Bitcoin for Kids

It is story time. Once again our protagonist Sharry is back in action, on a popular demand. And this time around, his father has a very fair chance of redeeming himself. If you are absolutely lost on what’s going on, I would urge you to go ahead and read my previous post here. While Sharry learnt a difficult concept like blockchain with ease, our readers found his father’s behavior rather, questionable.

Sharry’s father needs to mend his ways
Sharry’s father needs to mend his ways

Coming back to the topic, Sharry was very happy with his new dog. As promised to Santa, he handles his new friend with utmost care. However, lately, he has started feeling the crunch. As his dog is getting bigger by the day, it needs more food and more playtime. While playtime is not a concern for Sharry, but his pocket money is now falling short to take care of his needs. So has this weird idea.

Sharry and his “Digital Currency”

One fine day, Sharry decides to go to his dad. He asks for a Rs. 2000 note with a promise to return it within an hour. He claims that it is for a school project. Later, he clicks the photo of this note with his dad’s phone and sends an email to himself.

Now, Sharry has a “Digital Cash”, stored as a file in his laptop. He immediately decides to go to Amazon and order his dog’s favorite chew toy. On the payment page, he is looking for an upload button to pay with his “Digital Currency”, but he doesn’t seem to find one!

Sharry’s Dad:

His father, at the same time checks out his mailbox to find this mail with a weird attachment. Therefore, he plans to intervene and checkout what’s going on. As soon as he finds Sharry thinking of how to spend his “Digital Currency”, he takes this opportunity to teach Mr. Dog parent about Bitcoin.

Bitcoin and Sharry:

What Sharry did is actually the genesis of Bitcoin. Bitcoin is nothing but a digital currency which is stored as a file on your laptop in something called “Digital Wallet”. You can exchange this file, or a part of this file in return for goods and services. Pretty neat right? Innit? Well, if you still haven’t realized it yet, here’s a food for thought.

Files can be copied right? So if Bitcoin is a digital file, you can copy and paste it multiple times and hence make millions out of it. Alternatively, if anyone could do it, Bitcoin would have no value.

Let’s approach it like this: One of Sharry’s friend, Garry had a very beautiful toy car to play with. Everyone in his class wanted it. It was a status symbol. Everyone wanted to hang out with Garry. Now imagine, if every kid in the class had that car, would it be a big deal? No right?

On a similar note, greater the supply of a product, lower is the value.

With that being said, Bitcoin is trading at Rs. 25L for one as I am writing this article. How is that possible? Why have people forgotten the good old Ctrl C + Ctrl V?

The Bitcoin Magic:

Remember how Sharry’s father was removed from the North Pole Blockchain because he tried to tamper with Sharry’s letter? It was possible because everyone had the copy of everyone else’s letter. Similarly, in a Bitcoin blockchain, everyone has the records of all the past transactions. So you cannot just produce money out of nowhere and expect that nobody will catch you. You would be out of the blockchain even before you know.

The fun doesn’t end here. All this record keeping is not done by any human or company. It is done by the people like me and you. Hence the origin of the word: Decentralization, something that has no central authority controlling it.

And Finally:

After Sharry has learnt his lesson, his dad teaches decides to raise his allowance so that the newest member of the family can be accommodated properly. Also, now Sharry knows that the way he was trying to make money with, was not only incorrect, but unethical too.

So? What is your take? Do you forgive Sharry’s father?

Got questions? Want to take it to the next level? Reach out to me using your preferred platform from the links below

Until next time..

If you are interested in a quick read, I recreate these blogposts as carousels on Instagram as well. Below is an example of the same. You can follow me here.

This blog post is part of the blog challenge ‘Blogaberry Dazzle’ hosted by Cindy D’Silva and Noor Anand Chawla and sponsored by Queen’s Brigade.

27 responses to “How to explain Bitcoin to a 7 Year Old Kid?”

  1. I see the dad has finally succumbed and got a dog. Well done.
    So, iam not very savvy with digital money. I have read that Bitcoin increases in value….how does that happen.

    • So there are a lot of factors behind it. But the key one would be that it is fixed in number unlike our INR. So if demand goes up value is bound to go up.

  2. A nice way of explaining Bitcoins. The one about Sharry taking a photograph of money made me laugh.

  3. Looks like Sharry’s dad has redeemed himself. An interesting way of explaining the concept of Bitcoins. People do have this misconception that since it is digital currency, it can be easily copied.

  4. Sharry’s dad has really good ways to explain difficult concepts. As with blockchain it was easier to understand the concept of bitcoin this time.

  5. I have been hearing so much about bitcoin and have been investing in mutual funds etc. But I always wonder is it safe to deal in bitcoin.. is it like share market.. do direct me if you have other posts answering my question

    • Hi Mam. I would say, you invest in a company while investing in stocks/mutual funds. However in case of bitcoin (or any other crypto) you are betting on a project. The project (or crypto) bitcoin aims to become alternate currency of the world. Similarly other cryptos, ex. Ethereum, plan to provide platform for decentralised apps.
      So, the way one would fundamentally evaluate company before purchasing stocks, one should understand the project too.

      Secondly, bitcoin is still in speculative stage. So it’s extremely volatile. It has historically dropped to 80% from it’s peak within a few days.

      I’d recommend if you wish to invest, do it only for <5% of your portfolio and invest only what you’re okay losing.

  6. Again you explained bitcoin concept so brilliantly. Glad you explained many complex topics in this blog challenge. Looking forward for the next post.

  7. I really like the way you explain these financial terms with examples that not only 7 year olds but adults like me who did not know much about Bitcoin got the hang of it too.

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