Is Cryptocurrency the Future of Money?
What will the future of money look like? Imagine walking into a restaurant and looking at a digital menu board for your favorite combo meal. Instead of $8.99, it will show as 0.009 BTC.
Can cryptocurrencies really be the future of money? The answer to this question depends on a consensus on several key decisions, from ease of use to security to regulation.
Let's examine both sides of the
(digital) coin and compare and contrast traditional fiat and cryptocurrencies.
The first and most important factor is trust.
It is imperative that people trust the currency they use. What gives the dollar its value? Is it gold? No, the dollar hasn't been backed by gold since the 1970s. So what gives the dollar (or other fiat currency) its value? Some countries' currencies are considered more stable than others. Ultimately, it is the trust of the people that the issuing government of this currency stands firmly behind it, essentially guaranteeing its "value".
Bitcoin is decentralized and there is no governing body issuing coins, so how does trust work? Bitcoin is basically an online ledger where the whole world can see all transactions. It is located on top of the blockchain. Each of these transactions is verified by miners (people who run computers on a peer-to-peer network) to prevent fraud and prevent double spending. In exchange for services that maintain the integrity of the blockchain, miners receive payments for each verified transaction. There are countless miners trying to make money, so everyone checks each other for mistakes
This proof-of-work process is why blockchains have never been hacked. Fundamentally, this trust is what creates the value of Bitcoin.
Now let's look at trust's best friend: security.
What if my bank is robbed or my credit card is fraudulent? My bank deposits are covered by FDIC insurance. My bank will probably also reverse charges that I never made to the card. That's not to say criminals can't pull off at least a few frustrating and time-consuming stunts, though. It's more or less the peace of mind that comes from knowing that I'm most likely to be healed from wrongdoings against me. Knowing whether a transaction is insured for your protection is essential. We have reputable exchanges like Binance and Coinbase and a track record of righting our clients wrongs. Just like there aren't many reputable banks in the world, so are cryptocurrencies.
What happens when you throw a $20 bill into the fire? Crypto is no different. If you lose your credentials for a particular digital wallet or exchange, you will lose access to those coins. Again, the importance of doing business with reputable companies cannot be overemphasized.
The next problem is scaling
Right now, this could be the biggest hurdle preventing people from doing more transactions on the blockchain. When it comes to transaction speed, fiat currencies move much faster than cryptocurrencies. Visa can process approximately 40,000 transactions per second. Under normal circumstances, the blockchain can only handle about 10 transactions per second. However, a new protocol has been enacted to exponentially increase this to 60,000 transactions per second. Known as the Lightning Network, this network could make cryptocurrencies the future of money.
If you don't talk about convenience, you can't start talking. What do people generally like about traditional banking and payment methods? Clearly, it's mostly easy to use for those who prefer cash. If you're trying to book a hotel room or car rental, you'll need a credit card. Personally, I use my credit card everywhere I go because of its convenience, security, and perks.
Did you know that the crypto space also has a company that offers all this? Monaco now issues Visa-branded cards that automatically convert digital currency to local currency.
If you have ever tried to send money to someone, you know that the process can be very time-consuming and expensive. Blockchain transactions allow users to send crypto to anyone within minutes, regardless of where they live. It's also much cheaper and safer than bank transfers.
There are other modern money transfer methods that exist in both worlds
For example, consider applications such as Cell, Venmo, and Messenger Pay. These apps are used by millions of millennials every day. Did you know that they are also beginning to integrate cryptography?
Square Cash app now includes Bitcoin, said CEO Jack Dorsey. We believe this is a revolutionary technology for our industry and want to master it as soon as possible.
While it's clear that fiat spending still dominates the way most of us move money, the fledgling crypto system is quickly gaining ground. The evidence is everywhere. Prior to 2017 it was difficult to find mainstream media coverage. Now nearly every major business news outlet covers Bitcoin. From Forbes to Fidelity, they're all weighing in with their opinions.
What's my opinion? Perhaps the biggest reason Bitcoin might succeed is that it's fair, inclusive and grants financial access to more people worldwide. Banks and large institutions see this as a threat to their very existence. They stand to be on the losing end 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 every day?"
Your answer to this question could determine the future of money.
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