How to explain crypto to somebody who has no idea

explain cryptocurrency

Cryptocurrency, bitcoin, blockchain are some words you have probably heard somewhere. Cryptocurrency is one of the most interesting topics of the 21st century, as more and more people start to use it and its popularity rapidly grows throughout the world. In today’s digital world cryptocurrencies have become a global phenomenon and it’s hard to find somebody who’s involved in trading and doesn’t understand crypto and its use, but still, you may be among those people who have no idea what crypto means and it’s completely fine, as keeping up with today’s tendencies is nothing hard. The majority of the people who use it, even bankers, scientists, or developers have limited knowledge and often fail to understand the basic concepts of crypto. So, in case you are a beginner who wants to get to know cryptos, then you should read this article where I will tell you all you need to know about it and explain the basics of cryptocurrency. Remember that weeks ago, I was completely unaware even of this word but in such a short time I set a goal to explain it to you. So, let’s begin.

What is crypto?

Cryptocurrency is electronic money, a digital currency that is created for carrying out transactions while keeping the privacy of the senders and the recipients. It’s a decentralized currency meaning that cryptos are not backed by the centralized government. Cryptos are a digital alternative to traditional currencies like the US dollar and have quite a lot of advantages towards traditional money, which is why it’s often considered as the money of the future.

In the process of exchanging cryptos, cryptographic functions are used to conduct financial transactions. Even its name suggests that cryptography is an important part of cryptos that keeps the information highly safe from hackers, receiving and sending it as safely as possible because nobody can encrypt or steal your personal information while transacting money. Cryptocurrencies can be sent directly between two people by using private or public keys. These transfers happen in a very short time with minimal processing taxes, which allows users to avoid fees from traditional financial institutions.

We can say that it’s like software-based online banking without a central bank. There you have a ledger, balances, and accounts and you access your balance via password. Each cryptocurrency has a public ledger called Blockchain where you can see the past and present of each coin. If you want to make a transaction it means that you are transferring the ownership of your cryptos to someone else. There are various specific cryptocurrencies available today and among them the most popular and the most commonly-used one is Bitcoin. But there are also other digital currencies like Ripple, Litecoin, Ethereum, and many more.


As you already know, Bitcoin is just one certain type of cryptocurrency which is popular across the world. It’s digital money on the internet for transferring values. And in case you still believe that it’s too complicated for non-technical people to understand, you are mistaken because the basics are accessible to everyone who wants to learn something about it. So, bitcoin is a digital peer-to-peer decentralized cryptocurrency that is available on your digital wallet. These wallets called “Bitcoin addresses” let you send and receive Bitcoin. There are many other different wallets and other cryptos you can buy with bitcoin. People can move around balances of Bitcoin if they have their passwords.

If you want to understand how bitcoin works, first we should discuss what it’s used for. We can say that the bitcoin system is kind of like a PayPal where you can electronically send and receive payments over the internet. However, there is a difference as bitcoin is decentralized and there’s nobody out there who’s facilitating your transactions. It’s more available for average people as you don’t need a corporate third-party to verify this transaction. So, it’s a cheaper and faster alternative to credit cards, online banking transfers, and other traditional digital payment systems.

Why should you use bitcoin?

Bitcoin has tons of advantages to traditional currencies. First of all, it’s accessible to everyone. All you need is internet access without any background checks, credit cards, fees, or living in specific areas, which is certainly a pretty important factor for its popularity. As I’ve already said, you don’t need any technical skills and complex knowledge to use bitcoin. Another important advantage is its privacy which means that you can send and receive transactions without involving your identity and attaching your personal information. Besides, you are the one who sets bitcoin transaction fees and you are not charged by banks.

Also, one thing that makes bitcoin so popular is that it’s easy to liquidate. Probably, you don’t know what liquidation means, so let me explain that it’s the financial term describing a process of bringing a business to an end because it can no longer pay its obligations when they are due. But you can convert the bitcoins into cash simply as it’s available in all the crypto exchanges, its volume is enormous and exchange is easier for USD and EUR. Other than this, there are billions of bitcoins mined by somebody and only a few are available, meaning people are ready to pay money to buy bitcoins and own them. And one more advantage is that many stores accept bitcoin and it takes over about 40% of the crypto market which is like it’s attractive for people to invest in.

Brief History of Bitcoin

Bitcoin was invented in 2008 by Satoshi Nakamoto which is a pseudonym of an unknown person or a group of people. Before that, there have been many attempts to create a digital currency. It was obvious that the digital world needed something more than traditional currencies, something more useful and conventional but all of the earlier attempts of doing so failed for various reasons such as financial problems, fraud, or even contradictions between the company’s bosses and the employees. Because of these failures making a digital cash system was considered a long cause for a long time until society was introduced to bitcoin.

Over the years, bitcoin grew steadily in value and caught the attention of the mass media in 2014 which is considered as a reign of bitcoin as it was sold for more than USD 1000. After that bitcoin has had times of success and time of failures several times. Some experts predict that in 25 years the US dollar will still be the world’s most reliable currency while bitcoin may lose its popularity. However, even if it might not be around for so long, the vanishing of bitcoin is already impossible because the fundamental principles behind it will be relevant for a long time.

What is blockchain?

We’ve already mentioned blockchain several times but we still haven’t exactly explained what it means. Blockchain is a database for sorting data in cells or “blocks” that are linked together by cryptographic codes. This database is distributed on different computers and is not stored in one central location. In bitcoin, it describes a public ledger where all the information about the transactions is stored.

Concerns about bitcoin

Beginners usually question the reliability of bitcoin as they don’t know how it has a value at all. However, while using bitcoins you are the one who gives it the value while changing it to traditional currencies. It means that it’s ruled by the open market and isn’t derived from fiat currency or gold. People also have questions about whether they can buy things with cryptocurrencies or not. It can be used for any goods or services that accept cryptocurrencies. Generally, cryptocurrencies are legal in the USA, and in most parts of the world, you just have to pay attention to the fact that everything illegal otherwise, is also illegal with the cryptocurrencies.


Finally, I hope that after reading this article you know a bit more about cryptocurrencies and how they work. Although it may not be enough to fully understand the mechanisms behind the cryptos, now you probably have some information about one of the most popular currencies and popular terms in finances and economics. Cryptocurrencies did change the world and now people around the world are buying bitcoins to protect themselves from the devaluation of their national currencies. We can certainly say that the revolution in the financial sector started back to when bitcoin was first introduced and now central banks and governments have realized that it has the potential to draw their control away. So, now it’s up to you to decide, whether to become part of this revolution or stand beside and observe.