What will the future of money look like? Imagine walking into a restaurant and looking at the digital menu board of your favorite combo meal. But instead of being priced at $8.99, it shows as 0.009 BTC.
Could 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 (digital) coin and compare and contrast traditional fiat money with cryptocurrency.
The first and most important component is trust.
It is imperative 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 is it that gives the dollar (or any other fiat currency) value? Some countries’ currency is considered more stable than others. After all, people’s trust is that the issuing government of 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 essentially an online ledger that allows the entire world to view every transaction. Each of these transactions is verified by miners (people working with computers in 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, everyone checks their 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.
What if my bank is robbed or there is fraudulent activity on my credit card? My bank deposits are covered by FDIC insurance. My bank will probably also cancel any charges on my card that I never made. That doesn’t mean criminals won’t be able to pull off stunts that are frustrating and time-consuming to say the least. More or less, it’s the peace of mind that comes from knowing that I will most likely be cured of any wrongdoing against me.
In crypto, there are many choices when it comes to where to store your money. It is imperative that you know if the transactions are insured for your protection. There are reputable exchanges like Binance and Coinbase that have a proven track record of fixing their customers’ mistakes. Just as there are less than reputable banks around the world, the same is true for crypto.
What happens if I throw a twenty dollar bill into a fire? The same goes for crypto. If I lose my login credentials to a particular digital wallet or exchange, then 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 problem is scaling. Right now, this might be the biggest obstacle preventing people from doing more transactions on the blockchain. When it comes to transaction speed, fiat money moves much faster than crypto. Visa can process about 40,000 transactions per second. Under normal circumstances, the blockchain can only process about 10 per second. However, a new protocol is being introduced that will increase this to 60,000 transactions per second. Known as the Lightning Network, it could lead to crypto becoming 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 is obviously easy to use most of the time. If you’re trying to book a hotel room or car rental, 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 cards with a Visa logo that automatically convert your digital currency into the local currency for you.
If you’ve ever tried to transfer money to someone you know, the process can be very tedious and expensive. Blockchain transactions allow a user to send cryptocurrency to anyone in just minutes, no matter where they live. It’s also significantly cheaper and safer than sending a bank transfer.
There are other modern money transfer methods that exist 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 also know that they are also starting to include crypto?
The Square Cash app now includes Bitcoin, and CEO Jack Dorsey said: “Bitcoin for us doesn’t stop at buying and selling. We believe this is a transformative technology for our industry and want to learn as quickly as possible. ”
He added: “Bitcoin offers an opportunity to get more people into the financial system.”
While it’s clear that fiat costs still dominate the way most of us transfer money, the fledgling crypto system is quickly gaining ground. The evidence is everywhere. Before 2017, mainstream media coverage was hard to come by. Almost all major business news now covers Bitcoin. From Forbes to Fidelity, they all weigh in.
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 very existence. They will be on the losing end 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 just be what determines the future of money.