What will be the future of money? Imagine walking into a restaurant and looking at the digital menu board for your favorite meal. Only, it shows as 009 BTC, not $8.99.
Could cryptocurrency really be the future of money? The answer to this question depends on the general consensus on several key decisions, from ease of use to security and regulations.
Let’s explore both sides of the (digital) coin and compare and contrast traditional fiat money with cryptocurrency.
The first and most important component is trust.
It is important that people trust the currency they use. What gives the dollar value? Is it gold? No, the dollar has not been backed by gold since the 1970s. So what gives the dollar (or any other fiat currency) value? Some countries’ currencies are considered more stable than others. Ultimately, people trust that the government that issued that money stands firmly behind it and essentially guarantees its “value.”
How does trust work with Bitcoin since it’s decentralized, meaning they don’t have a governing body that issues the coins? Bitcoin basically sits on the blockchain, an online ledger that allows the entire world to see every transaction. Each of these transactions is verified by miners (people who run computers on a peer to peer network) to prevent fraud and also to ensure that there is no double spending. In exchange for their services in maintaining the integrity of the blockchain, miners are paid for each transaction they verify. Since there are countless miners trying to make money, each one checks each other’s mistakes. This proof of work process is that the blockchain is never hacked. In fact, this belief is what gives Bitcoin its value.
Next, let’s look at security, which is trust’s best friend.
What if my bank was robbed or my credit card was fraudulent? My bank deposits are covered by FDIC insurance. My bank will likely charge back any charges I never made on my card. That doesn’t mean criminals can’t pull off at least some frustrating and time-consuming stunts. It is probably more or less the comfort of knowing that I will recover from any wrong done to me.
There are many options for where to store your money in cryptocurrency. For your protection, it is important to know that the transactions are insured. There are reputable exchanges like Binance and Coinbase that have a proven track record of fixing bugs for their customers. The same is true of cryptocurrency, as there are less than reputable banks around the world.
What happens if I throw a twenty dollar bill into the fire? The same is true for cryptocurrency. If I lose my credentials for 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 scale. Currently, this may be the biggest obstacle preventing people from transacting more on the blockchain. When it comes to the speed of transactions, fiat money moves faster than cryptocurrency. Visa can process about 40,000 transactions per second. Under normal conditions, the blockchain can only handle 10 per second. However, a new protocol is coming into force that will increase this to 60,000 transactions per second. Known as the Lightning Network, this could result in cryptocurrency becoming the future of money.
No conversation is complete without talking about comfort. What do people typically like about traditional banking and spending methods? For those who prefer cash, it is often very easy to use. 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 there are companies that provide all of this in the crypto space as well? Monaco now issues Visa logo cards that automatically convert your digital currency into local currency for you.
If you’ve ever tried to transfer money to anyone, you know that the process can be tedious and expensive. Blockchain transactions allow a user to send cryptocurrency to anyone within minutes, regardless of where they live. It’s also much cheaper and safer than sending bank money.
There are other modern money transfer methods available in both worlds. Take apps like Zelle, Venmo, and Messenger Pay, for example. These apps are used by millions of millennials every day. Did you know they are starting to integrate cryptocurrency as well?
Square Cash now includes Bitcoin, and CEO Jack Dorsey said: “Bitcoin doesn’t stop at buying and selling for us. We believe it’s a transformational technology for our industry, and we want to learn as quickly as possible.”
“Bitcoin presents an opportunity for more people to have access to the financial system,” he added.
While it’s clear that fiat costs still dominate the way most of us transfer money, the fledgling cryptocurrency system is quickly gaining ground. The evidence is everywhere. By 2017, mainstream media coverage was hard to come by. Almost every major business news story now involves Bitcoin. From Forbes to Fidelity, they are all measured by their opinions.
What is my point? Perhaps the biggest reason for Bitcoin’s success 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 side of the biggest wealth transfer the world has ever seen.
Still undecided? Ask yourself this question: “Do people trust governments and banks more or less with each passing day?”
Your answer to this question may be what determines the future of money.