probabilities matter. Having access to knowledge is always wise, because a negative mind with bad intentions find a way nevertheless. I believe I'd be a good father and drop better knowledge to my kids about gambling. They wouldn't fear it like half of the noobs here, but they wouldn't be addicted to it either, hopefully.

yeah, but I also feel that this is a pretty good description to explain to a child at the age of 7 years  :)

It's a good idea to teach kids on Bitcoin but I would focus on how to use it rather than how it works because I think age 7 is way too early to understand it even if you try to make it as simple as possible.

Instead of explaining all that to a 7 year old.

I`ll provide a treat, teach him how to save his treats. After that, take it all away. and say this the reason why mom and dad loves bitcoin.

It`ll be a confusing experience what happened to the 7 year old, and he/she will start asking questions.

LOL, that's pretty good. Even teens these days don't know or understand anything about btc. I will show this to them now. Good job

the visualization in my head LOL

Thanks, I will send this to all my stupid friends (so, everyone who doesn't know how bitcoin works yet :P)

very easy to understand, even too easy  :D

This was me up until this week. My perception of 'mining' was so off it is almost laughable. I'm new to the whole adventure as of this week (despite hearing about bitcoin since it started), and my basic assumptions are undergoing some massive shifts.

That's a good explanation, but IMO it won't attract people to BTC. The idea of a robot choosing random people to give money to makes people think of a lottery rather than real money,

not easy as you said,because many people do not know or dont really care about internet.
bitcoin is need internet connection,and we must explain simply.

I'm 24, It was not hard for me to learn Bitcoin, then again, I was writing HTML code when I was 10. My underdeveloped mind thought that learning in-depth about computers was an activity adults do when they go to university. Or at least that's what my foster parents said. I was "too young" to be thinking about that "nerdy" stuff and that I should be playing football. All and all, I still have learned enough about football, and I will say I am athletic (not that it matter)

Back on point, this is a great way to explain to your grandparents how Bitcoin works. My grandmother essentially gave up keeping up to date and consequently will blindly accept anything I say about Bitcoin. This would be a good explanation for her.

I was trying to explain it to my son and family, my dad still finds it a bit mind boggling but my son got the drift even though he isn't a basement nerd. I just say it is digital money and that the Bitcoin blockchain is also used to solve problems as well and can help to build more and more applications of it in the future. I don't know if I explained it correctly lol but for a no techy there you have it.. ;D

Simple way to understand bitcoin must be using it in real time with very small volume. We need to intensive meet ups and training sessions all over cities world wide. So, we can spread the spirit of bitcoin. That will ensure the growth of bitcoin as well.

Explaining what is biticoin to my grandmother is like explaining it to my 5 yr old daughter so what  I told her is that, it is some kind of a digital currency that is not like dollar that is printed, biticoin is like a cash here in the internet.

yup understood
this analogy like a good story for children, when you tell them 'what is bitcoin' and 'how its works'
but in a different way i still not understand about mining,blocks,fork,chain,difficulty etc
i couldn't explain to people that asked me about mining, i just tell them that mining is one of way to earn bitcoin, all i know is just using and transaction with bitcoin safely

this is a nice way to teach kids to learn the bitcoin system
but if they ask whats mining? ill just say its how bitcoins are
produced.. if they ask more ill say just ask our friend google :)

There is no need to understand bitcoin completely. Because if you're going to create an alternate cryptocurrency only you need to understand bitcoin completely. Otherwise, there is no need of bitcoin knowledge to use it or to invest in bitcoin. You can simply start using it. In time you will get good knowledge of it.

hahaha, you're right, it is very easy to understand, even my brother who was 11 years old already understand after reading this article

First you have to understand the concept of cryptocurrency or virtual money. There are many videos available on youtube which explains from the beginning of Bitcoins, then there are many articles available on internest. You can also refer below links for more knowledge about bitcoins.

https://www.youtube.com/watch?v=22Cr_CD2lJw

https://www.youtube.com/watch?v=wJHk7QzSqn4

Haha I like the analogy. Maybe I'll show it to my friends later.

It's useful to describe the basic overview of bitcoins

However, it still takes a bit more explaining to describe to them their value

Maybe I will go against the most here but I find very hard to understand what is bitcoin with this example. To mention only one fact that must be without doubt in your example. No sign of word internet in your example when internet is the only environment when bitcoin exist and act. No sign of computer in your words when computer is (was, but is the symbol) the main product which produce this coin. Maybe this a good story which can entertain the kids but, according to me, not the explanation of the simplified meaning of bitcoin.

Simple way to understand bitcoin must be wikipedia. Bitcoin also has it own wiki reference.
https://en.bitcoin.it/wiki/Main_Page (https://en.bitcoin.it/wiki/Main_Page)
This resource will get us the full picture of bitcoin. Once we start using bitcoin then we can easily understand how bitcoin works.

There are so many articles and videos are available on the internet. Anyone can get all the information regarding bitcoins and it is easily available and simple to understand. There is a forum for the beginners in the Bitcoin Forum section, one can also check wikipedia and Youtube for more detailed information. 

Explaining it to kids could be more appropriate if I just say it is a internet money used to buy stuffs you want online, simple as that.

The better way to understand how bitcoin is working would be getting some faucet and earn some bitcoin from it. When you reach cash out level get it into a new wallet. This way I first interact with bitcoin. Now I'm not a master still. But I believe I have enough knowledge on bitcoin.

Biticoin is widely used everywhere, like it is the phone, atms across the globe and it is getting more popular in time.

Get in touch with any veteran bitcoin users online.
Just to earn bitcoin and save it for long time does not require any depth knowledge. So, you need not worry for understanding bitcoin completely.
Start using bitcoin in regular basis will get us to understand bitcoin in most of the areas. So, understanding bitcoin is an easy task.

Simple way to understand bitcoin would be using it.
When we started using bitcoin questions will automatically raises i our mind. Then we can find solutions and answers in internet to a better understanding.

Personally I don't think we need to make them go through all these. The best way to learn is still by finding out themselves through mistakes, hardship and experiences. If it's good and has the value eventually people will start to accept it. Most adults are ignorant because they haven't gone through the trouble but in countries where you get your money frozen, from there you will start to realize how valuable bitcoin is.

Mistakes are the good teacher, I agree. But making mistake in higher level like bitcoin environment would be not advisable. It's too risky. I see many people failed to watch their auto set fee for sending payment and included more than what they were sending. So, basic knowledge on bitcoin is must before start using.

I think this explanation is not only good for kids, i will be using this description to teach my colleagues who are interested in earning online. Thanks for wonderful and easy explanation.

in fact there is one thing that can make us understand about bitcoin easily, that is by playing trading, then you will find out all kinds of coins and what bitcoin advantage of all altcoin

I don't think so. Wikipedia is a wonderful tool to learn everything about bitcoin but it is in the same time the most difficult to learn about it. There are to many things which are professional things that cannot be understand by everyone but only from the specialists of the field. Then there are to many jumps with links from one conception or explanation to another which can confuse much people who hear for the first time about bitcoin.

I think way to explain it is just same as we introduced money to them, just tell them its like money in the bank,

you have it but you can see it physically, tell them where can they buy things using bitcoin how to check their account

good try,i think that childern is smart child,some question are briliant. and i also think,every question from old people or childern will different,but have same point. so if we can explain to child,we also can explain to old people. its not easy to explain what bitcoin is,to my parents.

Yeah the old ones are very denial about it, but bitcoin is a future money so is beter to teach the new generation or let them now about bitcoin. So that in 2016 and in the future a lot of people will use bitcoin.

Thats right. a trader can better know the ins and outs of bitcoin, such as coins specification, of course they are a great analyst,

To understand bitcoin better you need not to be a trader.
All the above, you never need to understand each and every aspects of bitcoin system to use it. Just how a wallet works and sending/receiving bitcoin is more than enough to make yourself as a bitcoiner.

Trading the bitcoin or alt coins may make you richer but never will give you the knowledge on bitcoin ecosystem. To understand bitcoin better, we need to use this forum more effectively. I believe this forum is more than enough for understanding bitcoin and it's all environments.

You know what's even harder? Trying to explain bitcoin to someone who isn't really comfortable with technology, aka an elderly person.

You forgot hashing power. The more hashing power you have, the more piggy banks you have, therefore giving you a higher chance of winning the "lottery".

That is why bitcoin is not really for the elderly, you need to tell the new generation that they will use bitcoin.
So that a lot of people will use bitcoin and later a lot of shop will it use too.