Tag Archives: Bitcoin

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Who’s a Bitcoin and Where Can I Facebook Him?

Have you ever heard your teens talking about Bitcoin and thought, “Oh, great—not another video game”?

If so, then you’ve been greatly misinformed. Yes, Bitcoin is a product of the Internet age and is used solely within the digital sphere, but it is not a video game. It’s also not a social media platform, mobile app or new dance craze.

Bitcoin is a form of digital currency—a.k.a. cryptocurrency—created and held electronically that operates independently of a central bank and its regulations. Being that it’s a decentralized currency free from the control of one institution or government, its value is derived from the relationship between its supply and demand.

This is all very confusing and quite abstract, we understand. But the simple truth is that teens can buy and use Bitcoin on the Internet to purchase just about anything. There are no age restrictions in place to purchase Bitcoins, and for a younger generation that operates almost exclusively on the Internet, it’s more than likely they’ll come across an opportunity to get involved with it.

So what should you, the parent, know about Bitcoin? We’ve distilled the info and packaged it into bite-sized pros and cons.

Pros:

  1. Allows teens to make purchases online

In most jurisdictions, an individual must be 18 years of age to make a purchase on online. That means your teen will either get a hold of your credit card with no restrictions (yikes!) or you’ll have to monitor each and every purchase (also yikes!). With Bitcoin, a teen can spend a specific amount and receive a corresponding amount of bitcoins in return, regardless of age. There’s no immediate risk of overspending.

  1. Teaches teens practical personal financial skills

Budgeting is engrained in this system. Teens have to decide what is worthy of their bitcoins. Additionally, all bitcoins are encrypted with the history of each and every purchase, meaning frivolous purchases will never be forgotten and hopefully can teach meaningful lessons. This system of spending also provides more independence, which might work well with some teens that resent being constantly monitored by parents.

  1. Encourages entrepreneurships

Teens can actually earn bitcoins using their skills—just like a job. The Internet isn’t as ageist as the real world, so if a 13 year old can do computer programming as good or better than a 35 year old, then they can be hired and paid in Bitcoin. Freelance writers, gamers and programmers are regularly being paid in Bitcoin for their services. The value of ability and competence is valued more highly in this space than experience/wisdom/degrees.

Cons:

  1. The dollar value of bitcoins is volatile

Fluctuation is the name of the game here. Within a two-year span, the price of Bitcoin went from under $100 to over $1,000. The current price of Bitcoin on the market as of this writing it $375. What this means in normal person terms: a bitcoin that bought you a DVD on Amazon yesterday won’t necessarily be able to buy you a piece of gum tomorrow. Additionally, there is only a finite amount available. This gets complex as well, but the basic fact is there will only ever be 21 million bitcoins in existence, with close to 15 million of them still unreleased to the general public.

  1. Only 2 percent of merchants currently accept Bitcoin

That 2 percent equates to 160,000 digital merchants, so there are places to use Bitcoin. It’s frustrating, but don’t expect to be able to use it everywhere. Additionally, if more merchants don’t begin adopting Bitcoin payment, the overall value could potentially take a hit.

  1. Can be used for not-so-reputable dealings

While some see and use Bitcoin as a way to fund some shady dealings, the big picture view is that they’re better used as an investment tool. Some analysts have made optimistic predictions that by 2025 one Bitcoin will be worth $17,473. That would provide a handsome return to current Bitcoin owners.

However, your teen can still use Bitcoin for smaller payment transactions. It’s a fun foray into money management that could give them insight into an emerging form of currency that could very well become commonplace in our society.

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All I Want For Christmas Is A Bitcoin

By Erin Lowry, contributor

Bitcoin seems as real as monopoly money and sounds as silly as a loonie or a toonie, except it isn’t printed in funny colors and is worth way more than $2. In fact, it isn’t even tangible. Bitcoin is a virtual currency introduced in 2009. While it may sound like a fun stocking stuffer, Santa would need to be feeling awfully generous to leave a Bitcoin.

What is Bitcoin?

Bitcon is an unregulated, non-FDIC-insured currency. Although it is not backed by the U.S. or any government or banking system, it has been slowly gaining both in popularity and acceptance. Some merchants, such as restaurants and small businesses, will accept Bitcoin in lieu of paying with cash or a credit card.

At its peak in November 2013, one Bitcoin was worth upwards of $1,200. As of this writing, one Bitcoin is worth nearly $370.

How do you get Bitcoin?

First, you need a wallet. No, not the kind you’re thinking. You need a digital wallet either on mobile, desktop, laptop or the Web.

Next, you need to acquire your Bitcoins. This can happen one of two ways.

Mining: Bitcoin uses the Internet and users’ computers and servers to offer up the computing power needed to perform the algorithms that keep Bitcoin running.

Or in slightly more simple terms: your bank uses massive data servers to perform transactions all day. Bitcoin has you. You provide your computer to the cause and are rewarded in fractions of a Bitcoin.

Anyone can do it: You just need to sign up, download the software and let your computer do the rest. But your little laptop or desktop probably won’t have the power to earn you much as a miner, so Bitcoin pools help bring resources together to earn more.

Buying: Not interested in offering up your computer to earn some Bitcoins? Not a problem. You can buy them outright on an exchange, or accept them as tender for an item you want to sell. Just be careful if you want to buy via an exchange, as there are scammers and fraudsters out there looking to take your money.

Is Bitcoin a good investment?

As a fun, speculative portion of a portfolio, sure, it’s a perfectly fine investment. But remember, Bitcoin is incredibly volatile and susceptible to hacking and scams.

In fact, Mt. Gox, previously one of the largest Bitcoin exchanges in the world, filed bankruptcy earlier this year after losing 850,000 Bitcoins. The company’s official claim was that the Bitcoins were stolen, even though 200,000 have since been recovered.

Bitcoin transactions are also irreversible and can only be returned by the person who received the funds.

Finally, there can be tax consequences to trading in bitcoin. The IRS says that bitcoin and other virtual convertible currency is a capital asset. As such, selling or trading bitcoin for “real” cash or goods can result in taxable gain.

So, if your teen wants to dabble in a unique form of finance, Bitcoin may be a great gift as long as you proceed with caution. But it might also be the only gift under the tree — in the form of a gift certificate, of course.

 

Erin-Lowry_150hErin Lowry is the founder of BrokeMillennial.com, where she uses sarcasm and humor to explain basic financial concepts to her fellow millennials. Erin lives in New York City and works for MagnifyMoney.