Bitcoin has opened up the world of money to rigorous discussion and debate. On forums, in cafes and amongst the Twitterites comes ideas about value transfer, the origins of money, and double-spending problems.
Never before have so many spent so much time talking about what a currency is, or how to transfer this thing called value. Then there’s clearing times, transfer costs, mining fees, and immutability.
Today we talk in terms of decentralizing, trust and payment rails.
We are exploring solutions for identity and owning your own data.
The talk of what money is, and what it should be, is pervasive.
And it is through the trading, debating and evangelizing about Bitcoin, cryptocurrency and decentralized finance, that a whole generation is becoming financially literate.
Why is crypto important for financial literacy?
Crypto has opened the door to the power of an idea.
The idea that a transfer mechanism can be created, maintained, and shared without government participation.
That a form of exchange can be trusted and accepted in spite of the fact that it is entirely virtual.
That people can make and accept mistakes without nanny-state regulations that otherwise exclude them from participation.
The power of Bitcoin is that it provides a foundational architecture for thousands of experiments to be built from. Bitcoin is a trading, innovation and risk assumption vehicle for the future.
In the meantime, the government wants you to budget, save, avoid debt and be financially responsible. But what about earning money, building cool businesses, taking risks and investing time, a few bucks and sweat equity for the future?
That’s not how your government sees financial literacy.
But then again, what does their budget, debt and savings look like?
Why isn’t making money part of financial literacy?
If you aren’t familiar with the term financial literacy, the term refers to knowledge that governments hope will make citizens more financially responsible.
Looking up financial literacy on Canadian or American government websites provides all the usual topics. There’s budgeting, saving, debt and investing. There’s usually some material on mortgages and insurance and how to avoid fraud.
The challenge with financial literacy for the crypto generation is that what none of these programs shows you is how to actively make money and build wealth in the first place.
No part of the program tells you how to take an idea and turn it into a company.
There is no instruction on how to start and run a business.
You are not taught about fundamental aspects of financial interactions like negotiation and incentives.
Financial literacy doesn’t teach you how to make many small controlled mistakes and learn to avoid large catastrophic ones.
The entire program is based on risk aversion. It’s about not losing in the future rather than the more useful concept of risk acceptance and mitigation to gain in the future.
You don’t grow by being protected from experience
After numerous financial crises, fraud and failures, regulation has been applied to avoid repeat events and protect citizens.
Citizens are protected from malfeasance, but at the same time, they are also protected from experience.
Take the accredited investor rules. This means that a base test determines if an investor is qualified to invest in certain risky opportunities. The rule assumes the capacity for losses. But it also excludes those who would potentially benefit from taking risks and making mistakes.
Being unaccredited is like trying to get a job so you can get experience, but being unable to get the job because you have no experience.
Accredited investors decide what gets built
Imagine a developer with expertise in technology and cryptography. This person would likely have superior knowledge and insight about a technical, crypto/token related project. They would know more than most accredited investors, and yet in the traditional market, they would be excluded from participating.
Because they’re unaccredited according to the law.
Accredited investors represent a small portion of the population. And a small group of accredited individuals decides what gets built. Through their regulated accreditation, their investment is the judge of what projects are worthy of development.
Then along comes Bitcoin, an open-source architecture.
And suddenly, the unaccredited had the opportunity to vote with their money, attention and labour. They were able to decide what got built and developed.
The unaccredited are now trading, building, speculating, and, in some cases failing their way to financial literacy.
Financial literacy means learning from mistakes
There’s a reason paper trading was discouraged on trading floors. There is nothing like the experience of putting on real trades in real markets with real money. By actively being involved in your trading decisions and experiencing real-world outcomes, you learn faster.
As a crypto enthusiast, you get to express your opinion on a coin, team, token or movement by buying some. You get to influence what gets built and developed by participating in ICOs. By trading these ICOs, you are testing and vetting the project, accelerating the discovery of its validity.
And for those ICOs that fail, you get to learn what worked and what didn’t. You get to see what red flags to look out for next time.
In crypto, you aren’t protected from risk by the government, you are free to embrace it. But you are also responsible for the outcomes of your decisions. This valuable negative feedback helps people learn to avoid scams and crooks in the future.
The government’s view of financial literacy is paper trading. You are owning your future by thinking about earning, risk-taking and owning your decisions.
And Bitcoin provides a solution to the income problem.
Bitcoin, the genesis seed for a forest of opportunity
The Bitcoin architecture has proliferated into numerous different coins, tokens, and chains. Supporting these thousands of projects are a series of tangential and essential businesses.
There’s a worldwide network of crypto miners and mining pools.
Some businesses collect and analyze blockchain data and report findings. There are also numerous crypto news sites which are a boon for content creators.
There’s an exchange business that lists the top cryptocurrencies and facilitates anonymous exchange. Others are focused on altcoins. And yet others are dedicated to futures and options trading across the world.
Numerous other businesses have been formed around crypto trading, custody and insurance.
The new crypto asset management business has risen providing financial products and services that didn’t exist a few years ago. There is also a growing decentralized version of the financial system developing including lending and derivative products.
Then there are projects working on identity and companies developing digitized asset-backed products using the architecture.
Now there are stablecoins backed by billions of dollars on Ethereum. Stablecoins provide numerous different use cases including an efficient dollar-backed payment rail.
And at some point, Central Bank Digital Currencies will surface.
How about the numerous blockchain companies developing unique ways for businesses to move, record and exchange digital value.
And so much more.
Crypto is providing many avenues for willing participants to solve their income problems.
A vision of financial literacy through building
Now what all these opportunities and tangential businesses do for the crypto generation is to provide them with a vision.
If that guy can do it, so can I. If she can start a company, I can too. What if I take that innovation and do this with it?
I can participate in the development of this project with my money and involvement.
Innovators and company builders have to learn how to explore an idea. How to bring together a team. How to find the right people to help you build it. Then get good advisors and maybe even raise money.
Learning how to explore innovative ideas, get a startup off the ground, and try again after a failure is financial literacy 101.
Maybe you’re trading instead.
Trading is an ongoing financial literacy bootcamp
Traders have to learn numerous important financial elements to even participate.
You have to come up with a stake from somewhere to trade. You have to figure out what trading platform you should use and make sure it’s secure.
Then you have to figure out all the ins and outs of various types of wallets. Then comes your education in online security to avoid scams, frauds and criminals.
That’s before your first trade.
Once you start trading, there’s a trading plan including how much you will use in the trade, your stop point and your exit. That sounds a bit like budgeting, but it’s effective risk management.
You will learn about how people are motivated by emotion, incentives, marketing and various kinds of information. You will come to understand what a secondary market is, why liquidity is important and the pluses and minuses of volatility.
Eventually, you’re going to discover what can happen when there’s too much leverage in the system. This is your financial literacy equivalent of the impact of debt.
When you pile into an altcoin on a tip, and it fails, you will be learning about the perils of trading using tips.
And that’s just a handful of the many valuable financial lessons you will learn as you trade.
Financial literacy means being a producer
The crypto generation has experienced two contrasting financial educations.
On the one hand, they’ve experienced two worldwide financial mushroom clouds in a dozen years. They’ve watched the government that wants them to save, stay out of debt, invest and be responsible, do the opposite of everything they talk about on their websites.
And the crypto generation also has the Bitcoin architecture, a bible providing the foundation for the unaccredited, non-government approved, live, financial literacy course.
It’s the financial education based on real-world experience. It involves making mistakes, learning and taking responsibility. It’s about participation. It means accepting risk as a fundamental part of life. And it’s an education that focuses on fixing the income problem instead obsessing about the spending one.
The crypto generation will come to learn one other important financial lesson, that being a producer is the most important thing you can be.
The government can shut down an economy.
They can turn the value of a currency into kindling.
They can confiscate hard assets.
But they will never take away your ability to produce.
And Bitcoin has given you the gift to build on, transform and play with. A way to turn yourself into an unstoppable producer.
And that is the most valuable form of financial literacy there is.
Canadian traders, innovators and crypto enthusiasts can buy, sell and trade BTC, ETH, XRP, QCAD
on Bitvo’s fast, secure, easy to use cryptocurrency trading platform.
Cryptocurrency traders can also enhance their financial literacy by exploring
Bitvo’s extensive education section written by a trader for traders.