What will the future of money look like? Imagine walking into a restaurant and looking at the digital menu board at your favorite meal combination. Only, instead of the price being $8.99, it is shown as 009 BTC.
Could cryptocurrency really be the future of money? The answer to that question is based on general agreement on several key decisions ranging from ease of use to security and regulation.
Let’s examine both sides of (digital) currency and compare and contrast traditional fiat money with cryptocurrency.
The first and most important ingredient is trust.
It is essential that people trust the currency they are using. What gives the dollar its value? Is it gold? No, the dollar has not backed gold since the 1970s. So what is it that gives the dollar (or any other fiat currency) its value? Some countries’ currencies are considered more stable than others. After all, it is the people’s trust that the issuing government of that money holds firm and essentially guarantees its “value”.
How does trust work with Bitcoin since it is decentralized, meaning there is no governing body issuing the coins? Bitcoin sits on the blockchain, essentially an online ledger that allows the entire world to see all transactions. Each of these transactions is verified by miners (people using computers in a peer to peer network) to prevent fraud and ensure that there is no double spending. In exchange for their services in maintaining the integrity of the blockchain, miners receive a payment for each transaction they verify. Since there are so many miners trying to make money, everyone checks each other’s work for errors. This proof of work process is why the blockchain has never been hacked. In essence, this trust is what gives Bitcoin its value.
Next, let’s look at confidence’s closest friend, security.
What if my bank is robbed or there is fraudulent activity on my credit card? My deposits in the bank are covered by FDIC insurance. My bank is also likely to reverse charges on my card that I never made. That’s not to say that criminals haven’t pulled off at least some frustrating and time-consuming stunts. More or less, it’s the peace of mind that comes from knowing that I will make up for any wrongdoing against me.
In crypto, there are many options when it comes to where to store your money. It is essential to know whether the transactions are insured for your protection. There are reputable exchanges like Binance and Coinbase with a proven track record of righting wrongs for their customers. Just as there are less than reputable banks around the world, the same is true in crypto.
What if I throw a twenty dollar bill into the fire? The same goes for crypto. If I lose my login credentials to a particular digital wallet or exchange, I won’t be able to access those coins. Again, I cannot stress enough the importance of doing business with a reputable company.
The next issue is scaling. Today, this may be the biggest obstacle preventing people from making more transactions on the blockchain. In terms of transaction speed, fiat money moves much faster than crypto. Visa can handle about 40,000 transactions per second. Under normal circumstances, the blockchain can only handle about 10 transactions per second. However, a new protocol is being implemented that will increase this to 60,000 transactions per second. Known as the Lightning Network, it could cause cryptocurrency to become the future of money.
The conversation wouldn’t be complete without talking about comfort. What do people like about traditional banking and spending methods? For those who prefer cash, of course, it’s easy to use most of the time. If you’re trying to book a hotel room or a rental car, you need a credit card. Personally, I use my credit card everywhere I go because of the convenience, security, and rewards.
Did you know that there are companies in the crypto space that provide all of that? Monaco is issuing cards with the Visa logo that automatically convert your digital currency into local currency for you.
If you’ve ever tried to wire someone money, you know that the process can be very tedious and expensive. Blockchain transactions allow a user to send crypto to anyone in minutes, no matter where they live. It’s also considerably cheaper and safer than sending a bank wire.
There are other modern methods of money transfer in both worlds. Take, for example, apps like Zelle, Venmo, and Messenger Pay. These apps are used by millions of millennials every day. Did you know that they are also starting to introduce cryptography?
The Square Cash app now includes Bitcoin, and CEO Jack Dorsey said: “Bitcoin, for us, isn’t just about buying and selling. We think it’s a transformative technology for our industry, and we want to learn as quickly as possible.”
He added, “Bitcoin offers an opportunity to bring more people into the financial system.”
While it’s clear that fiat spending still dominates the way most of us move money around, the fledgling crypto system is quickly gaining ground. The evidence is everywhere. Before 2017 it was difficult to find media coverage. Almost every major business news now covers Bitcoin. From Forbes to Fidelity, everyone is weighing in with their opinions.
What is my opinion? Perhaps the biggest reason why Bitcoin can succeed is that it is fair, inclusive and provides financial access to more people around the world. Banks and large institutions see this as a threat to their existence. They are on the losing end of the greatest wealth transfer the world has ever seen.
Still undecided? Ask yourself this question: “Do people trust governments and banks more or less each day?”
The answer to that question may determine the future of money.