In 2008, a person or group of people (there is speculation on who but we still don’t know for certain) who went by the name Satoshi Nakamoto issued a whitepaper titled Bitcoin: A Peer-to-Peer Electronic Cash System. A few months later in early 2009, the Bitcoin network was created. Born out of the financial crisis, Bitcoin was launched as a new type of currency, one that operates outside the control of intermediaries like banks and financial institutions. Transactions are verified by network nodes through cryptography and recorded in a publicly dispersed ledger called a blockchain.
To give you a real-world example, when you send money abroad today, you are likely to encounter a 9% fee charged by the institutions in the middle to conduct the transaction. Over time these fees add up, as they exist every time we use a credit card, take out a loan, or send money to a friend. In simple terms, the hope for cryptocurrencies like Bitcoin is to reimagine how people spend, save, borrow, and send money by acting as a new store of value.
There are, and will only ever be, 21 million Bitcoin
It can take up to 100,000 years for mineable deposits of gold to form, so once a mine is empty, you can’t go back. This was the idea that Satoshi Nakamoto had when designing Bitcoin. By capping the number, it becomes more rare and valuable. The limit has been set in the original code and is impossible to change due to the decentralized system (no one user has total control) that the code resides in.
Is Bitcoin a currency?
To answer this question, let's talk about what defines a sound currency. A currency is really only useful if it acts as a store of value. To be of any real use and maintain value, a currency should have these six attributes: scarcity, divisibility, acceptability, portability, durability, and resistance to counterfeiting. If all six are achieved, the currency has a strong chance of achieving mass adoption in an economy. Those same attributes, if held together, should limit monetary inflation and make currencies safe to use.
Now let’s take a quick walk through history to see the many ways in which currency has evolved.
Prior to money entering the scene 4000 years ago, bartering formed the backbone of any economy.
Items with utility like animal skins, salt, grain, and materials to make tools were used as a set medium of exchange. However, unlike today’s money, these items had intrinsic value.
Nearly 3000 years ago, people in China made miniature replicas of the mediums they were trading in the form of coins. Over the next few centuries, coins began to circulate from Greece to India to China. In 600 BC, King Alyattes of Lidya (modern day Turkey) created the world’s first official currency, allowing them to build a trading empire.
Once again, the people of China were reimagining currency. Around 600 BC, ancient Chinese moved away from the costly, and heavy (in large quantities) coins in favor of their latest invention - paper. However, it wasn’t until the 1600’s that European nations began to adopt paper currencies in lieu of metal coins.
Despite the end of coins, paper notes could still be traded for gold and silver and in 1879 the US adopted the gold standard, pegging the value of its currency to the precious metal. But the rapid economic growth of the 20th century meant that the value of the world’s currencies exceeded the amount of gold that was available and in 1933, the United States abandoned the gold standard. This meant that a person could no longer redeem their paper currency for gold, leaving the dollar unlinked to any real asset.
In the 90s, digital currency tried and failed to get off the ground, and it wasn’t until 2009 when Bitcoin was released that cryptocurrency, as an idea and a currency, began to grow in popularity and in widespread use.
As we can see, the system of exchange has evolved from trading tools and animal skins to metal coins to paper money to virtual currencies and electronic transactions. It’s safe to say that the monetary system will continue to progress as long as we need a way to exchange value for goods or services.
Kids and Bitcoin
There are a few reasons to get your kids started in Bitcoin. For starters, it’s a great way to help teach them about financial health, investing, money, and emerging technologies.
Bitcoin can also be a deflationary currency, which means that it will likely increase in value over time. Furthermore, it is a global currency that can be used to send and receive payments anywhere in the world without the need for intermediaries.
Ways to purchase Bitcoin
There is no shortage of ways to obtain Bitcoin these days. In fact, there are so many options that the process can be somewhat overwhelming for those who are new to the world of cryptocurrency. Perhaps the most important thing to understand is that there are two different types of exchanges: those that accept fiat currency and those that only accept cryptocurrency. Fiat exchanges will allow you to use traditional methods of payment, such as credit cards or bank transfers, to purchase Bitcoin. Cryptocurrency exchanges, on the other hand, will require you to already have Bitcoin in your possession in order to make trades. It is important to do your research and choose an exchange that meets your needs.
Once you have found a suitable exchange, the process of buying Bitcoin is relatively straightforward. You will simply need to create an account, verify your identity, and deposit funds into your account.
How to store Bitcoin
When it comes to Bitcoin accounts, there are two main types: custodial and non-custodial. A custodial account is one where the account holder entrusts the management of their funds to a third party. The most popular type of custodial account is an exchange account, where users deposit their cryptocurrencies in order to trade them on the platform. Non-custodial accounts, on the other hand, are those where the user retains full control over their funds. The most common type of non-custodial account is also known as a wallet, where users store their cryptocurrencies offline in order to add an additional layer of security from hackers.
Choosing the best account for your kids
Custodial accounts are typically easier to set up and use than non-custodial accounts. This is because the account holder does not need to generate or manage their own private keys. Accounts can be easily opened and funded, and there is no need to worry about losing private keys or keeping track of complex wallet addresses.
Ultimately, the decision of whether to use a custodial or non-custodial account depends on the individual's needs and preferences. Both types of accounts have their own advantages and disadvantages, and there is no one perfect solution for everyone.
The future of Bitcoin
Many experts believe that Bitcoin is here to stay. They point to the fact that Bitcoin is superior to traditional fiat currencies in several key ways. For one, Bitcoin is decentralized, which means that it is not subject to the whims of central banks or governments. Additionally, Bitcoin is incredibly efficient and fast. Transactions can be processed in a matter of minutes, and there are no costly middlemen involved. Finally, Bitcoin is highly secure, thanks to its blockchain technology. With all of these advantages, it's no wonder that Bitcoin has become so popular.
Bitcoin is a digital currency that has been around for more than 10 years. It offers several advantages over traditional fiat currencies, including decentralization, efficiency, and security. These factors have made Bitcoin increasingly popular in recent years. And with more people using and investing in Bitcoin, its future looks bright indeed.
It's never too early to start teaching your child about financial responsibility. Village App makes it easy for kids to start investing in Bitcoin with just a few simple steps. Create an account for your child today at Village www.getvillage.com and help them get started on their path to financial success.