How to explain ICOs, blockchain and tokens to your grandmother.

My Mom (Sallie Annett)

In my last article, I was talking about the future of blockchains. In this article I discuss a recent effort to explaining ICOs, blockchain, and tokens to my mother, who happens to be a grandmother. My mom (see left) is 82 and she’s awesome!

So how do you explain concepts like ICOs, blockchain and tokens to someone who is 82? It turns out it’s pretty easy.

I started out by asking my mom, “Have you ever heard of an ICO?” To which shaking her head, she said, “No.”

Then I asked if she had ever heard of blockchain? This time she put her hand to her chin trying to recall, “I don’t think so.”

Finally I asked her if she had ever heard of Bitcoin and she gave me a thumbs up. “I’ve heard of that one, is it some sort of electronic currency?”

Smiling back at her I said, “Before I answer that let me tell you about the decentralization.”

“You know how when you went to the doctor’s office and they have access to your medical records from your hospital visit, because they are in the same network? Well, that is because they put all your medical records into a central database.”

“However, the problem is they don’t have all your records from back when you were in Virginia. That is because the central repository for all medical records has yet to be created, and, the way things are going, may never happen.”

“Instead, imagine if the records just stayed where they are, where the tests and procedures actually occurred and your current doctor has access to them. That is what decentralization is all about.”

Mom raised her eyebrows, “So, Doctor Edward would then pull them into his computer..?”

“He could,” I replied. “But through the blockchain he could actually leave them where they are and just look at them remotely and be able to trust that the records belong only to you.”

“You see, the blockchain is simply code that allows information (or transactions) to remain decentralized and to know for sure that it is authentic and that you can trust it.”

“In order to make sure that the information (or transactions) belongs to who they say it belongs to, they use public and private keys to encrypt the links to the data, not once, but twice, so it is virtually impossible for anyone to use your identity or to change records, once they are part of the system.”

“The tokens, of which Bitcoin is one, do things like enable the blockchain code to execute. However, Bitcoin (or Ethereum, which you also might have heard of) is special because it is actually digital money.”

“Now these digital currencies are used to fund companies through what they call an ICO, which stands for Initial Coin Offering. It sounds kind of like an IPO an Initial Public Offering. But they are very different. In an IPO people are getting a piece of the company. However, in an ICO people are investing in future use of the code.”

Mom’s left eye brow went up and her left brow went down, “Huh? How do you invest in code?”

“Well,” I replied, “essentially what they are doing is investing in a piece of the Internet. They are acquiring tokens that will be used to enable people to engage in these decentralized transactions in the future. The idea is that as the usage of these tokens becomes more popular then the tokens (or coins) will go up in value. For instance, Ethereum, which I mentioned, increased its value by 2000x in about year.”

Mom’s face kind of scrunched up, as if she was smelling something a little off, “So if these token things are tied to code, how do they have value?”

“The best way I can explain it,” I began, “is with an analogy. You know how people collect baseball cards? They don’t collect them because they have intrinsic value (except as maybe a drink coaster), since they are simply a picture on a piece of cardboard.”

“Instead, they collect them because they allow them to be a part of the teams (the ecosystem). However, it’s not just because it allows them to be a part of something exciting (in this case the future of computing) but also because they can trade. However, the real dream of the baseball card collector is to find the rookie card that, based upon future performance, will one day make that card (or token) worth a lot of money.”

“You see, within the baseball card ecosystem, the baseball card collectors are trading them because they believe they have value, especially when combined with other cards (or ICOs) they have invested in.”

I smiled at my mom, expectantly, “So, does it make sense?”

Mom shrugged her shoulders, “Not really, this is all rather beyond me, but you go and play with the others, and you have fun!”