Teach Me Like I’m 5: What is Crypto?

5 minutes

Imagine you are feeling hungry, and you want to buy some food to eat. You go to a store and see a sandwich that looks yummy. What do you need to buy the sandwich? Money!

What do you think of when you think of money? Well, there are coins like the penny, nickel, dime, and quarter. There are also bills like the $1, $5, $10, $20, $50, and $100. These are physical types of money that you can hold in your hand to pay for purchases (like a tasty sandwich).

However, there are also types of money that you can’t hold in your hand because they are digital. Let’s say that you are ready to buy that sandwich for lunch, but you don’t have any coins or dollars in your wallet. Instead, you have a credit card. You can use the credit card to pay for the sandwich, and the money will come out of your bank account and go to the store’s bank account. Rather than handing over physical cash, you can use a credit card to make a digital, electronic payment, and the bank makes that happen. You are still paying for the sandwich, even though you don’t see the money in your hands!

Crypto is a digital form of money

Cryptocurrency, or crypto for short, is another type of digital money. Similar to credit cards, this is another form of money that you don’t physically see…but it is still a real form of money! A person can use crypto to pay another person or business, as long as the person or business being paid is willing to accept it. So, if you wanted to buy a sandwich from a business that accepts crypto, you could use crypto to pay for it online. The crypto you use to pay for the sandwich would go directly to the sandwich store.

One neat thing that is different about crypto from using a credit card, which is also a digital way to pay for things, is that a bank doesn’t need to be involved. Remember, when you use a credit card, a bank takes money from your account then puts the money into the store bank account. Crypto sends money from person-to-person without anyone else involved.

Bitcoin is a type of cryptocurrency

If you have visited another country in the world, like Mexico or England, you might have noticed that other countries have different types of money, or currencies. The United States currency is called the dollar. In Mexico, their currency is called a peso, and, in England, they call their currency the British pound. The most popular type of cryptocurrency is called Bitcoin. If you are paying for something with cryptocurrency, the price would be listed in Bitcoin, instead of dollars.

How does Bitcoin compare to U.S. dollars? As of March 2022, 1 Bitcoin costs about $38,000 U.S. dollars! That would be about 780,000 Mexican pesos or £28,000 British pounds. Because every country has its own type of money, things you buy can cost different amounts.

Why would the same item have different prices in different countries? There are a lot of reasons, but each country has their own way of managing all of its money. So when you visit places around the world, you will need to have that country’s type of money to be able to pay for things. But this is another cool thing about crypto…no matter where you are, crypto will have the same value everywhere because it is not associated with any country. This means that the value of crypto will not change wherever you are around the globe. Crypto, such as Bitcoin, will be worth the same amount if you are in the United States, in Mexico, or in England.

Fun fact: There are only 21 million Bitcoins in total. Although that sounds like a whole lot, there is a limit to how many Bitcoins will exist. This limited amount is why they can be so valuable, but remember…crypto is still a developing form of currency so its value is highly volatile!

How do you get crypto?

Right now, the easiest way to get crypto is to buy it online. On certain websites, you can buy different amounts of crypto with money you already have in your bank account. It is easy to do!

Kids and teens can safely experience what buying crypto is like using Stash101 at school or the upcoming Stash101 at Home. Using simulated money, the sites help kids from K-12+ learn about money through a fun platform that looks like the ones adults use.

Watch out for crypto in the future

Although it is not widespread everywhere today, cryptocurrency is gaining popularity. Many people are using crypto, but you aren’t able to go to any store and buy a sandwich with crypto yet. But keep learning about crypto so you can understand what happens next with this new form of money in the future!

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Written by

Stash101 Team