Being in the business of cryptocurrency, I’ve had some interesting conversations with people at various levels of knowledge about this topic. After talking about cryptocurrency with my 10-year-old daughter, I decided to sit down and write down some ideas on how I’d explain cryptocurrency to someone who has never heard of it before. Here are my thoughts!
In ancient times currency used to be backed by gold or silver, and these days fiat currencies are backed by the good faith and credit of their respective governments. Cryptocurrency, on the other hand, doesn’t rely on any government to back it up – it relies on cryptography instead.
For my daughter, that means Bitcoin and other cryptocurrencies have magic math powers because they can be traded and used in transactions with complete anonymity – no one can see how much you have or where it came from! But there’s more to cryptocurrency than just magic math powers… let me explain!
What is Cryptocurrency? | Cryptocurrency in 2023
Cryptocurrency is a digital currency that uses cryptography for security. Cryptography is the practice and study of techniques for secure communication in the presence of third parties (i.e., those who are not participants in the communication). The word comes from the ancient Greek κρυπτος Kryptos, meaning ‘hidden’ or ‘secret’. It can be used as an adjective (for example, a hidden treasure) and also as a noun (for example, the hidden meaning of this sentence). Cryptocurrencies use cryptographic algorithms such as public key encryption which produces pairs of keys: one public key is published while the other is kept private. Data encrypted with one key can only be decrypted with its paired private key.
A quick overview of how a cryptocurrency works.
A cryptocurrency is a type of digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently from a central bank. Bitcoin was the first decentralized cryptocurrency, meaning that it wasn’t controlled by any one person or government.
The idea for Bitcoin first came about in 2008 and the network began operating in 2009 with the release of its first open-source software client, Bitcoin Core. Bitcoins are not issued by any central authority and can be exchanged without incurring any cost as long as you know how to use them.
When someone sends money to a bitcoin address, they do this digitally by signing off ownership of the coins. In order to keep transactions confidential (and make people feel more confident when they’re sending something valuable), an electronic signature is created with three pieces of information: the sender’s private key, their public key, and their transaction data.
It’s like a digital signature because it can’t be forged; even though other people might have access to these keys, only the original owner will ever sign off with their private key for specific transactions.
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Why should my daughter care about this?
I want my daughter to be knowledgeable about the world she is growing up in. I want her to understand what is happening and why, and have the ability to make informed decisions about the future. I also want her to be able to explain these concepts when she has conversations with her friends. So I tried explaining it to her by using some of the example sentences on Wikipedia’s definition of cryptocurrency:
Cryptocurrencies are a type of digital currency that relies on cryptography for chaining together digital signatures of asset transfers, peer-to-peer networking, and decentralization.
She seemed excited at first but then got confused as we talked more about it. She asked me how you can send money from one person to another if they are so far away from each other. (I told her I would try to find out) She wanted to know if people could just make their own cryptocurrencies and use them to buy things (I told her that was very possible). And she wanted to know how blockchain technology works (I said Don’t worry, daddy will teach you more about blockchain technology.).
How do buying and selling work?
You can buy and sell Bitcoin on cryptocurrency exchanges. These exchanges exist online, where you can open an account, deposit money from your bank account, and then start trading by buying Bitcoin. When you want to sell your Bitcoin, you will have the option of withdrawing it back into your bank account or converting it into another cryptocurrency.
This is a really great way for people who are not familiar with using cryptocurrencies to get started because they do not have to purchase any themselves. All they need to do is sign up for a free account at Coinbase, which acts as an exchange or any other exchange.
From there, you can use their Buying tab to pick which crypto you would like to purchase. Once selected, choose your desired amount and hit Purchase. Once that transaction has gone through successfully (which could take up to a week), the funds will be deposited in your account and ready for withdrawal.
Is there anything she can do with it?
That’s a tough question. Right now, there are many things you can do with cryptocurrency besides buying and selling, it can be used for more things like paying for goods, and services or as a form of investment.
When you send someone money today, you might have to go through your bank and wait a few days before that person gets the money. That won’t be the case with cryptocurrency because it will be like sending an email – just instant!
The most popular cryptocurrency is called Bitcoin. In order to get Bitcoin, you need to mine for it by solving math problems on your computer or by buying them from someone else. Mining is difficult and requires expensive equipment, so people often buy Bitcoins instead.
If you want to use Bitcoin, all you need is a mobile device (like a phone) or PC and an internet connection. To send Bitcoin, you create a transaction by entering the receiver’s address and the amount to transfer. You then sign off on the transaction with your private key – this lets anyone know who sent it. The final step is validating the transaction which takes about ten minutes. Once validated, the transaction goes onto a block which creates new units of currency – this process is known as mining. Miners are rewarded with these new coins for solving math problems on their computers. And that’s how cryptocurrencies work!
What is the word Cryptocurrency mean? | Cryptocurrency by AG
The word Cryptocurrency comes from the ancient Greek κρυπτος Kryptos, meaning ‘hidden‘ or ‘secret‘. It can be used as an adjective (for example, a hidden treasure) and also as a noun (for example, the hidden meaning of this sentence).
What is Cryptocurrency? | Cryptocurrency in 2023 – by AG
Cryptocurrency is a digital currency that uses cryptography for security. Cryptography is the practice and study of techniques for secure communication in the presence of third parties (i.e., those who are not participants in the communication).