Is Cryptocurrencies The Money Of The Future?
Introduction
What will the financial future look like? Consider walking into a restaurant and looking up at your favorite combo meal on the digital menu board. However, instead of $8.99, it is displayed as.009 BTC.
Can cryptocurrency truly be the currency of the future? The answer to that question is dependent on overall agreement on several key decisions ranging from usability to security and regulations.
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Let’s look at both sides of the (digital) coin and contrast traditional fiat money with cryptocurrency. Trust is the first and most important component.
People must have faith in the currency they are using. What gives the dollar its monetary value? Is it made of gold? No, since the 1970s, the dollar has not been backed by gold. So, what gives the dollar (or any other fiat currency) its value? Some countries’ currencies are thought to be more stable than others. Finally, it is people’s trust that the government issuing the money stands firmly behind it and effectively guarantees its “value.”
How does trust work with Bitcoin because it is decentralized, which means there is no governing body issuing the coins?
How does trust work with Bitcoin because it is decentralized, which means there is no governing body issuing the coins?
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Bitcoin is stored on the blockchain, which is essentially an online accounting ledger that allows the entire world to view each transaction. Each of these transactions is verified by miners (people who operate computers on a peer-to-peer network) to prevent fraud and double spending.
Miners are compensated for each transaction they verify in exchange for their services in maintaining the integrity of the blockchain. Because there are so many miners trying to make money, everyone double-checks each other’s work for errors. Because of this proof of work process, the blockchain has never been hacked. In essence, trust is what gives Bitcoin its value.
Next, consider security, trust’s best friend.
What if my bank is robbed or my credit card is used fraudulently? My bank deposits are protected by FDIC insurance. My bank will almost certainly reverse any charges on my card that I did not make. That doesn’t mean criminals won’t be able to pull off at least frustrating and time-consuming stunts. It’s more or less the peace of mind that comes from knowing that any wrongdoing against me will almost certainly be rectified.
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When it comes to storing your money in cryptocurrency, you have a lot of options. It is critical to understand whether transactions are insured for your protection. There are reputable exchanges, such as Binance and Coinbase, that have a track record of putting things right for their customers. The same as there are shady banks all over the world, there are shady crypto exchanges.
What happens if I throw a $20 bill into a fire? The same is true for cryptocurrency. If I lose my sign-in credentials to a particular digital wallet or exchange, I will no longer be able to access those coins. I can’t emphasize enough how important it is to do business with a reputable company.
The following issue is scaling.
Currently, this may be the most significant barrier preventing people from conducting more blockchain transactions. When it comes to transaction speed, fiat money outperforms cryptocurrency. Visa can process approximately 40,000 transactions per second. Under normal conditions, the blockchain can only handle about 10 transactions per second. A new protocol, however, is being implemented that will increase this to 60,000 transactions per second. The Lightning Network, as it is known, has the potential to make cryptocurrency the currency of the future.
The discussion would be incomplete unless we discussed convenience. What do most people like about traditional banking and spending methods? Cash is obviously easy to use most of the time for those who prefer it. A credit card is required when booking a hotel room or a rental car. Personally, I carry my credit card with me everywhere I go for the convenience, security, and rewards.
Did you know that there are companies that offer all of this in the crypto space as well? Monaco is now issuing Visa-branded cards that convert your digital currency to local currency for you.
If you’ve ever tried wiring money to someone, you know how time-consuming and expensive the process can be. Blockchain transactions enable users to send cryptocurrency to anyone in the world in minutes, regardless of where they live. It is also significantly less expensive and safer than sending a bank wire.
Other modern methods of money transfer are available in both worlds. Consider the applications Zelle, Venmo, and Messenger Pay. Every day, millions of millennials use these apps. Did you also know that they are incorporating cryptocurrency?
Square Cash now includes Bitcoin, and CEO Jack Dorsey stated, “Bitcoin, for us, is more than just buying and selling.” We believe this is a game-changing technology for our industry, and we want to learn as soon as possible.”
“Bitcoin offers an opportunity to get more people to access the financial system,” he added.
While it is clear that fiat spending continues to dominate how most of us move money, the fledgling cryptosystem is rapidly gaining traction. The evidence is all around us. Prior to 2017, finding mainstream media coverage was difficult. Almost every major business news outlet now covers Bitcoin. From Forbes to Fidelity, everyone is voicing their thoughts.
What are my thoughts? Perhaps the most important reason Bitcoin may succeed is that it is fair and inclusive, allowing more people around the world to gain financial access. Large institutions and banks see this as a threat to their very existence. They stand to lose the greatest transfer of wealth the world has ever witnessed.
Still unsure? “Are people trusting governments and banks more or less with each passing day?” ask yourself.
Your answer to that question may well determine the future of money.
