An Intro to Cryptocurrency for You and Your Child
Financial Literacy for Kids: Crypto Crash Course
All About Cryptocurrency
2008, let’s set the stage. Michael Phelps broke the record for most gold medals in a single Olympics, Barack Obama was elected president of the United States and a little, inconsequential event known as the financial crisis provided the scenery for a major money plot twist.
Enter stage right, crypto
On the heels of this financial crisis, cryptocurrency came on to the scene. The opening line? Cryptocurrency is decentralized digital money stored and exchanged over the internet. With cryptocurrency, users can instantly transfer value anywhere around the globe without a middleman like a bank or payment processor. The result? Individuals are able to completely take control of their assets.
BAckground on Money supply
Governments love controlling the money supply, and they always have. However, money supply mismanagement has historically led to inflation (and sometimes even hyperinflation), which isn’t ideal for anyone socking away their savings under the mattress.
In 1971, the United States went off the Gold Standard and the US Central Bank (the Federal Reserve) gained the ability to print money seemingly out of thin air. Since this transition from a commodity-backed currency to a fiat currency, there has been steady inflation for decades. And the people who’ve been most “hurt” by inflationary trends are those who save their money. While they hold money in cash for a rainy day, the price of goods continues to rise and their dollars slowly lose purchasing power.
What’s more, in the financial crisis of 2008, the big banks completely mismanaged risk. While Wall Street got bailed out by the government, everyday workers lost their jobs, retirement funds and savings.
So, Who Controls Crypto?
Because cryptocurrencies operate on open, peer-to-peer networks of computers that are not controlled by a government or other regulator, virtually anyone can participate.
Without government oversight, cryptocurrency is kept secure because all transactions are publicly recorded on a technology called the blockchain. This evolving technology is the result of decades of computer science and mathematical innovation that makes the digital exchange possible.
Each cryptocurrency has its own blockchain that acts similar to a bank’s ledger and is constantly updated with a record of every transaction. Unlike a bank’s centralized balance sheet, however, the blockchain is distributed across the vast network of all of the users of the digital currency and thus more protected. Also unlike a bank’s confidential ledger, anyone can view the blockchain at any time.
The Crypto Contenders
The first cryptocurrency, Bitcoin (BTC), was launched in 2009 and remains the best-known, most influential and biggest cryptocurrency actor on the stage. In the decade or more since, Bitcoin and other cryptocurrencies like Ethereum (ETH) have entered the mainstream as a real alternative to government-issued currency.
By market capitalization, Bitcoin and Ethereum are the two most popular cryptocurrencies. However, hundreds of non-Bitcoin cryptocurrencies called “altcoins” now exist and more are added to the blockchain with each passing month. All of these cryptocurrencies are variations on Bitcoin and operate in essentially the same way.
The Benefit of Crypto
In a broad sense, currency is essentially a tool of communication. It allows people to agree upon the value of something and exchange. The current, centralized financial system doesn't let people move money freely, and the big banks, big government, and middlemen can make money movement very inefficient.
Cryptocurrency, however, is managed by peer-to-peer networks of computers without the oversight of a government or central authority. Virtually anyone can participate in digital currency, and crypto allows users to take complete control of their assets without outside interference.
The Future of Crypto
While the U.S. financial system is far from perfect, Americans mostly can agree that our money is safe in our bank accounts. Even as recently as 2022, however, that’s not the case for over a billion people around the world who don’t have ready access to basic financial services.
Cryptocurrency offers financial access and stability that citizens of developed nations have and extends it to the rest of the world. And while people generally think of crypto now as an investment, a shift is on the horizon where owners may regularly use crypto to transact with each other as well.
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