Children are the free souls that can come up with any question at any time. They don’t have the limitation like us of applying brakes to their questions. That is why most of their questions are intelligent and catch us off guard. It may relate to anything – including cryptocurrency.
So, are you ready to answer your child if they have questions like “what is Bitcoin” or “what is cryptocurrency”?
Here are some suggestions to make your life easy and help you prepare for a one-time inquisitive inquiry.
Start with Concept of Currency
Before you explain to your child what cryptocurrency is, you need to tell them about currency. Currency is used to buy and sell stuff. It is a historic achievement after the barter system could not match up with the more complex transactions.
While the barter system could be used to exchange goods or commodities of equal value, it was not suitable when the value of the goods or commodities was not equal. So, this is one of the things that led to fiat currency, which enabled the market to trade on a more sustainable and equitable level.
Who is the Boss for Fiat Currency?
Tell them that every country has its own fiat currency. The central banks of each country watch its fiscal aka fiat currency interests while keeping the well-being of the country’s citizens (micro & macroeconomic conditions) in perspective.
Thus, the central banks of each country back their currency or fiat currency. Therefore, they are considered legal tender or accepted anywhere in the world. Although there is no central authority watching over cryptocurrencies, there is still a publicly available record (public distributed ledger). This public ledger is accessible to everyone.
Finally, Why Does the World Need Cryptocurrency?
Here is where things become a bit complicated. But, some of the points that you can consider telling your children include the following.
Global Reach & International Acceptance
A fiat currency is only acceptable in the confines of a particular country’s borders. When you travel to some other part of the world, you can only purchase goods & services in that particular country’s local currency. Therefore, you have to find a money changer and get your country’s currency exchanged for the local currency. Meanwhile, for cryptocurrency like Bitcoin, if a vendor accepts it, you need a different type of intermediary – not a money exchange but a cryptocurrency exchange. Unless, of course, the vendor is ready to accept your crypto directly, which many vendors do now.
No Central Authority
There is no one watching over and trying to control the supply and demand of a cryptocurrency. There is no central bank or country that can control the flow of a cryptocurrency. Therefore, one of the advantages of using cryptocurrencies is that you cannot be stopped from conducting international transactions.
No Counterfeit or Fake Currency Notes
It is as simple as it gets but since children take every detail into account, tell them that when a cryptocurrency is floated in the market, every unit has its own unique address. This address is publicly available and can be verified by everyone who maintains the record of that cryptocurrency. Therefore, it is essential to understand that no one can create fake cryptocurrency units. Thus, it is another advantageous aspect of having digital currency.
Fixed Supply of Money
One last yet essential thing to tell your children is that cryptocurrencies also offer a great investment opportunity. Unlike fiat currencies, where the central banks control the supply and demand, cryptocurrencies are fixed in supply. It means that digital currencies like Bitcoin have a threshold and cannot be more than that number. For example, the total number of Bitcoins to be available would never exceed 21 million. Thus, it could be a great long-term investment to buy these digital currencies.