As a parent, I know that your time is precious. So I want to thank you for spending your precious time with me to learn about bitcoin!
By the end of this article, my goal is for you to have a clear understanding of what bitcoin is, and more importantly, as a parent, why you should care.
Remember…
We started the “bitcoin for parents” series exploring the idea that money makes the world go around (lesson 1). And this matters because, like it or not, as parents, we need money in order to provide for our families.
There are diapers to buy, unexpected doctors visits, and more! And each of these require money to pay for.
And without money as the tool to facilitate all these trades, all I have to say is “good luck” trying to figure out how salt you need to trade for diapers, or how many diapers it costs to pay for a doctors visit…
After establishing that money is a necessity, we then looked at what makes money good quality vs. bad quality (lesson 2). As a reminder, this matters because if we find ourselves holding bad money (like Zimbabwe Dollars), it can cause a lot of financial pain for our family. And that’s something we, as parents, must avoid at all costs.
Finally, we saw what happens to different quality money over time (lesson 3). As a recap: bad quality money will go away (like the Zimbabwe Dollar), while good quality ones will appear.
Now, with all of this foundation in place, let’s see exactly how bitcoin fits in. And to make it as easy as possible, let’s do it in reverse, starting with lesson 3.
(from lesson 3) good money comes
TL/DR: bitcoin is a new kind of money
Yes, it might feel anti-climatic or boring, but I want us to intentionally focus on the idea that bitcoin is just money for now. And that money is nothing more than a tool that makes it easier to trade back and forth, now and in the future, for all those products and services that we need.
The reason I want to focus here is because, in contrast, when 99% of people first come across bitcoin, they immediately try to figure out how a blockchain works, the bitcoin monetary policy schedule, or even how miners operate.
I am PURPOSELY going to skip over these low level “how” details (for now).
Why?
Through many conversations with fellow parents first learning about bitcoin, I’ve found that focusing on these “how does it work” level details is the fastest way to get confused or lost.
It’s the ultimate expression of not being able to see the forest from the trees…!
Don’t worry, later, in another series of articles, I’ll go through each of these details. But for now, as busy parents, I believe it is most important to first have an “ah ha” moment from a 30,000ft view.
So, keeping it simple: bitcoin is just a new form of money.
Zero to One
In January 2009, just 14 years ago, bitcoin launched. And in that short time, it has already been adopted by millions of people around the world.
With that said, in the grand scheme of things, bitcoin is still young and largely misunderstood. Even today, you’ll still hear critics / skeptics refer to it as:
- a ponzi
- a house of cards
- a scam
- something that will collapse any minute now
Luckily, this perspective is quickly fading away from public opinion.
Why?
It’s because the price of bitcoin has already popped! And intuitively, each of us knows that ponzi’s and scams die after the price pops.
So…since the price of bitcoin has already popped, it should be dead. Right?
And what if the price of bitcoin hasn’t popped just once, but has popped MANY times already?
Such as in…
- 2011 (from $100 to $10)
- 2013 (from $1000 to $200)
- 2018 (from $20,000 to $3,000)
- 2021 (from $69,000 to $15,000)
Since the price has popped multiple times…bitcoin should DEFINITELY be dead. RIGHT?
Answer: no!
Actually, the opposite is happening. After “popping” again in 2021 (from $69,000 down to $15,000), bitcoin is predictably on the rise once more ($31,000 as of this writing).
That’s why the misconception that bitcoin is a ponzi or scam is fading away – it just doesn’t hold merit anymore.
And on top of that, notice after each pop in the price, that bitcoin actually comes back bigger and stronger than before.
Now, consider this catalyst:
- BlackRock (ie. the BIGGEST money manager in the world) is applying to offer a bitcoin ETF for their customers (source). And so is Fidelity (source), another multi trillion dollar asset manager. And more companies are also submitting requests for ETF approvals too…
Now, add on these additional catalysts:
- bitcoin is a part of multiple 2024 US Presidential candidate platforms
- publicly traded companies are buying bitcoin (like Tesla, Square, MicroStrategy)
- countries like El Salvador and Bhutan are openly acquiring bitcoin
- bitcoin is part of the front page of CNBC all day, every day
For me, by slightly zooming out and focusing on the forest from the trees, I see bitcoin thriving as a new form of money!
How? Let’s talk about that next.
(from lesson 2) not all money is equal
TL/DR: bitcoin is a better quality money because it is scarce
Bitcoin isn’t just a new form of money that is just slightly better. Instead, bitcoin is much MUCH better quality compared to everything else.
And that matters. Let me explain…
Remember what happened to salt as money (from lesson 2)?
At first…
People were willing to trade their time (doing a job) and being compensated in salt, because salt was rare (ie. scarce). And because it was scarce, salt served as good quality money because it could preserve value over time.
Later…
As entrepreneurs figured out how to make / find more salt, salt became worth less (and less). Put another way, salt became bad quality money. And as that happened, less and less people were willing to be paid with salt or to trade for salt.
The journey of salt (from a good money to a bad money) happened as it became easier to make more of it. To be explicit: as it became easier to make, it became less scarce. Taken to the logical conclusion, once salt wasn’t scarce anymore, it lost it’s ability to hold value over time. And eventually, it stopped being money.
What does this have to do with bitcoin?
Bitcoin is the opposite of salt!
There will only ever be 21 million bitcoin. And no one can ever make more of it. No matter how hard they try.
Put another way, bitcoin is perfectly scarce! So unlike salt, it won’t suffer the same fate since again, no one can make / find more of it.
(side note: just how this 21 million limit is enforced is a fascinating journey down the bitcoin rabbit hole. And from thousands of hours of intense study, I have come to the conclusion, like every other Bitcoiner before me, that the 21 million limit is here to stay.)
Of course, scarcity isn’t the only thing that makes bitcoin a better quality money. There are many more, like how it incentivizes long term saving behavior, how no one can counterfeit it, and more (all of which you’ll learn about as you go down the bitcoin rabbit hole)…
But for now, the big takeaway is that all good quality money must be scarce. And bitcoin is the most scarce of them all – more than gold, US Dollars, Zimbabwe Dollars, or salt.
And all else equal, the more scarce a money is, the better quality it is.
Now, here is the kicker. History tells us when a significantly better quality money is available, it gets adopted!
This matters, because money makes the world go around.
(from lesson 1) money makes the world go around
TL/DR: because bitcoin is the best quality money, it is becoming the thing everyone wants to save with and earn too
The genie is out of the bottle. Bitcoin is going mainstream. And as we speak, there is massive adoption happening globally for this new and better quality money.
At the grass roots level, individuals like me are buying and holding bitcoin as a long term investment.
There are now over 1 million unique wallets holding at least 1 bitcoin:
At the corporate level, companies like MicroStrategy are also buying and holding bitcoin as a long term investment. Since buying their first bitcoin just 3 years ago, they’ve already accumulated over 150,000 bitcoin (worth ~$4.5 billion USD). And they are continuing to buy (having most recently bought ~13,000 in June 2023)!
Next, places like the Houston Firefighters Pension Fund (source) have recently started buying and holding bitcoin as a long term investment.
And at the city / state / country level, the same thing is happening. As an example, El Salvador has made bitcoin legal tender (source) and Bhutan has been acquiring bitcoin too (source)!
And soon, remember, BlackRock, Fidelity, and many other companies will start offering a bitcoin ETF.
The future is here…it’s just not distributed evenly
Even though bitcoin adoption is increasing every day, in the grand scheme of things, it is still very early.
Today, 99% of parents still don’t really get bitcoin. But everyday, that is changing.
And today, most companies / governments are still getting their head wrapped around bitcoin too. But that is changing as we speak.
While the world is figuring out bitcoin, that means you are actually ahead of most! And like any investment opportunity, those who are earlier to identify this long term investment opportunity have more upside to gain.
To be clear, I’m not saying the short term price of bitcoin will be higher today than it was yesterday, or higher this week vs. last week. But what I am saying is that by understanding that bitcoin is the best quality money, and that the best quality money wins over time…it’s clear to see that bitcoin is becoming the money that makes the world go around!
Conclusion
- bitcoin is money
- bitcoin is a significantly better quality of money
- Bitcoin is being globally adopted as the money that makes the world go around
And now, as a parent, you understand something that 99% of the world is still trying to figure out. And that gives you a distinct advantage!
Specifically, you now have a clear framework to evaluate if / how bitcoin should be a part of your family portfolio, just like I’ve realized that bitcoin is part of mine.
Next
In lesson 5, let’s me show you what life feels like as a parent who owns bitcoin. Sneak peek: it’s a good feeling.