Explaining digital currencies in a brief conversation is very difficult. There is so much to understand and it is wrapped in vocabulary the general public does not understand: wallet, blockchain, mining, faucets, pools, etc.
As the founder of AppleByte (digital currency supporting artists), I can share the method that has worked very well for us. In almost a year of building a user community of over 57,000 in social media, we have hit on a method of explaining cryptos clearly enough that the everyday user can understand and take the first step to get started. Then over time, we can get more and more technical if the user is interested.
This method certainly works with Bitcoin as well
You can see what we do on in our blog post How do digital currencies work
Or for convenience, I reproduced the part that is relevent to Bitcoin below:
--------------------------------------------------------------------
As with any new technology, digital currencies like AppleByte can be hard to understand. Lets look at how AppleByte works.
How are digital currencies created?Just like physical currencies, digital currencies (like AppleByte) don't just pop into existence, they have to be made. In physical currencies, paper bills are printed and coins are minted by government agencies, then distributed into the banking system. In the same way digital currencies must be created and distributed to users.
In a digital currency like AppleByte, the currency is created by a software application. This software runs on each computer connected to the AppleByte network. All of the computers connected to the network work together, sharing the complex calculations necessary to create each AppleByte, and a certain number of AppleBytes are created each day. This process is called mining, and is not free, as it costs computer power and electricity. To compensate computer owners for their work, AppleBytes are paid to the software users connected to the network. For more details on mining go here:
Mining AppleBytes How are balances kept and transactions processed?Just like at your bank, your account balance and transactions are stored on a server. At your bank, the bank owns the server. But, as a digital currency, AppleByte’s account data resides on a peer-to-peer (computer-to-computer) network that consists of all the computers logged into the network. This allows for additional security as there is no single server that hackers can attack, and each transaction is verified by all the computers on the network. Just like logging into your bank account with your browser, you can see your AppleByte balance and spend them using the AppleByte Wallet App. The wallet gives you all the info you need, just like using your browser for banking transactions. The Wallet App is available in several versions: Online, MAC, Windows, Android, and IOS....
