Let’s say, hypothetically speaking, that you have a 27-year-old son who is fervently studying cryptocurrencies of which you know absolutely nothing. Since decades of living have told you that communication is important, you want to engage in conversation. You wonder, though, “Where do I even start?” Here is some basic knowledge that comes in four parts to get you started—“started” being the operative word.
Number one: Bitcoin is the best-known cryptocurrency, but it’s more like the Ford Model T. The Model T put the world on wheels in much the same way that bitcoin has created cryptocurrency investors and inspired other cryptocurrencies. Today there are over 15,000 cryptocurrencies totaling over 2.2 trillion dollars. Said another way, bitcoin is the first chapter of a very long novel.
Number two: Blockchain often gets confused with bitcoin but is the mystifying technology that enables cryptocurrencies to be secure. Hence the word “encrypted” usually precedes “blockchain.” It is said that encryption makes it difficult, if not impossible, to hack the system.
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Going deeper, think of blockchain in accounting terms as a decentralized public ledger of transactions that enables fund transfers, transaction settlements, and the like. What makes it unique is that it lacks a central clearing authority, like a bank, but instead relies on a network of validators. This explains why banks, who have historically been the central clearing authority, feel threatened. If you want to sound in the know, you might say to your son, “I can envision the ripple effects cryptocurrency will have on ‘fintech.’” Not having spelled out financial technology will earn…
