Alzheimer's disease (AD) is the most common cause of dementia and affects millions of people around the world. Neuronal death in AD is initiated by the toxic action of oligomeric amyloid-β (Aβ) peptides. The formation of membrane channels by Aβ is a primary molecular action and does not require any other proteins. Channels are formed by short amyloid fragments faster and more frequently than by full-length peptides. The channel formation is dependent on an electrostatic interaction between a positively charged peptide and a negatively charged membrane. Negative membranes can be found in several locations of a cell – the inner leaflet of plasma membrane, mitochondria, and lysosomes, which all are well-known cellular targets in AD. Considering that the amyloid enters a cell by endocytosis and is exposed to lysosomal enzymes, we propose the amyloid degradation toxicity hypothesis. Endopeptidases degrade the endocytosed peptide. Produced fragments form membrane channels, which can transfer various ions (including protons) and even relatively large compounds. The neutralization of lysosomal content inactivates enzymes, which fails the whole system of recycling cellular content, including autophagy. The permeabilization of lysosomes could also lead to cell death through necrotic and apoptotic mechanisms. We discuss several mechanisms that describe how amyloid degradation products reach plasma and mitochondrial membranes, and form membrane channels. The pathogenesis of AD is discussed at various levels in a context of how the primary molecular mechanism of membrane channel formation could progress into the disease state. The discussion starts at the molecular level and extends to why the development of a disease takes years and is closely associated with aging. The proposed hypothesis offers an interpretation to several clinical observations such as the involvement of iron metabolism and an inverse association between developing Alzheimer's disease and cancer. Predictions about potential biomarkers and effectiveness of future treatments are discussed.