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How do you explain Bitcoin to your grandma ? What is Bitcoin ?

  • Bitcoin is a digital global money system. It allows you to send or receive money across the Internet. The mathematical field of cryptography is the basis of Bitcoin’s security.
  • It’s Decentralized which means that no one particular party owns it.
  • You can buy products on the Internet or cash them in for local currencies. Thousands of retailers online now accept Bitcoin (Overstock, Crate and Barrel, Nordstrom, Amazon gift cards).
  • Bitcoin can be bought through online exchangers using a credit card or bank draft.
  • Bitcoin is stored in a digital “Wallet” (just like a bank account without a bank). Wallets can be stored on a website, on your computer alone, on a cell phone, a device, or even on paper. (all cryptographically password protected)
  • A digital Wallet contains online Bitcoin addresses and a private key (a big long alphanumeric password).
    *Bitcoin addresses: They are like a bank account number. You may have 4 or 5 or more in your Bitcoin wallet. Each address (like a bank account #) has a balance. The balance could be from $0 to 1 million or 50 million or whatever.
    *Private Key: a secret code (like a PIN #) is generated for each address (like a bank account#) where you hold your Bitcoin. There is only one secret code and only the user knows it.
  • You can spend Bitcoin online or at a local retailer (I recommend you only put into your phone wallet what you plan to spend – like cash in your wallet). Example: Go to subway (some in California accept Bitcoin) or a shop (that accepts Bitcoin) scan the QR code on the bill they give you and then send to the Subway or store’s Bitcoin address.
  • The transaction is processed on an open digital ledger called the Blockchain network. It is processed by miners (all over the world on thousands of computers).
    *Everyone sees the transaction and address, but NOT your Private Key, your bitcoin balance, or your personal data.
  • The transaction is encrypted = turned into an alphanumeric code. Then it is included with other transactions in a “Block”. Thousands of miners work to verify it. Miners receive 6.25 Bitcoins for verifying or solving a block. This ensures that no Bitcoin is ever spent twice, no Bitcoin is hijacked, and no personal data is exposed – unlike a credit card transaction.
  • There are a limited amount of Bitcoins – 21 Million. They will not all be in circulation until around the year 2140.
  • The cost or fee for a transaction by miners over the Blockchain can be as low as .01 USD.
    The cost to send Bitcoin overseas through the internet is almost nothing. Western Union and other remittance agencies charge an average of 2 to 3 %. Remittance is a multi-billion dollar industry. International immigrants are sending $500 Billion dollars a year back to family members in their respective countries.
  • Is it real? US Citizens must pay the IRS taxes on all Bitcoin capital gains. It’s real enough for the IRS to tax it! It’s as real as the money in your bank but its acceptance is not universal yet.
  • Can you buy groceries with it? Not just yet, but it’s probably a matter of time (although you can buy them with a debit card linked to your Bitcoin account).
  • Is it Safe? A Bitcoin transfer can be safer than a credit card transaction as it doesn’t involve personal credit card data.
  • There are currently more than 2000 types of crypto-currencies or virtual currencies.

There are 4 Reasons Why Bitcoin will gain in value over time:
1) There is only a limited supply. Even more limited than Gold because more gold can be mined and found.
2) It’s essentially the first trans-national currency.
3) The instability of world governments and world economies
4) It has a store of value like silver and gold.

About the author

Jeff is a Compumatrix member and contributor who truly enjoys researching and learning about all things crypto. He believes that digital assets are the future of money.


  1. Well explained Jeffrey. Eve though many people are aware of cryptocurrencies and specially Bitcoin, there are still a sizable number of people who have not heard of cryptocurrencies and Bitcoin. I have personal experience of people asking, “What type of coin is this Bitcoin. Why it costs so much? Is it a golden coin with diamond studded on it? What is the size of this Bitcoin? In which shop it is available?”

    For such people, your blog unfolds everything about Bitcoin.

  2. This is a very good summary of what Bitcoin is and what can be done with it. It covers all of the important features and some of the benefits. It is amazing that there is so much to cover when one takes on the task of trying explain Bitcoin to anyone.

    It is harder to get Baby Boomers and the Greatest Generation age groups to understand it though because so many of the references are to things that they are often not familiar with. Case and point, digital wallets on your phone is a tough one to get one’s mind around when one is still struggling to understand using a smart phone or the Internet itself, in the first place. It is also difficult because much of the terminology used is unfamiliar to them as well, such as “decentralized” and “5000 types of crypto-currencies”, unless of course they are seasoned Compumatrix Members and then it is not much of a challenge at all… LOL

  3. I find it rather difficult to explain bitcoin and its ecosystem to a newbie.
    They always compare to real hard cash. The tax thing is also a bit tricky to explain, especially since it’s completely different from country to country.
    With that said I did find alot of useful information from this article. I hope it will get even easier to explain in the future.

  4. This is a CORRECTION to my post above. I made an error when I used the term “The Greatest Generation”.

    I meant to use the term, “The Silent Generation” and should have said, “It is harder to get Baby Boomers and The Silent Generation age groups to understand it though because so many of the references are to things that they are often not familiar with.

    That group of the population was were born between 1925 and 1945, whereas The Greatest Generation group was actually born in 1924 or earlier.

  5. What an awesome blog post Jeff P — it makes my learning all over again that much simpler and my gosh the wording and explanations –I am very thankful seriously and I will spend many times just reading this post and the responses also — thank you — just a great read

  6. Well, Jeffrey, I’m not sure if I could explain Bitcoin quite that well even to someone that understands the basics of cryptocurrency much less my Grandmother. But then, my grandmothers are long gone although they were quite “hip” and probably would be explaining to me how to use it at the corner grocery.

  7. The kindergarten language and wording are spots on, this I relate with many in my region yet to know or even aware of this new paradigm of business. I will be glad to share it with several.

  8. Very good overview of the concepts, functions, and uses of Bitcoin. I’m not so sure that my grandmother would get some of the finer points, but starting with the main point of thinking of it as digital “computer” money is a good start. I have many people ask me to explain what cryptocurrencies like Bitcoin are, I think I’ll print this, ask them to read it and then tell me what they understand and don’t understand. It will be a good guide as I do struggle myself get the concepts across to newbies.

    1. How do you explain bitcoin to your grand ma? Actually anyone for that matter. So many of us are stuck in the paper money field mainly because it is what they have grew up in. That which comes as a norm after so many years is hard to break away from is hard. We must time to show the benefits of making the change. It is a long process but would be my starting point. It was what was/is hard for me to do myself

  9. Update: I just had my 12 year old read this article and was prepared to laugh at how it all went over her head. Her explanation shocked me. She actually really seemed to get it. Good job Jeffrey.

  10. Jeffrey thanks for these Cliffnotes. I plan to save this blog and use accordingly. Not long ago during a conversation about Bitcoin, the person stated “ I just need to know exactly how it works before I would ever put my money in something like that”. We had a good conversation and I know he went home and studied further but he was not sold since he did not “fully” understand bitcoin. Soon after this discussion I read a blog somewhere that asked, do you really understand fully how a car or airplane works? Probably not and you still utilize those successfully.

  11. This is a most interesting article and well explained. I can see I;m not the only one that has difficulty explaining Bitcoin. The first question I usually get is “what is backing the coin”? I have always found it difficult to answer with any authority. Many friends that are in their golden years have lived through the Great Depression and find it very hard to place their trust in a crypto currency.If the Bitcoin was backed by gold or something of real value that thy can see,and feel it would help with their confidence. I will say for me the article was most helpful with my own understanding of Bitcoin.

  12. Thank you, Jeffrey! I always find myself having a hard work to explain all this to people I want to help understand and use Bitcoin. Because they are my friends and I want to help them, and I know Bitcoin is the future for the World finances… for the people all over the World to be able to have a decent life, with a decentralized currency. I sent this article to one of these friends, who I want to bring to Compumatrix, so… she needs to understand what Bitcoin is! Thanks for the help!

  13. Excellent summary. I need something like this to explain to many people and not just a Grandmother. There is actually one person who said she would never purchase Bitcoin because her brother told her to keep far away from it, because there are very bad people behind it! I was absolutely dumbfounded when I heard that. So I am going to use your post Jeff, to send them so that they can learn all about Bitcoin in a nutshell! Thank you!

  14. Well done Jeff. Although my Grandmother is not with me today , I have tried with my mother which is 86 . Sadly to say she is not interested. Doesn’t even have a credit card. That’s ok, I still had her sign up for Compumatrix and I manage her account.
    But that doesn’t stop me here there are many people who have never heard of bitcoin to which I’ll reach to teach them ( or least try) . And I’m talking about friends, neighbors , workmates and classmates

  15. Jeff has done a great job. All so well-explained. I will save all this valuable information.
    If my grandmother was with me , she would just smile and say – WOW..and pat me on my back.
    Mummy shows some interest.
    Friends and associates dont understand much of it but they are curious . I tell them that it is with their while to know. Hopefully, they will come forward and learn about cryptocurrency.

  16. This is well done and is probably explained as simply as possible. However, when it said “even grandma can understand it” I tuned in from a different point of view just to see how real that would be. The only real problem is that although it is done in simple terms, those terms have names that may not register with grandma. Names of terms like Miners, cryptography, decentralized, exchangers, Blockchain, digital wallet, and QR code. It is certainly a lot easier to learn the meaning of these terms than it is to learn the whole Bitcoin concept, but I’m just saying. Thanks for the re-do on what it is we are doing here.

  17. what a great read Jeff P — just puts so much info into a very concise and easy to understand format and with the bullet points and short explains on each it is just a great read and will be visited many more times as the learning continues –thank you Jeff P —

  18. This is a clear cut explanation of Bitcoin: what it is and how it works. I enjoyed reading this because it explained Bitcoin in simple terms to where someone who had no idea what it was could understand; hence, a grandmother. I also liked how it gave real life examples of how Bitcoin can and will be used. Some people I know think of Bitcoin as this intellectual far fetched idea that is hard to fully conceptualize, but I think if they read this blog post, they would finally understand the power and potential Bitcoin has. Bitcoin will and has revolutionized the world as we know it – now everyone just has to be aware of how to use it properly and take it to the next level!

  19. William, you do have a good point there. I guess all of us that have been in the industry for some time now just get used to the everyday terms of crypto and assume that someone might know them or understand what they mean. Its kind of funny, that if you were to explain Bitcoin using those terms like QR Code and digital wallet to a modern teenager,he probably wouldn’t blink an eye and know exactly what you mean. Teens are too savvy and techy these days. LOL

  20. In this instance, I am the Grandma, and boy does this grandma appreciate you taking the time to simplify, Jeffrey, the wording and the explanation of what bitcoin is and the definitions of the supporting language….very timely and exactly what I needed! Not only did you sort all the terminology, you gave a very simple description of what this involves. Now myself, and others can not get over their heads when we get asked the question – what is bitcoin and why would I want to use it?

  21. Though I am not a grandmother, I found this very helpful in explaining what Bitcoin is, how it works, and how I could use it. I found the subway example particularly helpful because it was so down to earth and relatable. In fact, I ate at Subway today and I thought about how fantastic it would have been if I could have used real Bitcoin to pay for my Subway sandwich! If everyone read this article and were truly able to understand what Bitcoin was, Bitcoin would be hands down the new method of transactions.

  22. boy when I go back and read this posting after the last few weeks of blogs here and put the info from jeff into the mix wow does this become a bit simpler to understand and also shows it is still a ways to go before the understanding is complete but gotta say it is more understandable today then it was 6 weeks ago and a very big thank you to all who contribute here —

  23. Yes Robert. It’s interesting that you should mention that so many people always ask what is Bitcoin backed by. I get a chuckle out of that question, because as you said back when Nixon( or at least I believe it was him) stopped backing the USD with Gold, we have only had the wonderful paper note of promise from the Federal Gov’t. What does that mean ? USD cash is backed by NOTHING. Only by people’s belief in its value. That’s it. Just like BTC is today.

  24. Thank you, Jeffery, this grandma did understand. This article helped to put into perspective a good deal of the information we have been learning from Gail and others. I had no clue about any of the digital technology associated with bitcoin and other cryptocurrencies. It strains the brain sometimes, but I am thankful to be in the right place at the right time, so I can learn and benefit.

  25. Well thank you Carmen. How wonderful to have an actual Grandmother learn from this. You are not alone in saying that it strains your brain sometimes. I often get confused at all the technicality of it all. I guess we just have to eat the meat and spit out the bones. There is so much of the crypto world we will never understand, but like driving a car, you don’t have to know how it all works to be able to use it.

  26. this is such a great fact filled read and when I get sideways with trying to understand the complexity of true Bitcoin comprehension — it really does go back to the US Dollar backing by only the trust of the US govt. makes more sense with Gold as a physical backing but then the ????? good read JP

  27. as much as I look at many different aspects when I taalk to others about the Crypto world — was visiting with my 98 yr. old Aunt yesterday and was talking to her about the possibilities of what we are doing here — and she looked at me said just like when I had my diner stay on it and work as hard as you can and stay true to the truth — I had to smile because I knew she really didnt understand the BTC part of it but she definitely knew the Business end — just sometimes it is amazing —

  28. It is amazing sometimes that people who never even grew up in the computer world like we did can still have an amazing knowledge of how things might work in it. I remember when my Dad got one of the first electronic calculators. He paid $100 way back when which was a lot of money at that time. Then My neighbor overseas got one of the first cell phones. A big huge device. We were so intrigued by it all. Those living prior to those times saw this whole tech revolution, but many thought they were just too old to participate and left it to all the young pups.

  29. What a great outline I know how I will explain it now just take them to this blog it has it all I don’t think you missed anything it should sure give them some idea of what bitcoin is and how to use it, you even gave it purpose and uses if anyone knows how to read this should open their eyes to understand bitcoin a lot better then they ever knew before.

  30. Thank you Timothy. Of course BTC is more complicated than any of this, but again, my car is more complicated than I even know. And I only need to know a few things on how to operate it to be able to use it. Same goes with Bitcoin. Just need to know that basics.

  31. Jeff, very informative blog! Very well explained,a lot of people can get information from your blog, Bitcoin has now become such a popular cryptocurrency, anyone can easily understand,Bitcoin cannot be a monopoly of a single individual, because it is decentralized.

  32. You said it Zahra. Not anyone can have any kind of a monopoly on Bitcoin. It’s truly amazing. In America now we are in a political fight for people who want to control our lives and control our everything in the USA. We are fighting for freedom actually. Bitcoin gives you that freedom away from the control of central banks and government control for that matter.

  33. Thank you, Jeff. Breaking it down to explain to a grandma type will be helpful to many. My mom used to have to write down directions to my home, and I lived in the same house for years lol. She didn’t feel safe doing certain things, and many people will need to write it down.

  34. Yes Tracy.. There is an old Chinese proverb that I have loved for years. It says. ” The weakest ink is stronger than the greatest memory”. I write it all down, it’s easy to forget if you don’t. LOL

  35. as the new year begins and becomes just another year older lol –keep staying as close to the newest crypto changes and understand them also and then you explain to you first and make sure You are Covered and Secure and then just enjoy Tea with your Grandma — great read JP and so much great info get more n more with each read thank you Sir —

  36. When I think of my grandfather, he had always been a farmer. I can’t recall ever having seen him on a computer, or handling anything computer related. He never even had a cell phone. My grandfather was very resourceful and if he had been interested in knowing about computers, he would have learned. I believe having an interest in learning about the computers is key to helping senior citizens become computer savvy.

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