In short, I would say Bitcoin is digital money. And Bitcoin can be sent directly to someone over the internet without the need of a banking company.

For an in depth explanation for your kid, I would use easy language and simple examples. Let’s take a closer look and start very basic and find out what are the main differences to the way we are using money. A coin in one’s purse is tangible – since you can hold it in your hand. Therefore, the two of us could demonstrate the basics of a trade: if you give me your coins, I will give you my banana. That’s what trading between people looks like, the exchange of money and goods. So, what is the difference between exchanging physical cash instead of making a digital money transfer? All current financial stuctures are made up. They are based on decisions that people make, what we all agree on or not. If enough people choose paper as a payment method it will work within this group. If nobody believes in paper money anymore, it will get obsolete. The same with Bitcoin: it is based on an agreement between people, a set of rules that are written down in the white paper. Plus, Bitcoin is immaterial, so you can’t touch it. Which is incredibly convenient, because it means you are able to transfer money over the internet. You don’t have to be at the same place to make that trade. You can observe some numbers on a computer screen and by pushing the right buttons you are able to send money to another person. With Bitcoin, all your transactions are safely documented on the blockchain, which is another huge benefit.

The banking system as a pyramid, a hierarchy.
It seems like the current banking system is setup in the form of a pyramid, with central banks like the Federal Reserve, EZB or BoE on the top.

You don’t need a bank for Bitcoin

Onwards to an even more significant advantage of Bitcoin: you don’t have to go through a bank. If you are using traditional money like Euro or Dollar, you have to ask a bank to make the transfer for you. Which can be broken down into a sequence like the following. You are giving your money to a banking company and a manager working there decides if they pass your money through to another bank. In the receiving bank office you have the same setup, which is another bank manager is doing the same work, checking transfers and making financial decisions for the costumers. Finally … at the end of this tedious process, the money will be paid out to the person on the receiving end. By using Bitcoin, you are able to skip all the middle men. You can send Bitcoin directly to the wallet of the recipient, and this simply provides an effective and quick peer-to-peer transaction. The money goes straight from sender to receiver.

My closing thoughts on Bitcoin

My research has led me to this final conclusion. You can use Bitcoin to sent direct digital payments to anybody on the globe without having to deal with a bank. Not having to ask a bank manager for permission makes the exchange of money more straightforward for people. For me, Bitcoin is digital money and furthermore an interesting asset to store value over a longer period of time.

Want to learn more about the benefits of Bitcoin? And why it is the next step for a stable and more equal society? You can listen to this conversation between Jack Mallers and Rick Rubin to get a more rounded opinion about it.

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As always, I am reflecting on my experiences and ideas here. This content is my personal opinion and therefore purely educational – not financial advice. | Ich reflektiere ich hier, wie üblich, meine Erfahrungen und Ideen. Die Inhalte sind meine Meinung und dienen der Bildung – sind also keine Finanzberatung.