What will the future of money look like? Imagine you are entering a restaurant and looking for the digital menu board at your favorite combo meal. Only, instead of $ 8.99, it shows as.009 BTC.
Could crypto really be the future of money? The answer to this question hinges on the general consensus on several key decisions, ranging from ease of use to safety and regulations.
Let’s examine both sides of (digital) currency and compare traditional fiat money and cryptocurrencies.
The first and foremost component is trust.
It is imperative that people trust the currency they are using. What gives the dollar its value? Is it gold No, the dollar has not been supported by gold since the 1970s. Then what gives the value of the dollar (or any other fiat currency)? Some countries’ currencies are more stable than others. In the end, people have confidence that the government issuing that money is firmly behind it and is essentially guaranteeing its “value”.
How does trust work with Bitcoin because it is decentralized in the sense that it is not a governing body that issues coins? Bitcoin is located on the blockchain and is basically an online ledger that allows the whole world to view every transaction. Each of these transactions is verified by miners (the people who operate computers on a peer-to-peer network) to prevent fraud and also ensure that there is no double-spending. In exchange for their services in maintaining the integrity of the blockchain, miners receive a payment for every transaction they verify. With countless miners trying to make money, every one checks each other’s work for errors. This evidence of business process is why the blockchain has never been hacked. Basically, it is this trust that gives Bitcoin the value.
Next, let’s look at our closest trusted 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. It is also possible that my bank will waive any fees on my card that I have never held. This does not mean that criminals will not be able to perform stunts that are at least frustrating and time consuming. It’s the somewhat peace of mind that comes from knowing that I will most likely be safe from anything wrong with me.
In cryptography, there are a lot of options when it comes to where to store your money. It is imperative to know if transactions are secured to protect you. There are reputable exchanges like Binance and Coinbase that have a proven track record of debugging their clients. Just as there are fewer reputable banks around the world, the same is true for cryptocurrencies.
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What happens if you throw a twenty dollar bill into the fire? The same goes for encryption. If I lose my login credentials to a specific digital wallet or exchange, I will not be able to access these currencies. Again, I cannot emphasize enough the importance of running a business with a reputable company.
The next issue is sizing. Currently, this may be the biggest obstacle preventing people from doing more transactions on the blockchain. When it comes to transaction speed, paper money moves much faster than cryptocurrencies. Visa can handle around 40,000 transactions per second. Under normal circumstances, the blockchain can only handle about 10 per second. However, a new protocol is enacted that will increase speeds of up to 60,000 transactions per second. Known as the Lightning Network, cryptocurrencies could make money the future of money.
No conversation would be complete without talking about comfort. What do people usually like about their traditional banking and spending methods? For those who prefer cash, it is clearly easy to use most of the time. If you are trying to book a hotel room or rent a car, you need a credit card. Personally, I use my credit card everywhere I go because of the convenience, the safety, and the rewards.
Did you know that there are companies that offer all of this in the crypto space, too? Monaco is now issuing Visa cards with the logo that automatically converts your digital currency into the local currency on your behalf.
If you ever try to transfer money to someone you know, this process can be very tedious and expensive. Blockchain transactions allow a user to send encryption to anyone in just a few minutes, regardless of where they live. It is also much cheaper and safer than sending a wire transfer.
There are other modern methods of transferring money that are found in both worlds. Take, for example, apps like Zelle, Venmo, and Messenger Pay. Millions of millennials use these apps every day. Did you also know that they are starting to incorporate cryptocurrencies as well?
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 we want to learn as quickly as possible.”
“Bitcoin provides an opportunity to reach more people of the financial system,” he added.
While it is clear that compulsory spending continues to dominate the way most of us move money, the nascent cryptocurrency is fast gaining ground. Evidence is everywhere. Before 2017, major media coverage was difficult to find. Now, almost every major business news outlet covers Bitcoin. From Forbes to Fidelity, they all balance their opinions.
What is my opinion? Perhaps the biggest reason Bitcoin is so successful is that it is fair, inclusive, and gives financial access to more people around the world. Large banks and institutions see this as an existential threat. They are about to be on the losing end of the largest transfer of wealth the world has ever seen.
Still hesitating? 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.