Explaining Bitcoin to regular people

[Coma]

By regular people I mean non close to the IT related world.
I was wondering how one regular person perceives the concepto of Bitcoin and how I perceived it being a software developer. Tried to explain it to some people and I frquently ended up explaining what a hash is, and once I could do it, still had a hard time explaining how a currency was based on that. I even had problems explaining it to people from IT. I even still have some minor doubts, which I think are mostly about economy more than technology-wise.

I also think the begginer guides are not efficient and/or even slightly misleading.

It would be cool if some of you could share your experience on how did you explained the Bitcoin system to someone.

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[Jaime Frontero]

"it's like PayPal without the fees."

easy.  (forget who first said that - sorry.  it wasn't me.)

just get them pumped about commerce in Bitcoin.  explain the security and how fast it is.  and how unstoppable and essentially unregulatable.

and how appreciation of the exchange rate is beneficial in commerce.

skip the tech, and the mining.  if they want to know, they can find out.

[FreeMoney]

"it's like PayPal without the fees."

easy.  (forget who first said that - sorry.  it wasn't me.)

just get them pumped about commerce in Bitcoin.  explain the security and how fast it is.  and how unstoppable and essentially unregulatable.

and how appreciation of the exchange rate is beneficial in commerce.

skip the tech, and the mining.  if they want to know, they can find out.

You need to say that it isn't dollars or they are going to think they have to chance of losing value. PayPal means to people that they get their dollars back (eventually, lol).

[Sukrim]

I sometimes compare it to gold/diamonds:

* It is a rare, limited ressource
* It's value compared to EUR/USD... can rise and fall, based on demand (supply is more or less constant)
* BTC themselves are not very valuable/useful (like gold which has only limited chemical uses, diamonds can be used industrially as they are hard stones, but no need for "nice, shiny" ones...) the value they have is artificial
* Even though they are "computer stuff" and a lot of people believe "everything can be hacked" (and also "the police can hack everything" interestingly... hello Hollywood/CSI/24!), great care has been taken that they can NOT be cloned/copied/"hacked" - as long as the own "wallet" is kept safe, the coins in there are safe too
* They are a mixture between "cash money" (anonymous, no fees [well, not really true, there can be tiny fees] when paying in cash) and "online banking money" (transactions take a little bit of time, ~1 hour, you'll need to send transactions online)


Actually I don't really see the need to explain how a hashed blockchain works when explaining Bitcoins. Do you start to explain the SSL-protocol when telling someone how to do online banking?!
The currency is based on processing the current transactions. This requires enormous computing power and until the whole 21 million BTC are "mined" (like gold/diamonds are being mined) a few of these are being generated and given to the people that provide this computing power. This will however become less and less until the 21 million limit is reached and after that it is anticipated that people will include small "tips" to get their transactions done.

[Jaime Frontero]

"it's like PayPal without the fees."

easy.  (forget who first said that - sorry.  it wasn't me.)

just get them pumped about commerce in Bitcoin.  explain the security and how fast it is.  and how unstoppable and essentially unregulatable.

and how appreciation of the exchange rate is beneficial in commerce.

skip the tech, and the mining.  if they want to know, they can find out.

You need to say that it isn't dollars or they are going to think they have to chance of losing value. PayPal means to people that they get their dollars back (eventually, lol).

true.

but that's where this comes into play:

and how appreciation of the exchange rate is beneficial in commerce.

[PLATO]

Bitcoin's the first mainstream internet currency. We have dollars, pesos, yuan, and now Bitcoins. The system's brand new, which is why you're hearing about it now. It's snowballing right now; in a few years everyone will have heard of it. There's a few big advantages of using Bitcoins over Dollars.

First, Bitcoin is decentralized. There's no bank or government that's in charge of the system. Instead, Bitcoin users agree on a common set of rules, and thanks to open source programming and cryptography, the system is secure. This decentralization means that unlike previous digital currencies, there's no one in the middle - Digicash, EGold, Liberty Dollars all failed due to noncompliance or poor business management or whatever, but Bitcoin will exist as long as people use it.

Second, there's a limited supply of Bitcoins. A coke cost your grandma a nickel, but costs you a buck fifty, because the Federal Reserve keeps printing more money, making each dollar worth a bit less. No one can 'print more Bitcoins' - one bitcoin will always be the same slice of the Bitcoin pie. [There are 21 million Bitcoins, but, you can split them up - I can senddue to inflation you 0.0005 Bitcoins, etc.]

Third, it's a democratic system. Using Bitcoins is as simple as getting a Bitcoin receiving address and telling people the address. Any Bitcoins sent to that address are now yours. It's just as easy to start receiving Bitcoins as it is to send Bitcoins, but if you want to accept Visa, it's a lot more difficult than simply using your Visa on Amazon.com.

[How does it work?]
Every Bitcoin transaction, ever, is stored in something called the Blockchain. This is like an accounting ledger that tracks which addresses are authorized to spend Bitcoins. When Alice's address sends Bob's address a bitcoin, this shows up in the block chain, at which point Bob is now the owner of the bitcoin. If Alice tries to send that same bitcoin to Carol, Carol's Bitcoin software will check the blockchain, and notice that she's no longer authorized to spend it, and reject the transaction.

[Who makes Bitcoins? How are they created?]
Right now there are 6 million bitcoins. They're generated at a predictable rate, as rewards for "miners" processing transactions for the network. This keeps everything secure - the more miners there are, the harder it is to attack the network. There is a competitive market to earn these coins; since they're in high demand. Anyone can use their computer to try and mine Bitcoins, but practically speaking, you need a high-end ATI graphics card to see much profit. The total computing power of the Bitcoin network is bigger than Folding@Home.

[Horkabork]

Knowing that my shady friends are more interested in things that are framed as being either dangerous or illegal, I just lie and say that it's a big Ponzi scheme. This makes them more inclined to join in than if I tried to explain bitcoins for real. Later, when they've had a chance to mine or trade bitcoins, we'll both know that I lied and have a laugh and then probably go eat some Thai food or something.

Then, much like what happened with bitcoins, someone will try to eat a really hot Thai dish and I'll say, "I don't know man. I think that's too hot for you." and they'll eat it just to prove me wrong and set their mouth on fire. This is how my relationships go. People are more likely to learn or do things if it is to prove me wrong.

[PLATO]

horkabork do you have a twitter feed I enjoyed that last post

[airdata]

My wife said " but where does the money come from?"

[Jaime Frontero]

My wife said " but where does the money come from?"

the BitStork.

[Horkabork]

horkabork do you have a twitter feed I enjoyed that last post

Not anymore. The only twitter account I ever used was for the sole purpose of tweeting while I was pooping or when I saw someone heading to the bathroom to poop. It was all just gross pooping details and postulating what coworkers ate the previous day based on my observations. Friends all thought it was some sort of commentary on how I thought that they should stop tweeting and facebooking mundane crap in their lives that nobody cares about. But the real purpose was that I had an office right next to a bathroom and devised the scheme as a way to make coworkers walk to another floor to do their business. It worked.

In this tale there is actually some sort of half-assed lesson about explaining bitcoins. People are less inclined to eat sausage if you truthfully and accurately explain sausage-making to them, unless they are huge sausage nerds who are really into sausage production. If your goal is to get people into bitcoins and they aren't massive finance nerds, sometimes it's best to just talk about delicious sausages and how you are able to buy them and eat them with your profits from bitcoin mining.

[BombaUcigasa]

My wife said " but where does the money come from?"

Computing Power / ( Electricity + Time )

You are buying bitcoins in your own house while sitting on your couch.

[Sukrim]

My wife said " but where does the money come from?"

Tell your wife to imagine a blank sheet of paper.
Then she should imagine whoever in your country prints money (federal bank...) printing a bank note on that paper.
Ask her "Were did the 100 Dollar/Euros/... come from, that were printed on this sheet of paper?"

Answer: Someone calculated that it's ok and reasonable at this point of time to issue x amount of bank notes. They come from nowhere.

The same goes for bitcoin, only that it has been predetermined far longer than with other money (as the boss of the central bank might have a good day and decide to print 2 million dollars more, because it's Tuesday) since after the money has been released, there is no longer someone controlling it. It has rather been said "This is how much there will be, ever!" and if anyone in the network tries to change this, the rest of the network will just say "you don't play by the initial rules, I don't believe you!".

[PabloW]

When I explain people I have to go all back and explain them why the money (a piece of paper) has a value, and I tell them to think about how money was created in first place

[Coma]

My wife said " but where does the money come from?"

That's what I'm talking about. Great posts guys, keep 'em coming.

[kjj]

My wife said " but where does the money come from?"

the BitStork.

+1

[nazgulnarsil]

I generally lead strong.

U WANT MIRRION DOLLAR?!

[hazek]

Would this be a valid way of how to explain it?: http://forum.bitcoin.org/index.php?topic=10502.0

[Coma]

Would this be a valid way of how to explain it?: http://forum.bitcoin.org/index.php?topic=10502.0

I think the content is important, but it should be as didactic and sythetic as possible. Maybe too much information can be counterproductive. Still thinking of it.

[nazgulnarsil]

I just tried explaining BTC to an old person IRL.  They don't believe that anything that you can't hold in your hand has any value.  The example of chinese people mining gold in WoW as a full time job didn't phase them.