What will the future of money look like? Imagine walking into a restaurant and looking at the digital menu board for your favorite combo meal. Only, instead of being priced at $8.99, it is displayed as .009 BTC.
Can crypto really be the future of money? The answer to this question depends on the general consensus on several key decisions ranging from ease of use to security and regulations.
Let’s look at both sides of the coin (digital) and compare and contrast traditional fiat currency to cryptocurrency.
The first and most important element is trust.
It is imperative that people trust the currency they use. What gives the dollar its value? Is this gold ? No, the dollar hasn’t been backed by gold since the 1970s. So what gives the value of the dollar (or any other fiat currency)? The currency of some countries is considered more stable than others. Ultimately, it’s people’s trust that the government issuing that money stands firmly behind it and essentially guarantees its «value.»
How does trust work with Bitcoin since it is decentralized, meaning there is no governing body that issues the coins? Bitcoin sits on the blockchain which is basically an online ledger that allows the world to view every transaction. Each of these transactions is verified by miners (people using computers on a peer to peer network) to prevent fraud and also ensure there is no double spending. In exchange for their services in maintaining the integrity of the blockchain, miners receive payment for each transaction they verify. Since there are innumerable miners trying to make money, each checks the errors of the others. 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.
What 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 criminals won’t be able to pull off some frustrating and time-consuming stunts. It’s more or less the peace of mind that comes from knowing that I will most likely be cured of any wrongdoing against me.
In crypto, there are a lot of choices for where to store your money. It is imperative to know if the transactions are insured for your protection. There are reputable exchanges such as Binance and Coinbase that have a track record of righting wrongs for their customers. Just as there are fewer reputable banks all over the world, so is crypto.
What happens if I throw a twenty dollar bill into the fire? The same is true for cryptography. If I lose my login credentials to a certain digital wallet or exchange, I will not 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. Currently, this might be the biggest hurdle preventing people from performing more transactions on the blockchain. When it comes to transaction speed, fiat currency moves much faster than crypto. Visa can process approximately 40,000 transactions per second. Under normal circumstances, the blockchain can only handle about 10 per second. However, a new protocol is being promulgated that will skyrocket up to 60,000 transactions per second. Known as the Lightning Network, it could make crypto the future of money.
The conversation wouldn’t be complete without talking about convenience. What do people generally like about 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, you need a credit card. Personally, I use my credit card everywhere I go because of convenience, security, and rewards.
Did you know that there are companies that also provide all of this in the crypto space? Monaco now issues logo Visa cards that automatically convert your digital currency into the local currency for you.
If you’ve ever tried to transfer money to someone, you know that this process can be very tedious and expensive. Blockchain transactions allow a user to send crypto to anyone within minutes, regardless of where they live. It’s also much cheaper and safer than sending a bank transfer.
There are other modern money transfer methods that exist 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 also know that they are also starting to integrate crypto?
The Square Cash app now includes Bitcoin and CEO Jack Dorsey said, «Bitcoin, for us, is about more than just buying and selling. We believe it’s a transformational technology for our industry, and we want to learn as quickly as possible.”
I added, “Bitcoin presents an opportunity to give more people access to the financial system.”
While it’s clear that fiat spending still dominates how most of us move money, the fledgling cryptosystem is rapidly gaining traction. The evidence is everywhere. Prior to 2017, it was difficult to find mainstream media coverage. Today, almost every major news media covers Bitcoin. From Forbes to Fidelity, they all have their say.
What is my opinion? Perhaps the main reason Bitcoin could be successful is that it is fair, inclusive, and grants financial access to more people around the world. Banks and large institutions see it as a threat to their very existence. They risk being the losers of the greatest transfer of wealth 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 well be what determines the future of money.