Experts explain how to address common questions newcomers may have regarding bitcoin and the blockchain space.
With Bitcoin’s (BTC) recent price movements drawing fresh attention to the blockchain industry, conversations centered around cryptocurrency have once again begun to see an uptick. Google Trends data shows that searches for the term “Bitcoin” have increased to yearly highs following the asset’s rally above $19,000.
Given the current circumstances, discussion centered around Bitcoin, general questions about blockchain and cryptocurrencies may come up at the Thanksgiving table. Yet while the crypto community has a lot to be thankful for this year, newcomers and the crypto curious may want to know more about the space than just the price of Bitcoin. With this in mind, leading experts shared some ways to explain certain Bitcoin and blockchain topics to friends and family this holiday.
Explaining Bitcoin as a currency
If you’ve ever ventured down the crypto rabbit hole, there is a good chance that your friends and family will ask you about Bitcoin and its function as a currency.
Tim Draper – the famous venture capitalist and legendary Bitcoin investor – told Cointelegraph that it’s best to let crypto newcomers know that Bitcoin is a trusted currency that isn’t subject to government control. “Bitcoin isn’t subject to the whims of a government that will freely flood the market with 13 trillion of them, diluting yours,” he said.
Draper further mentioned that retailers who accept Bitcoin don’t have to pay between 2% to 4% each time a debit card is swiped. Lower transaction fees are indeed one of the main benefits for retailers that accept cryptocurrency. According to findings from research firm Forrester and BitPay – a Bitcoin payment service provider – retailers that accept cryptocurrencies via BitPay only pay a 1% fee on purchases. The report states, “The composite merchant avoids 2.25% in transaction fees (based on primarily US rates) for every transaction completed using BitPay.”
Additionally, Draper mentioned how important it is that Bitcoin is borderless:
“Bitcoin can travel without restrictions from country-to-country. It’s also easier to send money quickly from anywhere in the world with Bitcoin. And with Bitcoin wallets and smart contracts, all the right people will be paid the right amount for their participation in a Hollywood movie, for example, even if the payments are worth fractions of a penny.”
The borderless nature of Bitcoin is extremely important, especially in countries suffering from high inflation rates and economic turmoil. For example, in countries like Argentina the demand for Bitcoin is on the rise as foreign debt accumulates.
Explaining why the price of Bitcoin is rising
While Bitcoin and other cryptocurrencies are volatile by nature, many tend to think that crypto market prices are based purely on supply and demand. However, this is only part of the equation.
Bill Barhydt, the CEO of Abra — a peer-to-peer payments platform that supports over 70 cryptocurrencies — told Cointelegraph that the price of Bitcoin is currently going up because the supply is being outpaced by demand. However, Barhydt noted that Bitcoin’s price is also being influenced by institutional interest:
“On the institutional side we have Grayscale that is taking in insane amounts of capital. Not to mention major hedge fund players announcing exposure to Bitcoin in their portfolios. This is something I said would happen this year.”
Barhydt further noted that retail interest is growing and therefore the price of Bitcoin is increasing. For example, one of the most notable wins for crypto this year has been PayPal’s announcement of support for the technology. “The bottom line is that this combination of retail and institutional buying is eating up the supply of Bitcoin at an accelerating rate,” Barhydt said.
Explaining the difference between blockchain and cryptocurrencies
Oftentimes there is confusion regarding the differences between blockchain and cryptocurrencies when discussing the topic with newcomers.
Alistair Rennie, IBM Blockchain’s general manager, told Cointelegraph that the main difference between blockchain and cryptocurrency is that blockchain is a technology underpinning cryptocurrency, while cryptocurrency is a monetary asset.
Rennie further mentioned that blockchain as a technology enables trust to be established and maintained among different parties. According to Rennie, this is possible due to the unique capabilities of blockchain to independently verify data for everyone involved with a transaction. As such, this makes blockchain useful for solving business problems outside of the cryptocurrency realm. Rennie explained:
“Blockchain acts as an immutable record-keeping system to store information such as a user’s account balance. Unlike traditional databases though, multiple (encrypted) copies of the database are shared among users so that any changes are immediately apparent. This makes it incredibly hard for someone with malicious intent to tamper with the data.”
Due to blockchain’s unique capabilities, Rennie noted that all users can look towards the blockchain as a single source of truth. In addition, he pointed out that blockchains never rely on third-parties to mediate transactions, giving users more control over their data and who is allowed to see it. “Blockchain has numerous uses beyond cryptocurrency where trust and data accuracy are important,” he remarked.
In regards to cryptocurrency, Barhydt of Abra told Cointelegraph that it’s best to explain cryptocurrencies as the idea of decentralized software based systems for storing and moving value between people or entities. “Decentralized means that no one owns it, there is no centralized or trusted third party required in the middle of any transaction and there is no off switch except for the Internet itself,” he said.
In the case of Bitcoin and its blockchain network, Barhydt noted that blockchain helps address the double spend problem, ensuring that individuals cannot spend or send the same Bitcoin more than once. “A blockchain represents an immutable database of transactions throughout a cyrpotcurrency’s history,” he elaborated.
Crypto is slowly but surely gaining traction
A key thing worth mentioning this Thanksgiving is that cryptocurrency appears to be headed towards mainstream adoption. Recent statistics show that over 55 million crypto wallets have been created. It’s also been reported that millions of dollars have been spent using crypto debit cards.
Moreover, PayPal’s recent support for cryptocurrency could help bring digital currencies to the masses. PayPal chief executive Dan Schulman stated during an interview with CNBC that cryptocurrencies will eventually go mainstream as businesses and consumers flock to digital payments and digital forms of currency. Schulman also pointed out that the COVID19 pandemic has led to a decline in cash payments, noting that “40 to 70% of consumers no longer want to handle cash.”