A very different Birthday present.
Get your Kids interested in Block chain and Digital currencies NOW! it may be the best present you ever give them.
Just recently I gave my daughters some investment advice and gave them a small investment in a few Crypto-currencies; this is how I explained it to them.
*I have called then No.1 and No.2 to save any embarrassment being on one of Daddy’s blogs
Considering they are both teenagers, well, one is 17, the other 19, but to me, total newbies in the world of finance, and if I can save them any of the heartbreak that dogged my early part of my life in so many ways as I had little to no financial acumen whatsoever given to me at that age, I hoped it would be something they would really appreciate.
The Conversation was its usual brick wall; grumpy frumpy Dad (that’s how I think they see me) talking to the cutting edge of modern and civilised society (That’s how I think they see themselves) and went a little something like this:
“Hi guys I’ve got a little surprise for you”
“Is it the latest death metal album? No? OK, Chocolate maybe?” No 1 asked, I replied:
“No something much better; I have put $500 in a few different digital currency accounts for you both”
Their faces were like … er, why?
“Because I believe you will make a decent return on investment and have some money for yourselves in a few years!”
“Can we cash it out now and buy stuff with it?” was their not too surprising response, after all you are only a teenager once, just eat It up and look for more, we have time, we are teenagers attitude.
Oh come on were we any different at that age?
“What is digital currency anyways?” They were at least curious, which is a good thing.
“OK what is a pound sterling?” I held up the coin and asked them.
“Money, er, one ice cream, 1.5 Mars bars chocolates?”
“You are correct, it’s a value, you and everyone you know sees different things in what this tangible coin can be exchanged for, but who sets the value for what you can exchange with this 1 pound coin?”
I asked feeling good about myself, and wondering if I should invest in a headmaster’s cloak and a tweed jumper with elbow pads. I, at least, had their attention.
“The people set the value and the banks can manipulate it, and have always done so with inflation, so banks money has always gone down in value.
Here comes the history lesson.” I warned them in advance
“Many years ago when you wanted say chickens, and you had bulls, you traded a bull for many chickens, that was fine, but when we became more advanced and the things we needed went beyond simple livestock and food, we could not always trade a whole bull for say a pair of shoes, so money was invented as a way to promise value against an exchange of goods and services.
Initially money or notes represented real gold, mankind’s oldest and trusted currency, but because there were so many bandits back then stealing your gold, Banks were invented to keep your gold safe, and you were issued notes representing your gold as exchange for goods and services. Everything went fine until:
In the mid 1960’s American President Nixon made a monumental; financial decision which many today believe is the cataclysmic reason why the USA is slowly losing its status as a world leader and many conspiracy theorists believe is the actual reason America will become a doomed nation. He took the dollar off the gold standard, meaning a dollar has only its trust and nothing else. Then many other major currencies followed suit.
So if 6 billion people were made to believe the dollar is worthless, then it could actually become worthless in a heartbeat. Gold has never been deemed as worthless and is something that is a final stand in society if all else fails.”
At this point I was losing them, quick think…zombies!!!
“So when the zombie apocalypse finally happens, if you have gold you can buy guns and swords to destroy the blood suckers with, fiat currency or paper money like; dollars, pounds, euros, Yen etc. will be thrown on the fire to keep you warm!”
Ah that brought them back!
“My point is any currency is based on perceived value, which means anyone now can start their own digital currency. Digital currency has many advantages over normal currency, it’s faster and less money to pay bankers in exchange fees, and it’s free from human and political bias, so you can send to any country anytime.”
I was quite pleased how this lesson is developing, so I pressed on:
Block chain for teenagers
“OK but how is it managed if there are no bank accounts as such, how safe is it? Asked No 2.
“That my dear, is the right question, well done; it is managed on what’s called Block chain”
“I have heard of block chain” piped up No.2
“Wow! OK, great what do you know about it” I excitedly asked her.
“No idea I thought it was a band” she chuckled having flustered me, keep control Daddy I thought to myself.
“Hmm no, not a music band but a band of people with very strong computers, who look after all the transactions, let me explain block chain like this; let’s say, you can bring three friends into this room to play a game, so how many people in the room?” I was now feeling so good with myself that I was actually introducing some math curve-balls in the mix, to keep them thinking.
“Me +3 plus you and my sister is 6 people, yawn” No 1 offered
“OK just to see if you were still here with me, now; I want to give an amount of money to No.1 No.1’s three friends are what block chain technology call miners, they each have a math question to complete and for the transaction to go ahead, the answer must be the same for all of them, but the route to the answer is always different.
OK so let’s say the security answer for the money I am giving you, is the number ‘21’
N0.1’s first friend has a sum of; 33-12 answer = 21
No.1’s second friend has; 15+6=21
No.1’s second friend gets; 100-79=21
Neither one of the friends could see the other friend’s question or know the answer, but three 21s means the chain is complete, the security checks out, and the transaction happens. That is the base fundamentals of block chains.
Miners work on massive algorithms (equations) from all corners of the Earth, and get paid in coins for completing these tasks successfully, so they can earn a living doing it, so there is no shortage of miners to complete transactions.
They don’t know how much each transaction is worth, or who is sending to whom, they very probably don’t know who the other miners are, all they care about is solving the algorithm to get their coins. This is what makes the block chain so interesting to so many people right now.
If you take out human greed and corruption away from important wealth making decisions you can make a fairer world for all
My Word, they are still here, I don’t want to lose them now! Quick think of something really exciting kids will love, oh yeah their money!!
“Have you heard of bitcoin?”
“I saw you can pay for albums on a few websites with bitcoin”
“Yes you can. How bitcoin started was interesting; the guy that created it is still anonymous today, no one really knows who he is, and they started the block chain.
Now back in 2008 Bitcoin had to start off at some value, so it started at 0.01c per coin, guess how much today for one Bitcoin? 700 USD!!!
So get you calculators out and let us say you have $500 in Bitcoin in 2008, and that sounds easy right? But back in 2008 everyone was scoffing at anyone investing in Bitcoin and you were being advised by everyone it’s a scam, and you will lose your money, so let’s pretend you are a hermit and you don’t go out at all and you are oblivious to public sentiment and go ahead and invest 500 USD in Bitcoin, how much money would you have today?’
After fighting and bickering between each other and a good scolding off by their mother, they decided to get No.1 to press the calculator buttons and work together.
“Hmm OK 500 USD in 2008 when the coins are what? 1c? OK, you actually lose money straight away; you are buying something worth less than the money you put in?? Why would anyone do that?” They asked
“Another great question, your answer will be clear, when you work out what your 500 USD is worth today”
“Hmm ok 500 USD x 700 USD= Nooo, wait let me do that again, can’t be right!” She exclaimed
“What was the answer you got?” I insisted
“350,000 Dollars is the answer!” They looked at me astonished. I tried to explain further:
“Actually it’s a lot more than that, cos the coins start to multiply in your account as the network of Bitcoin users grew, splitting off new block chains making the coins more valuable, and merchants bought into the idea and gave it the sentient backing it needs to create its value, so the exponential effect meant that many who invested the $500 we used as an example, in the real world became multi-millionaires in just a few short years.
Since then many newer Crypto currencies have arrived, me too currencies if you like, but there is room for more digital currencies, especially if you can improve on the first one.
These new currencies are based on their growth through memberships and people who buy into the coin, and the same sentiment and perceived value as the pioneers at Bitcoin. I put the cash in for you to start you off, here are your passwords, I put you in a few different ones where the value is very small right now like Bitcoin was in 2008, some will grow, some may not grow as fast as others, one may make you very rich, who knows, that’s the nature of Investing. but compared to money in the bank that always goes down I thought it’s a great idea for a present
Now you can trade your coins and buy and sell up and down, use the coins at merchants to buy anything you want, or just sit and watch your coins grow.
Some crypto-currencies have an affiliate program where they sell financial trading and you can get a commission for introducing friends, but that is entirely up to you, if you just want to sit and watch your nest egg then fine.
Rest assured Block chain technology and Digital money is here to stay, and if you ever want to get into a chat about how centralized banks and how Investment bankers are raping ordinary people which is one of the reasons that inspired the block chain movement, let me know”
I didn’t know about them but I was ready for a beer!