Explaining Bitcoin

At a recent dinner with some old business associates, I found myself at one point talking animatedly about Bitcoin, which is a current investment subject of interest and having to explain how the whole crypto-currency world works to my evidently uninitiated listeners. When it came down to it, the technical aspects weren't so easy really, because I kept getting challenges and questions like:

• who backs Bitcon and where do they come from?
• who sets the value of Bitcoin?
• how does Bitcoin work?
• how do you get and spend a Bitcoin?
• is it possible to have a physical Bitcoin?
• It's all drug dealers and black market isn't it?
• how do you know it's not just a scam?

Hmmm, all really good fundamental questions and I think I managed to answer most of them well enough, but I had to dig deep into my memory bank to remember precisely how the mining and block-chain systems work: underpinning the whole thing to prevent fraud, via the majority approval system, for example.

That bit of mental gymnastics got me thinking that, if no-one except me in my pre-selected group of seven knew anything about Bitcoin, maybe that's one of Bitcoin's problems - a general lack of knowledge and understanding among the 35-55 age group - including some key business leaders at that. Of course, in this age range we have the tail-end of the boomer generation and then it's all generation-x, with even the older of the generation-y millennials still a bit too young to fall into this bracket. So, are interest in, comfort with and use of new technology-enabled concepts, such as crypto-currencies like Bitcoin and Litecoin, just age and technology-related generational things? Probably not, because this was just one example and it's a pretty complex subject area, but it was interesting that in my group only one boomer had taken any interest in it. Maybe the conclusion to draw is that actually some boomers now have a lot more time on their hands!

Howard is a senior Insurance and Risk Management practitioner with over 30 years in the profession, he's a Fellow of the Chartered Insurance Institute, Chartered Insurer title-holder, he also holds an MBA and a Master's Degree in Natural Science from Oxford University. His professional interests span the Corporate Insurance, risk management and risk financing sectors.