How to Explain Crypto Mining to your Grandparents
Your grandparents are hip, they’re with it. They already know what cryptocurrency is and can talk about it at length. Just yesterday, they explained to everyone at Chair Zumba that all money is essentially nothing more than an accounting system, and that cryptocurrency is simply an accounting system spread across a huge number of computers, where transactions are collectively monitored, but everyone is anonymous. Later on, at dinner, Grandpa talked long into the late afternoon, allaying everyone’s fears about the safety of cryptocurrency. He said that, because the transactions are shared by so many computers, the system is more secure—unlike a bank, where you only have to hack one computer and you’re in.
But then one of their friends piped up. “Yeah, yeah,” she said. “We know all about how binary data is exchanged through decentralized peer-to-peer platforms, but my grandson told me yesterday that he wants to move back into the basement and start mining crypto. What the heck is that?”
Your grandparents had no idea. They looked like a couple of schnooks. Upset, they tossed and turned and couldn’t get to sleep until well after 8. They started Googling “crypto mining” first thing this morning and now they’re getting even more confused, so they waited until 6:30 to call you with their questions. If they’re ever going to be able to hold their heads up at canasta again, they’re going to need some help. Here’s how to talk to your grandparents about crypto mining, in a convenient and easy-to-follow script format.
Grandma: You told us that cryptocurrency was digital! Now they’re saying it can be mined?
Grandpa: You said it wasn’t in the ground!
You: It’s not, Grandpa. There’s no actual mining involved. It’s a metaphor. Crypto mining is just a name for the way Bitcoin transactions are tracked and how new Bitcoins are brought into circulation.
Grandma: Just Bitcoin, or all cryptocurrency? I know there are 11,000 coins.
You: I am impressed. But for the sake of this conversation, I might just say “Bitcoin” to make it simpler. So, here’s how it works: Whenever there’s a Bitcoin transaction, it’s recorded.
Grandpa: On a ledger, we know.
You: Right, and when there are enough transactions to equal a megabyte of data, it’s referred to as a block.
Grandma: How many transactions do there need to be?
You: It can vary, but it’s usually around 1,600. And all the blocks together make up the blockchain.
Grandpa: Why are we wasting time talking about things that are not mining? It’s almost time for Matlock.
You: Well, all those transactions need to be verified and recorded by someone, and that person is called the miner.
Grandma: That sounds more like bookkeeping than mining.
You: I don’t disagree, Grandma.
Grandpa: Can anyone be a miner?
You: Technically yes.
Grandpa: What about a minor? Can a minor be a miner?
(Grandma and Grandpa share a laugh.)
Grandma: Could you be a miner? You know about all that stuff.
You: I could, but it wouldn’t really be worth my time. I wouldn’t have a chance of actually getting to mine.
Grandma: Why’s that?
You: I’ll get into that in a minute, but first, let me tell you what mining is. I think I have a metaphor that’ll help you understand.
Grandma: Let’s hear it.
You: Imagine you’re at a carnival. Everyone’s waiting in line to get on the Ferris wheel, and there’s room for only a certain amount of people in each car.
Grandpa: You promise this has something to do with Bitcoin?
You: I’m getting there! Pretend the Ferris wheel itself is the blockchain and each car is a block. The people are transactions. When a new car comes up, the carny opens the rope and lets a certain number of people on before the next car can be filled. That’s writing the block. When that car’s done, another one comes up behind it. That’s like the next block, which gets filled with new transactions.
Grandma: So crypto mining happens at carnivals?
You: In this metaphor, the carny is the crypto miner. Instead of their being one person manning the ride the way there would be at a typical fair, there are a bunch of them. They all want to be the one to let people onto the ride because they only get paid for each car they load. Those are crypto miners.
Grandpa: Do the people getting on the ride pay him?
You: Not exactly. With Bitcoin, the majority of the fees are paid as a reward from the system itself. So it helps to imagine that the person running the fair pays the carny each time they load a car.
Grandpa: How much we talking?
You: Right now, the miner is rewarded with 6.25 Bitcoins.
Grandma: So how does someone get to be the person who gets to write the block?
You: Potential miners are required to guess a 64-digit mix of letters and numbers to be allowed to write the block. The process of guessing it takes either thousands of computers, guessing thousands of numbers each second, or a lot of luck. It’s the equivalent of trying to guess the combination to a padlock, only instead of three or four little dials to rotate, you are working with 64.
Grandpa: So the carnies need computers?
You: No! It’s just a metaphor. Pretend the fair operator says he’s thinking of a number between 1 and a googol.
Grandma: We use Bing.
You: Still? I thought we talked about that. But that’s not the point. Say he picks a number between 1 and 1 million then (although it really would be much larger). The carny who figures out the number first gets to let people onto the Ferris wheel—and gets paid.
Grandpa: Wouldn’t the one carny who’s great at math get the answer every time and make all the money?
You: It’s more luck than math. The carnies are guessing numbers over and over until they get it right. It’s the same way with Bitcoin, only the numbers are being automatically guessed by computer servers in fractions of a second.
Grandma: Why is it called mining?
You: It’s kind of like mining in the sense that it’s a bit of a longshot. You’d probably have about as good a chance of striking it rich mining for actual gold in the mountains.
Grandpa: Just as well. Okeedokee, next time maybe you can help me figure out why my camera never comes on for Zoom calls.
You: I’m pretty sure that’s because your desktop computer doesn’t have a camera.