Future Tense

Gold, Tulip Bulbs, Rai Stones?

Finding the best analogy for cryptocurrencies.

Pickaxes, a clear piggy bank with bubbles and gold coins in it, tulips.
Photo illustration by Slate. Photos by Thinkstock.

Think of a car. No wait, a train, think of a train. Actually, imagine a room full of transparent piggy banks. Picture an apple. Your Visa card. Or how about some large, circular disks carved out of limestone?

Wait, back to the car. Your car:

Meanwhile, someone recently explained blockchain as a dance—“just a clumsy little dance that a computer needs to do in order to replicate a deeply human characteristic.”

These types of cryptoanalogies have become increasingly popular—and increasingly absurd. As early adopters try to take cryptocurrency mainstream, they’ve tried (and often failed) to find simple ways to explain the complex technology, to conceptualize these difficult concepts. After all, communication is (a web wallet) key. But while I love a good analogy, the metaphoric attempts to explain crypto are out of this world. There are analogies out there for 5-year-olds, and 7-year-olds, and 10-year-olds—for, you know, “that moment that every crypto-parent fears … ‘Hey Dad, what’s a blockchain?’ ”

Is blockchain not already a metaphor? While blocks of transactions are linked together in a set order, there’s no actual “chain” nor are there physical “blocks”—until some guy makes it literal, that is:

Some analogies boldly attempt to describe the technology sans technology (often invoking the supernatural instead), whereas others try to compare the moment we are in to others before it. The current crypto craze has been compared to the birth of the internet and the mainstream adoption of YouTube, and—looking further back—to the industrial revolution, the Cambrian explosion, and the gold rush. But for its detractors, it’s a fraud, a Ponzi scheme, a pyramid scheme—“a colossal pump-and-dump scheme, the likes of which the world has never seen.” It’s also the World’s First Global Casino. Some metaphors have been repeated so often that they have become an ingrained part of the lexicon (“mining” springs to mind), while others are repeated so often that they may as well be. But a poor metaphor can actually make it harder to understand what’s really happening (“mining” also springs to mind).

James Grimmelmann, a professor at Cornell Tech and Cornell Law School, has the unenviable task of teaching the basics of blockchain to lawyers. He says that cryptocurrency analogies are especially difficult: “One of the problems is that there are so many pieces, and the right analogy for each piece is a little different,” he says. Analogies that try to capture the entire system become increasingly absurd, because they have to be—there’s nothing quite like cryptocurrency to compare it to.

Andrew Maynard, a professor at Arizona State University, agrees. “There’s nothing that really sort of fits easily and completely—as with all metaphors. I think you can use metaphors effectively to explain parts of cryptocurrency, but you’ve got to be really careful not to extend them further than they’ll actually go.” (Disclosure: ASU is a partner with Slate and New America in Future Tense.) A well-chosen analogy might make things easier to understand, but a poorly chosen one actually obscures meaning. Over analogizing, meanwhile, can make things more confusing.

And yet it seems cryptoanalogies are here to stay. So which part of the process are the most common analogies trying to explain, and how effective are they?

Gold, Digital Gold (but Better), or “Perfect Gold”

Bitcoin is often compared to gold or digital gold—a well-established form of digital currency representing physical units of gold held by an issuer. Gold is considered a stable global currency, free of the political influence, inflation, and devaluation inherent to state-issued currencies. It’s highly portable, divisible, durable, fungible—all the things people seek in an ideal currency.

Bitcoin is said to be the new gold. It’s an independent, global currency. It’s something people have imbued with a high value. And, like gold, there’s a limited supply of it. (The gold metaphor seems in perfect alignment with the flawed “mining” one below, but the two metaphors are more or less unrelated.)

Some actually argue that bitcoin is better than digital gold. As one Bitcointalk forum member points out, bitcoin is gold plus magic:

Imagine, that you are a wizard. You have a magical power over gold that you own. By making a few magical passes with your hand and your mobile phone you can magically split any gold coins and bullion and deformed gold chunks into arbitrary small pieces and then recombine them back into larger ones. Your magic powers allow you to operate equally easy both on tiny speckles of gold dust and on huge 10000kg pieces of gold (as long as you own this gold). Now imagine that you can magically teleport any amount of your gold over the internet to any other wizard on the planet.

To put it less mystically: As OKCoin CEO Star Xu pointed out in his presentation at a 2015 Bitcoin Conference, bitcoin offers “better portability, divisibility, durability, and fungibility than its precious metal cousin” (as summarized by Kyle Torpey at Inside Bitcoins). Trading digital gold more closely resembles swapping IOUs than trading physical ownership of the asset—but when you transact with bitcoins, you’re actually transferring ownership of the asset itself. And while gold itself is obviously extremely durable, it has to be kept somewhere. Bitcoins can be stored “on a computer, piece of paper, or even in your head with a twelve-word passphrase.” Xu gives it the superlative “perfect gold.”

But the analogy worries Maynard. “Gold is something that already exists in the ground. … Cryptocurrencies don’t intrinsically exist,” he says. “The other thing,” he adds, “is that gold has got a relatively stable value because over centuries as a society we decided to give it that value. You don’t have the same sort of normative value with cryptocurrencies as you have with gold, which make them very, very volatile compared to gold.”

Bulbs and Bubbles

See also: Magic beans

One of the most popular analogies for those who are doubtful of bitcoin’s longevity is “tulip bulbs,” a reference to the tulip mania that gripped Denmark in the early 17th century. Really, one could compare bitcoin to any asset imbued with speculative value but to compare the coins to tulips is especially dismissive.

Tulip mania, or tulpenmanie, was one of the first speculative bubbles and has become a shorthand for the most ridiculous deviations of asset prices from their intrinsic value. Over four years, speculation drove tulip bulbs to wildly inflated prices, peaking in February 1637—when a single bulb could sell for 10 times the annual income of a skilled craftsworker—before dramatically plummeting to almost nothing. Heads of banks are quickest to compare the hype around cryptocurrencies to tulip mania—both the former president of the Dutch Central Bank and the CEO of JPMorgan have employed the analogy as a warning that the value of bitcoin could crash at any moment and a reminder of the folly of previous bubbles. In fact, the former president of the DCB has said that bitcoin mania is “worse” than tulip mania: “At least then you got a tulip.”

Tulips are a tangible example of the balloon/bubble metaphor often used to describe the crypto craze (though if we’re going to be technical about our analogies, balloons make more sense than bubbles—bubbles don’t actually get larger before they pop). Comparisons are also drawn to the dot-com and housing bubbles, as well as England’s South Sea Bubble of 1720, when secretive shares—“for carrying-on an undertaking of great advantage but no-one to know what it is”— skyrocketed. If nothing else, bitcoin analogies make for a great history lesson.

In a 2017 Medium post, entrepreneur and crypto investor Matt Mihaly argues that the tulip analogy is terrible:

Is bitcoin better than tulips? Hell yes. There’s not even a reasonable comparison to be made. The tulip bulb bubble was bound to burst because tulip bulbs are a terrible store of value. Something that has a limited lifespan, can’t be divided, is not at all fungible, can’t be recognized for its valuable characteristics (unique color variations on the bloomed tulip), and has no historical record of anything approaching stable value is highly unlikely to retain the kind of value that would let someone literally buy a house with a single bulb.

As Grimmelmann explains, neither gold nor tulip bulbs are good objective metaphors because both are incredibly loaded. “Gold is appealing to people who want to boost bitcoin, because traditionally people have valued gold. … Tulips are a reference to the tulip craze, that it’s just all speculative,” he says. “The point of them is both the same: Bitcoin is valuable because other people expect it to be valuable and that self-perpetuating nature is what props up the value.”

But Maynard, who studies risk, is a cautious fan of the tulip/bubble metaphor. “I think that that’s actually quite a useful way of getting people to think critically about cryptocurrencies. … It’s quite a good way of raising red flags over the volatility.” However, he added: “I don’t know whether other people interpret it in a different way. And that’s always the difficulty with metaphors.”

Rai Stones, a Pre-Modern Micronesian Stone Currency

Cryptoarcheologists have latched onto this primitive stone currency as a precursor to bitcoin and blockchain, arguing that its decentralized record of ownership is analogous to that of crypto. It’s been cited by Forbes, CoinTelegraph, Science News, Bitcoin.com, and the blog of author and programmer Yevgeniy Brikman, among others.

The Micronesian island of Yap historically traded on a currency known as rai stones—large limestone discs weighing up to 4 tons and requiring a wooden pole and several villagers to move them around (not exactly an easy asset to trade with). To avoid moving the stones each time a transaction took place, the Yapese developed an oral history of ownership, with every villager keeping track of each transaction and therefore who owned which stone—something cryptoanalogists point to as an early example of a distributed ledger, or a blockchain. They also point to limestone’s scarcity, and the extreme difficulty and luck involved in “mining” it (usually involving sailing to another island) as a bitcoin parallel.

Or not. “No, no, it’s the total opposite,” says Grimmelmann. Rai stones and bitcoin “both point out that currency is socially constructed,” but “beyond that, it’s the worst analogy I can think of, because it is the exact opposite of the spectrum between extremely big physical objects and purely virtual currency on computers.”

“That is getting obscure,” says Maynard, who hadn’t heard the rai analogy. “My first question would be: Where is that any different from any other form of primitive currency? To my mind, and I think very simplistically, you go back to the basics of what money is, and it’s basically assigning value to something which you can then use in trade. But there’s always a question of who assigned that value, where that value comes from, and whether it’s totally market-driven or scarcity-driven or whatever.”

Mining and Miners

Mining is the term for what computers do when they create new bitcoin. There will only ever be a total of 21 million bitcoins, and so far, more than 17 million have been “mined.” So where do bitcoins come from? Roughly every 10 minutes, a new “block” of transactions is added to the blockchain and with it a predetermined amount of bitcoin generated. In order to be the one to add the next block, computers worldwide compete (using a huge amount of processing power) to solve a complex puzzle, the winner being rewarded with the new coins. The puzzle-solving activity undertaken by computers is known as “mining,” and their operators as “miners.”

The problem with the mining metaphor is that it invokes the action of excavating. But the bitcoins don’t exist to be dug up or found. They are mining for bitcoins not in the sense of searching for them, but rather, bringing them into existence, or minting them.

In “Weaving Is a Better Metaphor for Bitcoin, Instead of Mining,” David Orban discusses the weight of false analogies, arguing that the mining metaphor is actually harmful to an understanding of bitcoin:

[T]he imagery that comes with it of shiny golden coins, which link us to old perceptions of what the nature of Bitcoin is, and how it should be handled; the selfish activity of the miners, the gold rush, where the metal which is intrinsically useful in some industrial process, or in electronics, gets whipped to ridiculous valuations; the value of gold as investment. … These and others don’t apply or only very weakly apply to Bitcoin, but we bring them with us nonetheless with the power of the words we accepted.”

Orban prefers, as the title implies, weaving: “[W]eavers take the intertwined threads and through their expert, value added activity create a strong fabric—which is exactly what the global distributed network of computers creating the Bitcoin Blockchain does!”

Grimmelmann points out that the term mining has become so ingrained that people don’t notice that it’s a metaphor anymore—it’s taken on a meaning of its own. But he prefers to instead explain the blockchain computing activity to his law students using the analogy of the lottery ticket: Everyone is competing to find the random winning number that will unlock the next block, but it’s such a random number that luck plays a part in finding it first, as does your number of entries/computers. “It’s a much better analogy than mining,” he adds, a word he suggests may have come out of online gaming. “It’s a metaphor for doing some really boring repetitive task because you get some reward for it.”

But the metaphor of mining does have its advantages, according to Maynard. “I actually quite like that,” he said “You’ve got people putting in a lot of effort to sort of ‘create’ something, which is very analogous to miners who are putting in a lot of effort to extract something and give it value.” So long as we don’t think of the coins themselves as like gold, as discussed above. “But again,” the risk professor warns prudently, “It’s very, very specific to one part of the mechanism of cryptocurrencies.”

A Set of Clear Lockers or Transparent Piggy Banks

Ignoring the fact that the web wallet —the digital “location” where people “store” their “coins”—is already a metaphor, people have attempted to explain this mechanism further, using the idea of glass deposit boxes, clear lockers, safes made of bulletproof glass, or my personal favorite, “indestructible piggy banks made of transparent plastic”:

There’s a room that anyone can access. The room has security cameras that anyone can view, and every second of recorded footage is available online forever.

The room is filled with indestructible piggy banks made of transparent plastic. Naturally, these piggy banks have coin slots, and everyone can see which coins are in which piggy bank. These piggy banks can never leave the room.

Each person has a key that can open their piggy bank. Let’s say I want to buy a pair of alpaca socks, and you want to sell them.

First, you tell me which piggy bank is yours. Then, I walk into the room with a ski mask on. Anyone in the world can see me on the security cameras, but not my face.

Next, I unlock my piggy bank, take some coins out, then put them into your locked piggy bank. I leave the room.

Now, everyone in the world knows that your piggy bank has coins that were previously in my piggy bank. This is the case with every transaction, so everyone knows the history of every coin.

For adult explainers, these piggy banks tend to just be boring glass-fronted lockers with a slot. But it’s a helpful analogy for what happens when someone loses their personal bitcoin “key”: The money is stuck inside the locker, inaccessible forever. As the safe analogist adds, “[I]f you don’t trust yourself to keep track of your key, or you’re afraid somebody will steal it from you, you can have Mr. Gox or Mr. Web-wallet or some other fellow hold your key for you. He’ll let you pick a secret pasword [sic], and he’ll open your safe for you if you tell him the password.” Or he’ll embezzle your money and cost you millions.

Maynard takes issue with the locker analogy. “I find that gets a little convoluted,” he says. “But also, it doesn’t tell you anything about who pays for the lockers.” While the analogy implies that the moving coins between lockers is free, bitcoin transactions come with a fee—and an unstable one at that. Meanwhile hardware wallets, the most secure type of bitcoin storage, cost money.

Grimmelmann also believes the analogy is limited—in his case, because the transparency feature is only true of some cryptocurrencies. It works for bitcoin, but there are many other coins for which transactions are hidden.


The God metaphor, found here on the Bitcoin Discussion subreddit, tries to describe the fact that the omnipotent blockchain sees, manages, and records all:

The blockchain is like if God, who can see everything happen everywhere all at once, was watching all the new gold in the world being dug up, and all the gold that had already been dug up change hands, as people traded it for sheep and swords and things. As he wants everyone to be nice and also responsible human beings, he gives everyone in the world a treasure chest. Then he makes it so all gold is kept in the treasure chest of whoever owns it, and the only way money can be removed from your chest is if you think the 24 magic words. There’s a lot of words, and because God picked these 24 in a special way that makes it pretty much impossible to ever guess, no one can ever get into your treasure chest.

So if someone digs up a piece of gold, it goes straight into their personal treasure chest. If you want to buy something from Joe, you agree with him how much gold to pay, then you think your magic words, and God moves that much gold into Joe’s box. God confirms everything. One ounce of gold, went from your box into Joe’s treasure box. God never forgets, he never lies, he never misses anything, and he’s never wrong, because he’s God.

God is the blockchain. Bitcoin is the gold.

The not-so-subtle metaphor goes on to have the devil show up and suggest an evil paper-based money system that people have to keep in the hands of more powerful entities, also known as banks.

“That’s not terribly helpful,” says Grimmelmann. “It describes lots of systems where exchanges are public.”

A Checking Account or Credit Card

People also compare blockchain technology to a checking account or credit card, in which money is nothing more than digital figures you move around. You own not stacks of cash but a number.

Maynard thinks that the credit card analogy, while incomplete, covers an important cryptofeature that is often left out of cryptoanalogies: fees. “Something that is so often missed, especially when talking about blockchain more generally, is that there is always a third party that gets value from those transactions, whether it’s the miners or whoever. So that Visa analogy, as long as you don’t push it too far, is really useful in recognizing that there’s a transactional cost. Every time you make a transaction somebody benefits from that.”

As one Redditor puts it:

You use your Visa card. Visa authenticates the transaction. Visa gets money for that. You send bitcoin. A miner authenticates the transaction. Blockchain rewards that miner for that. 

I could go on. A quick Google reveals there are endless comparisons out there. Cryptocurrency is to money as email is to mail. Bitcoins are like … coins? Bitcoins are like “coupons that you can spend at any store.” Bitcoins are like digital apples. Blockchain is like a game of soccer, while blocks are like crumpled-up pieces of paper. Blockchain forks are like a vegetarian restaurant deciding to change its menu. Web wallets are like banks.

To its credit, the viral car/sudoku/heroin metaphor does a decent job at capturing both the weirdness of the bitcoin mining process—the idling car is your computer, the sudoku is the complex problem it’s racing to solve, the heroin is … heroin—and the absurdity of this new cryptoworld, in which real “value” can be created, seemingly, out of thin air.

But as Maynard and Grimmelmann kept reminding me, no cryptoanalogy is perfect—no, not even car/sudoku/heroin. Once you try to apply it to blockchain, its weaknesses emerge. What’s more, metaphors don’t make sense at all unless you have a rough grasp on the part of cryptocurrency that they are trying to explain. But once you’ve explained the process by which computers compete for the bitcoin reward, do we really need the sudoku, or the car?

This new field is complicated, but mixed metaphors are making it more so. Techies are not always the best at explaining things, but it’s important to find clear language to explain what’s happening if people are ever going to get on (the metaphorical) board. Let’s give people the benefit of the doubt and skip the stones. Though at this stage, mining is probably here to stay—so entrenched that it’s nigh impossible to excavate.