How I explained buying a box of Cracker Jacks with Bitcoin to my Wife.

Ok, so I have researched and done my own digging in how Bitcoin works. Though I cannot fully wrap my head around the truly technical aspect of it, I think I have a decent grasp. That is until my wife asked me to explain how she would buy a theoretical box of Cracker Jacks with Bitcoin. At first I thought well, that is simple, but then I began thinking about the price fluctuation and my own opinion that BTC is more like a commodity IMHO than a currency itself. Sure, there are places that accept it, but is my box of Cracker jacks that cost me $1.50 or  0.000094 BTC right now going to cost me 0.000124 or 0.000052 BTC tomorrow? I guess that is possible or even probable, with fluctuation up and down. Now this was my running down the tracks on my logic train in my head, so I explained it a bit differently to her and I am still not sure if I got it right.

You see, I used the idea of a gold miner and the price of gold. I am not sure if this is the best analogy, but it is what I most closely associate BTC with. So I explained it this way:

• Gold has a market value that fluctuates, today, spot value is: $1256.34 per oz
• The miner spends $1000 per oz. getting the gold
• He sells it to an assayer for $1,256 per oz.
• The assayer tests it and send it to be melted into bullion or a bar and is charged $100 oz. to do this.
• The gold is now worth $1356 per oz.
• A jeweler buys the processed gold for $1400 per oz.
• He makes a piece of jewelry with it and sells it to you for a premium at $1500 per oz.
• Your gold is worth $1500 to you right? Maybe, but if:
• You go to resell it to a gold dealer, he is only going to give you about 90% of spot value which is about $1130.
• He will hold it, waiting for gold prices to increase, or sell it to another person holding gold at spot or a 5%-10% premium above spot value, so lets say $1383
• And the cycle goes on and on and on, because we are only the temporary custodians of anything.
• The price of gold will always flux up and down, so much like Bitcoin, what you pay today may not be what you pay tomorrow, there may be a slight +/- each day.
• I believe this is why many countries left the gold and silver standard, because even though a dollar is a dollar, what it was worth in 1910 is only about 8% of what it is worth today, and this is called inflation.
• Bitcoin doesn’t not have to worry about inflation from my understanding. It will just continue to grow in value, because unlike gold, we know what the final number of BTC there will be, and everybody wants some right now.

I am not an economist, mathematician, or a financial guy. Perhaps I am way off base and botched this explanation? if anyone has any other thoughts on a better way to explain this lets hear them please.

 

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