Topic: Using metaphor to help ordinary folks understand bitcoin (Read 6969 times)

Crypto exchanges are the replica of the old bartering system with some dedicated cryptocurrencies like Bitcoin. "history repeats itself" in either of the ways and that is going to happen in the trading system with the increasing use of Bitcoin for the exchange of goods and services.

You explained it in details, I think there's nobody including children or old folks who don't understand the way you explain.

Bitcoin is simply a ledger of user names with their corresponding balance of money.

The only way to move money from one account to another is by using your password to take money from your user name and add it to someone else's user name.

But in order to keep your user name and password from being hacked your user name is a long string of numbers and letters and your password is also a long string of letters and numbers.

Everyone can see your user name, so if they have your password they can move your money.


And new money is added by solving an algorithm. The user that solves it gets money added to his user account.

This is interesting but has some flaws. I will re-write it when I get home to my computer (I'm typing on my phone now) because I think it has some useful ideas but is confusing in certain ways.

With people who are techno savvy, I say that Bitcoin is the world's first truly peer-to-peer digital currency. That piques their interest.

For others, it's the concept of mining and how Bitcoin is created that is a challenge to explain.

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There's a new faucet in the middle of town.  It's dispensing a metal called Bitcoin. This new metal is vastly superior to traditional forms of currency (dollars, pesos, yen, even gold) in many ways, so people in this town are collecting it to trade for things.

Alice has her bucket hooked to the faucet. She believes in the idea of this new kind of gold and her bucket is pretty nice. She gets a block of coins every 10 minutes, but she must keep her bucket securely fastened to the faucet so others cannot steal it.

Along comes Steve. He believes in this idea as well. He hooks up his bucket, which is the same as Alice's, and contributes his time and resources to watch it. Because the faucet only dispenses a limited amount of coins every 10 minutes, he must split his reward evenly with Alice.

Soon Harry, Fred, Egon & Spangler show up with their buckets. Soon, the whole town is mining for bitcoins using the same bucket and splitting the loot.

Now here comes Mike with his fancy bucket. Not only is it bigger, but it's faster at collecting bitcoins. It's also more flashy so to scare away would-be thieves. Mike hooks up to the faucet and collects a larger percentage of bitcoins because of his better bucket. Soon, Alice, Steve, Bob notice Mike's fancy bucket and higher profits. They and the others are now running out to upgrade their buckets.

Before long, bucket shops have sprung up all over town selling the newest, largest, and fanciest buckets. The more of the best, most powerful buckets that are hooked up to the faucet, the more secure the Bitcoin system is, and the more coins are released into the wild (to a point). Alice, Bob, Mike and the others have become like system administrators for Bitcoin, helping to secure it from pirates, marauders and thieves; and their buckets process and approve transactions from all other Bitcoin users, so long as they stay properly connected to the original faucet.

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...And so on. You really have to dumb it down for some people. And that means no mentioning computers, mathematics, economics or the internet. To really get them thinking, you could end by saying that the faucets are not all in one town, but all over the world, and each faucet is simply an internet connection.

This will be useful with just about everyone I know 

This is incorrect and misleading, not just an oversimplification. Bitcoin is a digital gold, perhaps, or a bunch of safes floating in the cloud and a bunch of digital gold you can move between those safes, or many other things, but it is not "just like a virtual dollar" at all and saying so is missing the whole point. Paypal is just like a virtual dollar.

I find keeping it short and simple is most effective.

This is top-notch. Exactly the kind of response I was hoping for when I posted this thread to begin with. Thanks, Vladimir.

I plan to write a clear, easy-to-comprehend explanation of why fiat money is a ripoff sometime soon as well, which will help those folks who don't immediately get how much better gold is than USD.

Bitcoin is digital gold with a few added features for convenience and security.  Gold 2.0 

Bitcoin is just like a virtual dollar

This ^ hits the nail on the head. Banks are not secure, they are very vulnerable to a number of different sorts of attack, and also to government seizure. Whether web wallets are "as secure as a bank" or not, they are very insecure and a bad place to keep your money. I for one would prefer a web wallet (which I despise) over a bank (which I truly hate) but honestly I use neither and would not recommend either. I haven't had a bank account in years.

The owners of banks are "above the law" in many ways; the operators of web wallets are also hard to prosecute for entirely different reasons. In either case you are trusting somebody to hold your money for you and you have relinquished control of it. When your money is in the bank, it's not the same as when your money is in a safe in your closet.

Of course, if you're holding government issued currency in your safe at home, your wealth is much less secure than if you're holding bitcoins in your safe at home, since the issuing government can overprint and inflate the currency rendering your money useless and your wealth gone.

When your money is in a safe in the cloud and in the form of bitcoins and you have one key and a trusted third party has a cryptographically scrambled copy of that key, you're in a whole new ballpark and your money is protected from all the worst threats that make a safe in your closet or an account at the bank both excessively risky (i.e. your house burning down/being burglarized or the government seizing your funds, or the key to your safe being stolen, or the bank operators making risky bets with your money and losing your fortune).

The hybrid wallet filled with bitcoins is in my opinion the safest, most secure, best all-around bet for holding wealth at this moment in history.

Go ahead, call me crazy.

Please check this, too. Pretty scary.
And not to be completely OT (sorry OP), I'll just repost this.

i don't see any good pipes and tubes references in there ... i.e. probably not good for senile congress techno-phobes.

Bitcoinica
Instawallet
MyBitcoin

Coinbase had already been hacked twice (server rooted due to outdated / vulnerable software, plus ruby exploit), but the attacker worked with Coinbase instead of slowing emptying the wallet.

Why do you think this?

Web wallets are not as secure as banks.

For web wallets you could just use the concept of a bank, they keep your keys in their bank. Many people are already familiar with online banking and having a password to make transactions.

I've re-written the entire metaphor to be a bit more ready-to-use/publish. I would love it if somebody would come forward and help with some graphics. I will be writing more like this one; we can consider this just specifically an analogy to help folks pick the best wallet for their purposes.

If somebody takes the initiative to sketch up some graphics, perhaps following the ideas I've put in brackets below, or just using your own creativity, I will begin a blog and try to write a new analogy depicting a different aspect of bitcoin every week or two. This analogy really only gets across one side of bitcoin, and really only provides info about how to do certain things. I have many other ideas.



This analogy is to help you understand how to keep your coins safe and how to choose a wallet.

Imagine there are a bunch of safes, each with a number printed on them, lined up in a public place. The safes are very secure, bolted to the ground, and no known technology can cut them open.

[graphic depicting a bunch of safes with numbers stamped on them, lined up, in a cloud, hinting at the idea that this public space is actually “on the web” or “in the cloud” in some sense]

Each safe has a slot in the top, allowing money to be dropped in. To get the money out, you need the key that opens the safe. The keys are also very secure, and nobody can pick the lock or open it without a perfect copy of the key.

[graphic depicting a closeup of one of the safes number 253, with a slot in the top and a coin being dropped in it, little cartoon style lines to show that the coin is in motion being dropped in the slot]

Each safe is made of bulletproof glass, so anybody can see how much money is in each safe; but the safes don't have names on them, only numbers, so unless somebody tells you “safe number 253 is mine!” or you see him opening that safe, you don't know which safe belongs to which person.

[graphic depicting safe number 253, with transparent walls, now with a small stack of coins inside of it]

If you want to send Bob some money, you just ask him which safe is his, and he'll tell you, “mine is safe number 253” and you can go drop some money in the slot on the top. Now, maybe Bob doesn't want you (or anybody else) to know how much money he has. But the safe is see-through, made of bulletproof glass, so when you go to drop money in, you can see what he's got, right?

The trick is, anybody can have as many safes as they want. So Bob gets another safe, number 481. When he wants people to send him money, he says “put it in safe number 253,” but then periodically, he goes and takes his money out of safe number 253 and drops it in the slot in the top of safe number 481. Since anybody can drop money into any of the safes, even if you see him dropping money into safe number 481, you don't know that he owns that safe—you would only know he owns it if you see him opening the safe to take money out. So if he ever needs to get some money out of safe number 481, he might expose his secret, and everybody could see how much money he has! But Bob is smart; when he needs to get money out of his secret safe, he always wears a mask, and so nobody can ever tell he owns safe number 481.

[graphic depicting a character in a guy fawkes mask dropping money in safe number 481, which has lots of coins in it]


So nobody can tell how many safes Bob owns, or how much money he has; but if he wants somebody to send him money, he can tell them the number of one of his safes.

Now, for Bob's frequent-use safe, number 253, he has to access it pretty often. When he wants to buy something, that's where he grabs the money from; and when somebody sends him a big chunk of money, he needs to open the safe to pull that money out and stick it in one of his secret safes. Bob is afraid that somebody might steal his key. Somebody could look and see that his safe has a big stack of bills in it, and if they know it's his safe, they might go sneak in his house and search for his key. Bob thinks about hiding the key in a super-secure place; maybe burying it in the woods behind his house where nobody will ever find it. But he has to use it so often! He can't dig it up and bury it again every time.

[graphic picturing Bob with worried expression on face, with thought bubble of digging beneath a tree to bury a coin]

Then Bob hears about Mr. Web Wallet. Mr. Web Wallet and his buddy Mr. Online Exchange offer some services. Mr. Online Exchange (or Mr. OE for short) offers some other services as well, but both Mr. Web Wallet (Mr. WW for short) and Mr. OE offer a key-holding service. Mr. WW or Mr. OE will take your key, and let you choose a username and password. Whenever you want to take some money from your safe, you just tell them your username and password, and they'll go open the safe for you and hand you the money, or just drop it into whichever other safe you tell them to.

[graphic picturing two fat fellows like the banker from the Monopoly game, one with “Mr. WW” on his hat and one with “Mr. OE” on his hat, each looking a bit like a slimy car salesman, that cocky “we're gonna getcha” grin on their faces, perhaps each one with a big key-ring full of keys and another with a clipboard on which there are many usernames and passwords and at the bottom there is a blank line with an X next to it, waiting for Bob to sign up. Perhaps Bob can be pictured in this graphic as well, looking a little skeptical or hesitant, maybe scratching his head]

For a minute, Bob thinks this is great; he doesn't have to worry about somebody stealing his key, because he knows Mr. OE and Mr. WW have good security guards; they have lots and lots of keys from all their customers, and they charge various small fees for their services, so they can afford to spend a lot of money on security. But Bob is still worried. What if somebody robs Mr. OE or Mr. WW and gets all the keys? Or worse yet, what if Mr. OE or Mr. WW decides that they'd rather steal all the money out of all the safes they have keys for and just take off, instead of trying to earn money from their small fees? Bob has also heard that the Government doesn't like Mr. OE and Mr. WW and might tell them not to open safes for anybody without asking them for ID first. Bob doesn't like that, he doesn't want to have to give ID to get to his money and he doesn't want to be vulnerable to theft or fraud.

Bob is about to despair. Suddenly, he hears about Mr. Hybrid Wallet (or Mr. HW). Mr. HW offers a similar service, but with a much better system. Mr. HW asks you to choose a username and password. Mr. HW takes your key and makes a copy of it. He gives you one of the copies, then he takes his, and writes your password on it. Then he chops it into a bunch of pieces so that there is only one letter on each piece. He holds onto the chopped up pieces of your key, and puts them in a little box marked with your username. When you want to get money out of your safe, you go to Mr. HW and tell him your username and password. He goes to your little box of key pieces, and puts all the pieces back together, using your password to guide him. Then he opens your safe for you, and either gives you the money or drops it into whichever safe you ask him to. When he's done, he takes the key back apart into all the pieces, and puts it back in the little box with your username.

[graphic showing a key with a long password (12 characters or more) written on it, then showing that same key chopped into one piece for each character, then showing those pieces dumped into a box with “BobSmith239” written on it and perhaps even that box put onto a shelf full of other boxes with usernames on them]

So Bob goes with Mr. HW, the Hybrid Wallet. He takes his copy of the key, and he buries it under his favorite sycamore tree in the woods behind his house where nobody can ever find it. He rests easy at night, knowing that nobody can steal his key. He knows that if anybody breaks into Mr. HW's secure facility, and steals all the keys, they won't be able to open his safe, since his key is cut into little tiny pieces. Mr. HW doesn't keep Bob's password written down anywhere, and without the password, nobody can figure out how the key goes back together. Bob is no fool; he didn't pick “CAT” for a password, since he knows that would make it too easy for a thief to put the three pieces of his key back together; by choosing a password that's at least 12 characters long he knows that it will be mathematically unfeasible for the thief to figure out which way the 12 pieces go.

[graphic showing Bob sleeping soundly, with a thought bubble showing his key buried under a tree and his coins stacked in his safe and a puzzled thief trying to put together the chopped-up pieces of his other key]

If Mr. HW ever loses the pieces of the key, or gets shut down by the Government, or gets robbed by a thief, Bob can just go out back and dig his key up from under the sycamore tree, go open his safe, and take out his money. Bob is safe and secure.

Choose for yourself based upon your circumstances how you want to store your coins; but remember, if you hold the key yourself, you are responsible for making sure it can't be lost or stolen, and if you let an online exchange or web wallet hold your key for you, you are trusting them to keep your key safe and secure and to grant you access to your safe whenever you want. The hybrid wallet has the best of both worlds and limits the risk on both ends.

If you use a software wallet such as Bitcoin-QT or Electrum or any other wallet which you download and run as a program on your computer, you are holding your own key and must keep it secure yourself. If you use Mt. Gox or any other exchange site, or any "web-wallet," you are letting Mr. WW or Mr. OE hold your key for you. If you use Blockchain.info's Hybrid Wallet, or any other Hybrid Wallet, you are using Mr. HW.

[graphic showing Bob with his key visible in his pocket, an "=" symbol, and then the Bitcoin-QT logo and the Electrum logo; then showing Mr. WW and Mr. OE, an "=" symbol, and then the Mt. Gox logo and the Instawallet logo; then showing Mr. HW (who should look very trustworthy), an "=" symbol, and then the blockchain.info logo]

I am very happy to have threat like this which explain all things so now i can talk too much about this with any body