There is no bigger fear than when my grandma ask me about what I do for a living, and I have to put my mind working to explain my grandmother who has lived a civil war, who had to go to the public fountain close to the house with an axe to get some ice water when the tubes where frozen, who prefers when she goes to the market to keep the money in her bra instead of in the wallet, what is what I work for. But if it’s difficult to explain her about Business Intelligence, Analytics and Artificial Intelligence, the situation gots more extreme when she asked me about Bitcoin when she heard it in the news. But here we go…
Ok, Grandma, we’ll start from the beginning, what is blockchain?
Grandma, you know things are evolving pretty quick these days, and so are doing the way we communicate and interchange information. Blockchain allows us to send information and pieces of information in a quicker, safer and more transparent way. Just imagine internet as an accounting book, which everyone has a copy of. Each time I want to send you a bit of information, everybody in the internet will know about it and all of them will write it in their books. Just imagine I send you my contact information, everybody will write in his book: David sent his contact to his grandma, and his grandma received it.
When we talk about information, information might be anything. It could be a money transfer, it could be a vote for something we have already settle down, it could be the temperature taken from a device which is in the middle of the jungle,… it could be actually anything, and all this transfers of information will be written in everybody’s books.As you can see, this blockchain technology makes the process:
- easier, as we didn’t need any intermediary or middleman
- cheaper, as we didn’t have to pay high commissions to any company in between us
- transparent, as everybody know what I sent, and whom I sent it
- and secure, as there is no way I can fake the fact I sent you my contact, and you can not say you don’t have it
Now we can go further, what are the crypto currencies and why do they have such a strange name?
As you know grandma, I enjoyed my classes at the school, and I love to analyze the etymology of every word, and as my teacher told me once, if you know the origin of any word, it will make you understand a bit of everything even before anybody tells you about it.
Crypto, comes from the Greek kryptós which mean hidden or secret.
Cryptography is the science or study of the techniques of secret writing, and this brings us to our topic as our Crypto Currencies are a digital resource that work as a medium of exchange of the information we mentioned before, using cryptography to secure the transactions and to control the creation of additional units of the currency.
But if we look at it in an easier way to understand it, just imagine there is a new company, a startup, which wants to give a new service using the new technology we have just talk about, the blockchain. They will develop a protocol or an application with some great functionalities blockchain allows. Once they have their idea, and they probe it’s something many people would like to use, they’ll go to the market and ask for money, which in the traditional world would be an Initial Public Offerings (IPO), but this time they’ll call it Initial Coin Offerings (ICO).
The ICOs allow startups to create new crypto currencies called "tokens", to finance them much easier and cheaper and to carry out their projects. These tokens are usually purchased by investors, and the price of these tokens will vary depending on the value of the service the startup offers. If anyone want to use the service or application our startup created, they will have to buy their token or crypto currency to use it. It’d be the same as if we want to start working with a Thai company and we have to buy some Baths (the official currency of Thailand) in order to buy their products or use their services. If there are many people working with our startup, which means buying their crypto currency, the value of the crypto currency will increase.
Ok grandson, I might be understanding it, but then what does Bitcoin mean?
Ok, now it’s getting easier as we already have learnt many new concepts. Bitcoin was the first crypto currency and it was created in the 2009 by an unknow programmer under the name of Satoshi Nakamoto. It follows the same rules we mentioned before, so that means the transactions take place between users directly, without any intermediary. Bitcoin was called the first decentralized digital currency, as there is no main administrator and the information is shared between all the people who are using this technology, as we saw with our example of me sending you my contact information.
Although Bitcoin was created just 8 years ago, in these digital times it’s a world of time where everything can happened. And actually it already did, and Bitcoin moved from being a currency nobody cared about with a value under 0.30$ during the first years, to being recognized by many governments, institutions and companies an accepted way of payment and with a value over 3,000$.
So then?
Definitely, grandma, I’ll open you today a virtual wallet and I’ll transfer you some coins, as I’m sure that by the end of this year or the next, probably you will need it when you go to the corner grocery store :-)
P.s.: No grandparents were damage during the hard proccess of understanding so many new concepts. This experiment was meant to make everybody a bit easier to enter into this amazing new wolrd
P.s.2: The picture of this post is a regular anonymous grandma, not mine, as she didn't allow me to publish her picture :-)