“Cryptocurrency” has become something of a buzzword in the last few years; it seems like you cannot open any magazine, newspaper, or log onto any online news source without seeing something referring to it. While people are divided on its impact and its future, there is no doubt that it is sending shockwaves through the financial world, so let us look at ten ways cryptocurrency will change the world.
While people are divided on its impact and its future, there is no doubt that it is sending shockwaves through the financial world, so let us look at ten ways cryptocurrency will change the world.
What Is Cryptocurrency
First things first, let us not get ahead of ourselves and allow us to start at the beginning. While most of us have heard the word, not all of us know exactly what it is, how it works, or what we do with it.
A cryptocurrency is something of a global phenomenon, yet it remains something of an enigma with members of the public, banks, governments, companies, and authorities not being completely and utterly clear on what it is. Even in 2017, you will still struggle to find a global bank or accounting firm that can pinpoint with accuracy and certainty what a cryptocurrency is and how it works.
In a nutshell, cryptocurrency is a type of digital currency that has been created and designed to be secure, and anonymous. As a currency, it is used predominantly online, and it uses cryptography (code breaking for those that don’t know) to convert information into an impenetrable code to facilitate and track purchases and transfers.
The idea of encryption was born in the Second World War as a response to the secure communication. With the advent of technology, it has developed to include computer science, mathematical theory, and even computer languages to become a super-secure way of transferring information, cash, and communications over the internet.
The first cryptocurrency was called Bitcoin, and it remains today as the most popular cryptocurrency on the market. Launched in 2009 by an unknown developer known by the pseudonym “Satoshi Nakamoto”, its popularity has gone from strength to strength with a single Bitcoin now worth over $4000.
Bitcoin, like other cryptocurrencies on the market, is used to facilitate payments of any value, in real time, and without any transfer fees. It runs on something called the blockchain technology which is a decentralised, digital ledger, run by miners whose computers crack codes to receive more Bitcoins.
Its popularity is based on the concept that it is entirely free from any governmental or authority interference and because it can facilitate completely anonymous transactions. Whilst this does mean that it can be used for various nefarious purposes, it does have its benefits.
These benefits include the fact that cryptocurrency transactions cannot be faked or reversed and due to the low cost of using it, it makes it more reliable and efficient than global currencies. The fact that they are decentralised means that they are available to everyone, whereas banks can impose limits on who can open an account, and how much money can be sent or received and from where.
So now we know what a cryptocurrency is, let us move on to how cryptocurrencies will change the world.
How Cryptocurrencies Will Change The World
Faster and more cost-efficient bank transfers
There is nothing more annoying than having to pay extortionate fees just to transfer money between banks, mainly if the transaction is a cross-border one. In honest terms, the way that banks still transfer cash is archaic – they can take up to a week, sometimes more and they involve clearing houses and correspondent banks making the process unnecessarily complicated.
When using a cryptocurrency, all of these obstacles are removed, and both national, and cross-border transfers can be made instantly and without having to pay any fees.
In fact, the technology used to facilitate the smooth transfer of cryptocurrencies – the ledger – can be used to transfer traditional currencies, in the same way, meaning that the need for banks involvement becomes somewhat obsolete. This technology means that series of transactions between foreign exchange traders can all be confirmed and enacted instantly and simultaneously.
An increase in global remittances
Did you know that every year, migrants from the third world and developing countries that have moved to western countries, send home over $500 billion in remittances to their families? This is a figure that far exceeds foreign direct investment, and with fees for international transfers between 6-10%, this is a tremendous burden on some of the world’s most vulnerable and less privileged people.
Cryptocurrency and ledger technology can save them a fortune every year by allowing them to make instant and fee-free transactions. By using a digital currency, users could even send transfers directly via a mobile phone and only have to pay minimal fees on currency exchanges.
Safe money for those on a lower income
With mobile technology moving at a fast pace in African countries, it is being shown that developing countries can lead when it comes to sophisticated types of technology.
Some estimates even suggest that 60% of commerce and trade in Kenya, is done via the exchange of mobile phone credits. Any individual who has access to a mobile phone can keep money on it and then transfer it to another user – unfortunately, these services carry hefty fees, and in some cases, these are as much as 20%. It is another way in which digital currencies should change the playing field. Of course, in high-inflation countries, this could carry some currency risk, but it would be safer than storing cash at home, or at a local bank.
It is another way in which digital currencies should change the playing field. Of course, in high-inflation countries, this could carry some currency risk, but it would be safer than storing cash at home, or at a local bank.
Increasing the potential and power of e-commerce
While e-commerce is going from strength to strength, there are ongoing concerns about credit card fraud and the safety of your personal information when shopping online. This results in fewer consumers being comfortable to buy online, as well as online vendors turning away good business.
If you bring a cryptocurrency such as Bitcoin into the equation, there is no way that the transaction can be undone, once it has been made. It also mitigates the risk of fraud for the vendor and allows them to sell their products and services worldwide. As money can be sent as quickly and efficiently as sending an email, it will enable the process of online shopping to become much more comfortable and smoother without having to abide by international rules or restrictions on trade.
Smart contracts and programmable money
When assets and currency become entirely digital, they can be quickly moved in automatic ways – therefore allowing the development of systems such as smart contracts and programmable money.
An example of this would be an escrow account – these type of accounts are already used in significant transactions such as property deals, and on sites such as UpWork. It works by allowing the buyer to put money into escrow, and this amount is only transferred to the seller once the title of the property is handed over. In other words, the money is held in a specified place and is only moved once a checklist has been completed.
This concept has been adapted for the digital age, where particularly with the online world, trust can be a bit of an issue. A smart contract allows the money to be held and earmarked for sending, once a digital checklist has been checked off satisfactorily.
When it comes to programmable money, this could be an integral concept in more complicated contracts that include multiple parties and requirements. An example would be, putting money into a finance contract which will pay out x amount based on specific stock prices. A computer could then link stock prices to a stock price website, and then pay out to different members of the contract, based on the performance of each stock.
Providing stability in unstable currencies
While the concept of cryptocurrencies are still in their infancy and are therefore not as stable that mature currencies such as the EUR or USD, some countries could certainly benefit from a currency such as Bitcoin.
In Venezuela for example, inflation has grown a staggering 128% since the beginning of 2017 which has led to widespread social and economic unrest, and in some ways, Bitcoin is a more stable currency than the national one. In fact, Bitcoin use has grown seven times in popularity since the beginning of the year, and it could be a smart move for Venezuelans looking for a more stable way to store their cash.
With an increased usage of crypto and digital currencies, the days of waiting days, and sometimes weeks for transfers to be affected could be over. There is no doubt that cryptocurrencies offer a more secure and efficient way of settling a real-time transaction through their use of ledger technology. There is no doubt that they could soon become a viable alternative to a debit card, bank wire, or telegram transfers.
Cryptocurrency such as Ripple offers cost-effective and quick transfers of fiat currency. With less than 4s, money can be transferred worldwide! Where does that leave traditional banking system?
Power to the people
The public’s trust in banks and financial institutions has always been something that has hung in the balance, and with the recent global economic crisis’s, this is something that continues to present issues for the industry.
It is, however, an excellent opportunity for crypto and digital currencies as they are not centralised, or regulated in any way. Offering users fewer layers of intermediation, the cryptocurrency sets the rules and regulations around compliance and provide a viable alternative to the much-abused banking system. A method of trade, investment, and wealth accumulation that empowers the people and removes the power from a select few can only be a good thing.
Making currency exchange obsolete
The global forex industry is worth billions and billions of dollars every day, but if digital and cryptocurrencies were used to their full potential, this could all change. In a world where business is breaking down borders through the power of the internet, it seems only logical that currency will be the next thing to develop in this way.
It is expected that shortly, we will see a shift towards one or two global currencies instead of centralised and government-controlled currencies that are inflated and deflated based on the whims of bankers and government members. This would allow for coins to have the same values around the world and would remove the need for the types of currency exchange systems that we see at the moment.
Disruption in a stagnant industry
There is no doubt that cryptocurrencies are something of a disruptive concept and that they are steaming ahead to disrupt further the way that we trade, exchange, and transact. One of the leading reasons for its popularity is its transparency through the public ledger that is available as a constant source of truth. One thing is for sure, if the financial industry wants to keep their footing, they will need to work hard on being more transparent or risk losing their market share, and more, to digital currencies.
From the moment of their very inception, there was no doubt that cryptocurrencies would change the world. Now with CEO’s of global banks, and various countries talking down the importance of digital currencies, and in the case of China, banning it – its popularity will continue to grow.
It is clear that the majority of people who are against the ideas, have a vested interest in it not become successful but fortunately, the power of the people and the benefits of such currencies, far outweigh the voices of those that oppose it.
Recently, the Managing Director of IMF, Christine Lagarde, acknowledged that cryptocurrency would change the traditional banking system shortly. As soon as digital currency overcomes its limitations and controversies, it is very likely it will start overtaking central banks. Lagarde’s statement confirms the research on the ways cryptocurrency will change the world, and the financial system will be only one of them.
Let us know in the comments below if you can think of any other ways that cryptocurrency will change the world! Maybe something you have already witnessed in your country?