What will the future of money look like?
Imagine walking into a restaurant and looking up at the digital menu board at your favorite combo meal.
Can
crypto really be the future of money? The answer to that question hinges on the
overall consensus on several key decisions ranging from ease of use to security
and regulations.
The first and most important component is trust.
It's
imperative that people trust the currency they're using. What gives the dollar
its value? Is it gold? No, the dollar hasn't been backed by gold since the
1970s. Then what is it that gives the dollar (or any other fiat currency)
value? Some countries' currency is considered more stable than others.
Ultimately, it's people's trust that the issuing government of that money
stands firmly behind it and essentially guarantees its "value."
How
does trust work with Bitcoin since it's decentralized meaning their isn't a
governing body that issues the coins? Bitcoin sits on the blockchain which is
basically an online accounting ledger that allows the whole world to view each
and every transaction. Each of these transactions is verified by miners (people
operating computers on a peer to peer network) to prevent fraud and also ensure
that there is no double spending. In exchange for their services of maintaining
the integrity of the blockchain, the miners receive a payment for each
transaction they verify. Since there are countless miners trying to make money
each one checks each others work for errors. This proof of work process is why
the blockchain has never been hacked. Essentially, this trust is what gives
Bitcoin value.
Next let's look at trust's closest friend, security.
How
about if my bank is robbed or there is fraudulent activity on my credit card?
My deposits with the bank are covered by FDIC insurance. Chances are my bank
will also reverse any charges on my card that I never made. That doesn't mean
that criminals won't be able to pull off stunts that are at the very least
frustrating and time consuming. It's more or less the peace of mind that comes
from knowing that I'll most likely be made whole from any wrongdoing against
me.
In
crypto, there's a lot of choices when it comes to where to store your money.
It's imperative to know if transactions are insured for your protection. There
are reputable exchanges such as Binance and Coinbase that have a proven track
record of righting wrongs for their clients. Just like there are less than
reputable banks all over the world, the same is true in crypto.
What
happens if I throw a twenty dollar bill into a fire? The same is true for
crypto. If I lose my sign in credentials to a certain digital wallet or
exchange then I won't be able to have access to those coins. Again, I can't
stress enough the importance of conducting business with a reputable company.
The next issue is scaling.
Currently, this might be the biggest hurdle that's
preventing people from conducting more transactions on the blockchain. When it
comes to the speed of transactions, fiat money moves much quicker than crypto.
Visa can handle about 40,000 transactions per second. Under normal
circumstances, the blockchain can only handle around 10 per second. However, a
new protocol is being enacted that will skyrocket this up to 60,000
transactions per second. Known as the Lightning Network, it could result in
making crypto the future of money.
The
conversation wouldn't be complete without talking about convenience. What do
people typically like about the their traditional banking and spending methods?
For those who prefer cash, it's obviously easy to use most of the time. If
you're trying to book a hotel room or a rental car, then you need a credit
card. Personally, I use my credit card everywhere I go because of the
convenience, security and rewards.
Did
you know there are companies out there providing all of this in the crypto
space as well? Monaco is now issuing Visa logo-ed cards that automatically
convert your digital currency into the local currency for you.
If
you've ever tried wiring money to someone you know that process can be very
tedious and costly. Blockchain transactions allow for a user to send crypto to
anyone in just minutes, regardless of where they live. It's also considerably
cheaper and safer than sending a bank wire.
There
are other modern methods for transferring money that exist in both worlds.
Take, for example, applications such as Zelle, Venmo and Messenger Pay. These
apps are used by millions of millennials everyday. Did you also know that they
are starting to incorporate crypto as well?
The
Square Cash app now includes Bitcoin and CEO Jack Dorsey said: "Bitcoin,
for us, is not stopping at buying and selling. We do believe that this is a transformational
technology for our industry, and we want to learn as quickly as possible."
He
added, "Bitcoin offers an opportunity to get more people access to the
financial system".
While
it's clear that fiat spending still dominates the way most of us move money,
the fledgling crypto system is quickly gaining ground. The evidence is
everywhere. Prior to 2017 it was difficult to find mainstream media coverage.
Now nearly every major business news outlet covers Bitcoin. From Forbes to
Fidelity, they're all weighing in with their opinions.
What's
my opinion? Perhaps the biggest reason Bitcoin might succeed is that it's fair,
inclusive and grants financial access to more people worldwide. Banks and large
institutions see this as a threat to their very existence. They stand to be on
the losing end of the greatest transfer of wealth the world has ever seen.
Still
undecided? Ask yourself this question: "Are people trusting governments
and banks more or less with each passing day?"
Your
answer to that question just might be what determines the future of money.