How to explain to your child what cryptocurrency is

As a parent, you want to answer the most complicated questions of your offspring. But how do you explain what cryptocurrency is if you don’t understand it yourself? Arwen Kleyngeld, author of the Crazy Money Book for children, comes to the rescue. Shouldn’t we keep children far away from cryptocurrency?

‘I think children are very much concerned with it. They hear from each other that you can get rich with them and that you can buy them. I also think that children find it easier than many adults, because a large part of their lives already takes place online. It’s nice if they understand what it’s all about.’Okay, explain!

‘Cryptocurrency is a whole new form of money. It’s digital money. So you can’t hold it. With “ordinary” money, the bank keeps track of who has how much money and who has paid what to whom. To store or trade with digital money, you no longer need a bank, but only a computer. Users of cryptocurrency store the digital money together, without anything or anyone in between, with something called blockchain.’Blockchain: also something so complicated.

‘That’s not too bad. This blockchain is a computer system in which data (such as a payment) is recorded. Literally it means a ‘chain of cubes’. The first block contains data. In block two, all that data from the first is summarized, plus new data. And so it goes on and on. That chain of knotted blocks together form the blockchain. What is special about this is that no bank is needed for this. All users can see how much cryptocurrency belongs to an account. With that, the money can always be followed and found.’Why would you want all this?

‘Cryptocurrency was conceived to change the financial system. The idea of digital money is that, in the future, even people without a bank account still pay things and get money from someone. This is especially nice in poorer countries, where many people do not have a bank account. Because having a bank account costs money. And without a bank account, it is very difficult to buy a car or a house, for example.’Are there any disadvantages to cryptos?

‘Absolutely. A problem with cryptocurrency is that its value varies a lot. You also can’t buy anything with it yet. And if that could be done, it would also be very expensive. Because making a payment via the blockchain costs a lot of electricity and therefore also money.’ Would you recommend children get in?

‘Yes, but only with money that you can miss. You can win money with it, but also lose it. If you buy crypto coins, they can become worth more or less. Sometimes as much as 20 percent in one day.’Are we really going to pay for this in the future?

‘I do think that this will become a real means of payment in the future. There are still a few problems to be solved. Cryptocurrency must become more stable in value and it is still too expensive to make a payment with it. It will take a while, but I think it will happen.’