How to Explain Cryptocurrency
to Different Ages

7 min readFeb 26, 2018

What is Cryptocurrency?

Cryptocurrency can be a complicated subject to understand, especially with new types of altcoins emerging and new trends happening all the time. We want to make it easy for you to understand what cryptocurrency is and how it is secured. We have created explanations of cryptocurrency that are tailored to different ages and levels of experience to help you out.

Child 🍪

If I give you a cookie, then you have a cookie! You saw me put it in your hand and now it’s yours. Simple! I didn’t need anyone, like your aunt, to watch me give it to you. The cookie is yours now, and you can do whatever you want with it.

Imagine that I gave you a digital cookie. You can’t touch it, but it’s still yours. The problem with a digital cookie is that it could be copied easily and given to other people. How do you know that I didn’t give that digital cookie to someone else too? Because it’s digital, you can’t see me give it away, so you can’t really know. Right? Maybe I made a copy of it and gave it to your friend Allison too.

But luckily, you can be sure that I gave only you the digital cookie because some smart computer scientists have figured it out! They gave a number to each digital cookie. So I can give you digital cookie #1, but I can’t give it to anyone else. Computers make sure that each digital cookie has a different number and they keep track of when you give or get a cookie in a digital book to make sure everything is okay.

And that’s what cryptocurrency is. It’s digital money, like a digital cookie, that you can give to anyone in the world. Smart computers keep track of who you send cryptocurrency to and who sends it to you too.

Teenager 💵

Cryptocurrency is a new type of money that you’ve probably heard a lot about. It is essentially digital money that you can directly send to or receive from anyone in the world. You don’t need a third party, like a bank, to oversee the transaction because there isn’t an organization that acts as a middle man. You have complete control of your cryptocurrency and can trade it with anyone you want without having to go through anyone else.

You store cryptocurrency in a digital wallet that only you can open because you are the only one with the special key (a string of numbers and letters).

The danger with anything digital is that there are hackers out there who try to copy the digital code. Computer scientists have figured out how to keep hackers from duplicating cryptocurrency by using complex mathematical formulas. Plus, cryptocurrency relies on Blockchain to help keep it secure.

Blockchain is essentially a record of all the transactions made with digital currency. It’s very similar to a record that a store keeps with all of its transactions. All the transactions that happen during the same time frame are called “blocks” and they are added to the chain of existing block transactions, which is where the name “blockchain” comes from. The mathematical formulas help keep this record safe and secure. And Blockchain is public, so once your transaction is added to it, everyone in the world can see it, making it impossible to change.

College Student 👨‍🎓👩‍🎓

Cryptocurrency is a decentralized digital currency. No one controls or verifies these digital transactions, allowing cryptocurrency to be “a peer-to-peer electronic cash system.” In this way, cryptocurrency hearkens back to olden times when individuals made direct transactions with each other, trading goods and services so that both parties benefited.

Cryptocurrency is called “crypto”currency because of its use of cryptography, a complex system of algorithms, to keep your information secured. Cryptography allows you to store your cryptocurrency in a digital wallet, which is like a digital version of your traditional leather wallet. This wallet secures your payment information, passwords, and cryptocurrency, and it is protected by a private password (a string of letters and numbers) so only you can access it. Once your wallet is set up, you can make trades and complete cryptocurrency transactions.

These cryptocurrency transactions are kept secure by Blockchain, which helps protect accounts, balances, and transactions by recording everything in a public ledger. Different transactions that happen during the same time frame, called “blocks,” are added to the ledger, or “chain.” (Hence, Blockchain.) This ledger is available to everyone, meaning that once you make a cryptocurrency transaction, the cryptocurrency peer network can view it. Each peer has the complete ledger of all transactions, keeping all accounts balanced and secured.

For example, Alex sends cryptocurrency to Bryan and digitally signs off on the transaction. That transaction is broadcasted to the cryptocurrency network and distributed to every peer through the Blockchain.

Miners have to confirm the transaction to make sure everything is legitimate. They essentially put their digital stamp of approval on the transaction to add it to the Blockchain. Once the transaction is confirmed, it cannot be forged or reversed and becomes part of the permanent record.

Grad Student 🎓

Cryptocurrency is a form of digital currency that relies on a peer-to-peer network to verify transactions. It is decentralized, meaning there is no central controlling authority or servers involved. Your cryptocurrency is secured in a digital wallet that houses your personal information and passwords. This wallet is secured by cryptography, a system rooted in mathematical algorithms and computer science that converts your information into an un-crackable code.

Every cryptocurrency transaction is essentially a file that contains both the sender’s and the recipient’s wallet addresses (public key) and the amount of cryptocurrency that will be transferred. Each individual in the transaction must sign off on it with their private key, a string of letters and numbers that help verify your identity and digital wallet.

Your digital wallet can be stored on a computer, mobile device, or on a sort of physical storage device, like a USB. Most wallets have a friendly interface that helps you make transactions. Some methods of storage are safer than others, but all rely on the same concept of containing a private and a public key required for transactions.

The biggest concern that any payment method has to deal with is double-spending, or spending the same currency twice. The solution: Blockchain. Blockchain is a public ledger that houses the transaction history for cryptocurrency. It is available to the network of cryptocurrency holders, and is, therefore, duplicated and shared across a network of computers. This ledger can be added upon, but you can’t change previous data. Once a transaction is confirmed, it becomes part of the immutable record.

Transactions are confirmed by miners. Miners rely on powerful computers to help them figure out 63-digit hexadecimal numbers (hash) to verify a transaction. No actual advanced math is needed to be a miner, but you do need computing power. Miners earn a small amount of cryptocurrency for each transaction that they verify. This is the only way that new cryptocurrency is generated, and there is a cap to prevent too much cryptocurrency from being created at once. In that sense, miners are “minting” new cryptocurrency. Once miners confirm a transaction, it is broadcast through the Blockchain and becomes a permanent part of the database.

Expert 🤓

Cryptocurrency is a decentralized digital currency that is essentially an encrypted string of data. There is no governing entity or authority that controls or manipulates the market, and users are free to make direct trades with one another. This digital currency is stored in a digital wallet, a software-based system to enable transactions. Users can store their digital wallet on a physical storage devices or on computers, mobile devices, paper, or by other methods. Each user has a unique private and public key that help verify the identity of the user when making transactions.

Cryptocurrency is built on Blockchain, a transparent, public, append-only ledger to prevent double-spending. Blockchain relies on creating a consensus between scattered parties. These parties do not need to trust each other; they only need to trust the mechanism through which their consensus is reached. Any party can make a change to the ledger, but that change must be agreed upon before it is added to the Blockchain.

This peer-to-peer network allows you to add data to it, but you cannot change previous data. The ledger is publicly distributed through the network of cryptocurrency users. This distributed database cannot be manipulated, hacked, or changed once it is published, helping to prevent fraud.

Cryptocurrency transactions contain sender’s and recipient’s public key and the amount of cryptocurrency to be exchanged. Each individual must also verify the transaction with their private key. Their transaction is appended to the Blockchain and must be verified by a miner.

Miners use computing power to help them become the first to figure out a hash (an encrypted 63-digit hexadecimal number) in order to verify a transaction. Miners receive a small amount of cryptocurrency for verifying transactions. Mining for cryptocurrency is the only way to generate and mint additional currency.

This system, however, adapts the challenges of figuring out a hash so that no one actor on the network consistently solves more challenges than other actors. The challenges are randomized, assuring that no one actor controls the Blockchain by adding or blocking transactions in the ledger that others agree with. When miners verify a transaction, the transaction becomes part of the Blockchain and can no longer be altered.

There are different types of cryptocurrencies on the market, but all are worldwide decentralized currencies. Cryptocurrencies like Bitcoin and Ethereum are public cryptocurrencies, while private currencies are being created by companies around the world.

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