In a few years from now, cash may no longer exist. Instead, we might be using microchips in our hands which will communicate with a digital currency system. As humans, we want things (and processes) to become more uncomplicated. That is how we measure progress.
Right now, technology facilitates economic activity but may soon supersede the need for faulty monetary policies (by creating more efficient economies) in the long run. Robert Solow was right all along. Despite this, we still use archaic paper currencies. This form of legal tender, however, in a decade or sooner, might be replaced by another official means of exchange of many nations – or at least be in heavy use.
Society needs a safer, easy-to-use means of exchange and incidentally, as you read this, digital currencies are being designed and studied at Universities and information technology ‘thinktank’ companies the world over.
It would require a monumental shift in thinking for people to stop using cash at all. At a human level, it seems simple. Paper money is (literally and figuratively speaking), dirty and it takes up space. It’s also possible for cash to cause stress as when you have it – you have a target on your back.
So, what could replace cash?
Central Bank Digital Currencies (CBDCs) are currently in hypothetical planning stages with some countries conducting proof of concept programmes. CBDCs are a means of monetary exchange (by a Central Bank) that exist in a digital state on a server in a cloud.
The idea of using a CBDC was prompted by the emergence and prevalence of Bitcoin and other cryptocurrencies. Believers in the mass use of CBDCs want the world to use less cash. They believe people are safer if they do not have money at hand, which can be stolen, and that commerce can be more efficient in a cashless society.
We could say that the history of money is a story of its gradual dematerialization from tangible objects to intangible computer code. Programming code is written for and used to facilitate many facets of our lives, so why not with money?
An ETA is sooner than you think
Over time, what has been used as money has changed, starting from trading large objects which were seen as a basic store of value. Gradually people started shrinking those objects into paper and then turning paper (IOUs) into a special paper. Later, they formalized the process by setting up a financial system to support it – Lo and Behold – the adoption and use of cash was borne.
Some progressive nations have shown genuine and committed interest in testing the viability of CBDCs. Seven Central Banks in October issued a statement in which they said they were studying common principles and salient features needed for a viable CBDC.
The Central Banks in Canada, Britain, the European Union, Japan, Switzerland, Sweden, and the United States now believe there is a threat that private digital currencies pose to the control of monetary policy.
More specifically, they are also competing with China, who they purposefully excluded from their group. They plan to have a viable digital currency system to prevent a case in which China gets the first-mover advantage.
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Advantages of CBDCs
We want to create a more efficient payment system. Managing cash can cost money mostly because of securing the safe use of it. We can include more people in a financial system as there is no need for consumers to have a bank account to hold a CBDC.
Safety is, therefore, a huge “positive” to having a cashless society. This is especially in emerging countries where many people still use cash as opposed to cards and electronic transfers (ETFs). Cash is trusted while banks aren’t necessarily trusted at all. Consumers also might not want to pay fees to keep their bank accounts open.
One salient case for a contactless (digital) payment system would is due to the advent of the Covid-19 virus. This has awakened us to the potential emergence and spreading of potential viruses in the future.
CBDC might also make micropayments cheaper which would allow for new services and business models. So, one can enable the efficient sale parts of products and services, such as individual news articles or television series episodes for a few cents rather than relying on subscription models.
A CBDC may also reduce friction between payment systems and increase the speed of transactions while ensuring their finality. This can be achieved by achieving delivery versus payment in securities transactions.
Interest-bearing retail CBDC might boost monetary policy efficiency. CBDC can provide a Central Bank with an additional financial instrument – the rate of interest it carries. CBDCs would provide competition to stable coin exchanges such as Bitcoin and Facebook’s Libra.
Issues with digital currencies & CBDCs
Cryptocurrencies currently exhibit huge swings in value (volatility) as people use them as a speculative asset. This could change if they were somehow monitored and administered by Central Banks.
The disintermediation of commercial banks would occur if consumers move money from bank accounts into CBDC. This could start a vicious cycle as banks raise deposit rates to attract more money and less bank credit will be extended at these higher interest rates.
A Central Bank could need to provide additional liquidity to banks and hence take on credit risk. There could be an increased reputational risk for Central Banks. Digital systems need to be protected and the system’s staff monitored.
Many questions remain unanswered
Cross border transactions will also create new paradigms for central banks. There are risks of a type of dollarisation for economies with volatile exchange ranges and high inflation.
‘Dollarization‘ is when a country replaces its currency with the US dollar because the dollar is so stable and widely used. In the foreseeable future countries may then opt to replace paper money with the best (continental) CBDC available – like a digital Euro for the EU.
The future depends on the goals of the CBDC. It would grant the public access to the state’s balance sheet when, right now, cash is the only way for private individuals to hold central bank money. All other types of money holdings are based on centralized/private money creation systems. These are still prone to manipulation and abuse by central banks themselves or their subsidiaries.
Did you know that there are still more than 700 million people in the world who live in extreme poverty? These people must scrimp, starve, and struggle to survive off less than $1.90 per day.
By 2030, the World Bank estimates that more than 90 percent of those people will be concentrated in Sub-Saharan Africa.
This is perhaps one of the greatest developmental failures of the modern world. Despite the continent’s expansive natural resources and increasing connectivity, foreign actors still feel it’s too risky to heavily invest in their markets.
Blockchain could be the key!
Bitcoin and “Blockchain” were created in the mass wave of distrust in banks after the 2008 financial crisis. Therefore, the technology enables individual, distributed data storage that could become the perfect evidence (trust) base and financial infrastructure for a developing country.
With the right implementation, Blockchain holds the potential to completely revolutionize and revitalize such economies, especially in Sub-Saharan Africa.
So, what is this Blockchain?
Blockchain is essentially a kind of decentralized database that allows you to have a safe, secure way to handle their data without the need for third parties.
For example, you could with Bitcoin, make or accept payments in real-time without needing a centralized bank.
“[It is] a way for one Internet user to transfer a unique piece of digital property to another Internet user, such that the transfer is guaranteed to be safe and secure, everyone knows that the transfer has taken place, and nobody can challenge the legitimacy of the transfer,” said software entrepreneur Marc Andreessen.
“The consequences of this breakthrough are hard to overstate.”
Historic background
Until the mid-twentieth century, most of Africa was ruled under a colonial system meant to exploit the people and their natural resources for European benefit. Africans, in addition, were rushed into development according to European standards rather than homegrown ones.
The legacy of rapid development, distrust and corruption left behind an economic system failing to recover in the 21st century.
While the World Bank celebrates a decrease in global poverty levels, the number is expected to remain stagnant in Africa. Today’s poorest people are living in places with the least economic growth.
Sadly enough, poverty and lack of investment in many developing countries stem from how they were integrated into the world system.
The land was cut into countries according to European treaties and agreements, rather than by traditional and tribal land divisions. This situation worsened upon the handover of colonial power to so-called “democracies.” Power often shifted to the ethnic groups that former colonizers favoured.
Corruption multiplied in the form of bribes, political persecution, rigged elections, and a massive wealth gap. All of this still affects the wealth distribution and investment potentials of many developing countries.
Of course, this created a lack of trust in banks and government throughout much of Sub-Saharan Africa.
The perfect fit for Africa
During a 2012 study conducted in rural Western Kenya, Stanford University researchers waived the costs of opening basic savings accounts for a number of unbanked individuals.
While 63 percent of the subjects opened an account, only 18 percent of them used the accounts. This was likely due to three factors: a lack of trust in banks, unreliable service and prohibitive withdrawal fees.
Unfortunately, the prevalence of unbanked individuals in the informal sectors scares off foreign investors, who heavily rely on transactional evidence to make investments. Otherwise, pouring money into markets is too risky. That’s where Blockchain comes in.
How would it work?
Blockchain can host an entire evidence base of transactions, loan repayments, and asset titles. The technology is also decentralized and requires individual confirmation, creating an element of trust and transparency beyond traditional banking systems.
According to Victor Olorunfemi, Director of Products for Pan-African tech and crypto-exchange, KuBitX, Blockchain’s major benefits lie in “frictionless P2P and cross-border payments, transparent elections, land registry management [and] transparent crowdfunding.”
Let’s look at some of the different ways Blockchain could benefit developing economies, especially in Sub-Saharan Africa.
1. Creating financial infrastructure and accountability
According to a study by the Milken Institute, viable financial markets require consistent, accurate data on assets and credit histories. Luckily, Blockchain may fulfil these needs.
The use of Smart Contracts technology is ideal in areas lacking accountability, such as the real estate or land/agricultural sectors. In Africa, a lack of record-keeping practices often leads to “missing” or non-existent title deeds. In some cases, this is intentional.
Title deeds “go missing,” only to end up in the hands of benefactors other than the rightful owners. Smart Contracts could eradicate these issues through the use of special tokens that cannot be duplicated, changed or removed. See the article on tokenization.
Likewise, Bitland, a company in Ghana, currently helps individuals record deeds and land surveys. By resolving land disputes, Bitland creates more stability while accurately recording land asset data.
“There’s a massive number of people in the informal sector, but there’s not much data being collected on them right now.”
Merit Webster, co-president of the MIT Sloan Africa Business Club.
“That means you don’t have that credit history or payment history for them. If you have a decentralized approach to collecting data, you end up with more malleable data. [This] is very valuable for creating credit histories.” The agricultural industry also has the potential to thrive using Blockchain.
“Blockchain could be used to track goods around the world. This allows farmers to earn a fair wage for their goods.”
Also, farmers could use record-keeping technology to streamline the supply chain and document resources. This would lead to better efficiency, lower transactional costs, and improved logistics.
2. Security in banking
According to the World Bank, there were 1.7 billion people with no bank account in 2017. This situation is worst in developing countries, especially African ones. For example, over 62 million of these people lived in Nigeria.
Besides, data from Google Trends reveal that Lagos, one of Nigeria’s biggest cities, ranks globally as the number one city based on the volume of online searches for Bitcoin (BTC). Clearly, for the city’s 21 million-odd people, there an immense interest in some form of an accessible payment system.
Of course, it’s unrealistic to expect bank branches to magically appear in every remote corner of the world. However, a digital database using Blockchain technologies has the potential to reach far beyond physical banks.
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Many Africans value trust and transparency. In developing countries, this lack of trust goes beyond the Internet. Developing countries with less industrialization tend to have higher levels of corruption.
This reduces national investment opportunities in the public sector and instills a lack of trust in centralized oligarchs handling an international investment.
Because its power lies within the community of users, Blockchain can combat these trust issues. All data logs and amendments must pass through this community and identification confirmation tests.
Blockchain technology also secures your data incredibly. Hacking and data breaches are all too common nowadays. In 2017, for example, around 3 billion Yahoo user accounts were stolen.
When information is stored in the same place, hackers have one, easy target. In contrast, Blockchain is a distributed entity. This dissemination of data leaves it far less vulnerable to cyberattacks.
3. Fostering Entrepreneurship
Coupled with the Internet, Blockchain technology could be the perfect platform for aspiring African developers. Because the ‘source code’ is free of charge, skilled coders can adapt, create, and configure special applications, called DApps.
These are available on Crypto platforms and provided by companies like Ethereum, and a South African firm specializing in what they called the Keto-Coin.
Rather than waiting for governments to drag their feet trying to create jobs—individuals on the continent can form small firms that build and sell Crypto-based Apps locally or abroad.
“Despite the frictions and impediments mentioned,” said Olorunfemi. “Blockchain can still provide an avenue for promising African tech projects to access capital (FDI) via token offerings on digital assets exchanges.”
Many courses are even readily available online to quickly learn about new technology. Microsoft, for instance, offers a platform via Azure for you to build and learn about the Blockchain.
One-man shops in countries with unfavourable economic systems, like Zimbabwe, can also adopt smaller, stable, Cryptocurrencies to facilitate or payments. In cases of rampant inflation, they can temporarily act as a store of value or help you pay for things until your currency stabilizes.
As with the Venezuelan hyperinflation case study, Cryptocurrency intervention could help many developing countries troubled with economic instability.
There is also the option of Crypto-mining. But before you pull out the ‘high-consumption energy’ argument – think outside the box for a moment. What about energy sources that are free and available nearly 24/7? Like water and the sun!
The African continent is full of capable scientists and mechanical engineers. One could build special solar-powered energy centers to power Bitcoin-mining.
And without the expertise, governments or private companies could alternatively just invite Crypto companies with abundant financial resources to mine (cleanly) for a special tax/fee while creating jobs for the locals.
4. Elections
In addition to the financial side of things, Blockchain technology could help eliminate some forms of corruption. For example, many African countries’ elections are incredibly vulnerable to the social scourge. In some extreme cases, some officials change or forge written ballot votes to rig elections.
To combat this, Blockchain databases could record votes. This makes it nearly impossible to tamper with using Smart Contract technology. Having fair elections improves infrastructure, which then increases development and economic dependability.
While some might see Africa’s economy as underdeveloped, others might see it as a blank canvas well-suited for a large-scale implementation of Blockchain. Economic and governmental systems are shifting and slightly shaky in many Sub-Saharan African nations.
The challenge is to foster a rigid economic system to implement Blockchain.
Don’t just take our word for it—African nations have often implemented new, practical technologies before the Western world. Let’s look at the example of M-Pesa. Back in 2014, Americans and Europeans were amazed by Apple Pay’s launch.
However, this mobile payment system wasn’t exactly “new.” By that time, Kenyans had used M-Pesa, a very similar technology, for years.
“There’s a lot of opportunity to leapfrog the way the West developed and have these more unique African solutions, but it needs to come from within,” said Webster.
“It needs to come from entrepreneurs in the continent who want to implement these solutions. It’s important to engage people very early on. Systems incubated in the West don’t stand as great of a chance to work as African ones do.”
Concluding remarks
With the possibility of an experimental, large-scale takeover of Blockchain technology to improve African infrastructure, the nations there could leapfrog in development and growth.
This must begin internally. According to Olorunfemi, “Education—of policymakers and other stakeholders—which is often ignored has to be a critical factor in paving the way for the acceptance and adoption of new technologies and the accompanying investment.”
The results in Sub-Saharan African countries could help eliminate much of the world’s poverty. It would also remove remnants of mistrust and corruption left behind by the days of colonial exploitation.
While there are some obstacles to large-scale Blockchain implementation, we can’t think of a better benefactor than there. The possibilities for business using the Blockchain are endless!
To learn more about how to get started with Cryptocurrency mining or purchasing, visit our resources page for useful links and guides.
Additional input by Bobby Quarshie (BQ).
Citations: Christopher Lee and Jackson Mueller.
Swan, Melanie. “Anticipating the Economic Benefits of Blockchain.” Technology Innovation Management Review 7.10. Oct. 2017.
Bitcoin Lessons from Venezuela, Where Hyperinflation Reigns. Online Source: https://www.lathropgage.com/newsletter-237.html
As a small online business, it makes sense to ensure that what you are selling is very easy to access. This is especially important when offering something that is common. The purchasing process should be practical and aesthetically pleasing to your clients.
Your online shopping cart software creates that important connection between you and your customers. It must therefore help you achieve three goals:
-Deliver the best and most secure experience for your users;
-Make it simple and desirable for them to complete transactions;
Customers expect consistency, reliability, and speed. Most users are now accustomed to the speeds facilitated by broadband Wi-Fi and omnipresent LTE mobile networks.
This percentage has probably increased since then. Therefore, delivering experiences that embrace mobile best practices has to be one of your primary concerns as you choose a solution.
Some other salient things a good online shopping cart solution should pay attention to:
TRUSTis obviously a huge part of establishing a valuable relationship. Your shopping cart software is an extension of your brand, and your buyers must trust it with their personal and financial information.
As buyers avoid using direct credit card purchases (due to increasing fraud and data breaches) in favour of more secure methods. Your company must be prepared to offer new payment options.
Customers appreciate the SECURITY and ease of mobile wallet payments, such as Apple Pay and Google Pay. This is because they can complete purchases using a single-use virtual credit card number.
Give them the ability to use these alternative payments and if possible, do not exclude Cryptocurrency!
It would also need to link up to your MARKETING and customer service platforms to provide a holistic customer experience.
Naturally, you also want a system that tracks product sales and customer activity with as much detail as possible, and that can also sort transaction data across a multitude of categories.
As a human race, we are constantly striving for easier ways of doing things: simpler, faster, and more practical. Thanks to better tech, you can now interact with people globally and instantly with the click of a few buttons.
Likewise, you can also physically move quickly due to advances in transportation technology. When it comes to the age-old practice of banking – the same is now happening.
Provided you have the necessities, a passport, residential address and a mobile phone, you can now open a bank account within minutes. This is brought about by a Fintech offering better known as Open Banking.
Open banking uses APIs that enable third-party developers to build applications and services around the financial institution.
Wikipedia
It is ultimately about giving you a better, secure, and flawless service experience. This comes with the opportunity to gain access to excellent financial products.
Online security expert and Chairwoman of Zortrex, Susan Brown reflects on the advent of the new offering:
“Just over a year ago when Open Banking came into the limelight for the Fintech world. CMA9 were effectively mandated to make their banking platform accessible for third party companies.”
This is all wonderful, innovative, and promotes transparency within the financial services market. There is only one drawback:
“Consumers really do not know what Open Banking means, there has been a lot published about the benefits that are to be had from Open Banking. At the same time, consumers have become very aware of the negative aspects around sharing their data.”
Scourge of hacks & breaches
Daily, you hear more and more about hacks, and data compromises. With the UK’s Lloyds Bank breach last year; the trust by its consumers to share their financial and personal information, some would say, is completely gone.
In addition, you go onto a site to review products and before you know it, you are bombarded with adverts on the products that you have been looking at elsewhere. This has led some consumers to abandon shopping carts and refrain from using online retailers.
If not adequately protected, the newly established Fintech system might suffer a similar data breaches.
Visa and Mastercard for one, are among the established firms threatened by Open (Mobile) Banking. And so, they should be according to Brown.
“As consumers knowledge grows about their data and the security around their financial data has not been secure as shown with the Marriott hack.”
Naturally, new systems pose a huge threat for banks. They become the digital gateway channel connection to the financial sector. This eliminates the direct relationship between consumers and banks.
This is not a bad thing as banks are overwhelmed and cannot always keep in touch with everyone.
An added layer of protection
The solution for failing global acceptance would be for a new Fintech company to gain the trust of its new customers. They would naturally also be able to chip away at the market share of other expensive financial institutions.
What you as a consumer know and want is privacy and security. Currently, only banks can make this happen – but at a high cost.
With a new digital tokenisation system like Zortrex vault, you can concurrently let your consumers reap the awards on their transactions.
They can as a result, gain redeemable tokens for patronising your services. This can occur while both you and your partners offer them products globally.
“Don’t be a gateway for the challenger banks be in control of your omni channel for your consumers,” Brown advises
You can still tap into the pool of 17-odd million Bitcoins that is now in circulation. You can even purchase them in the fiat currency equivalents.
But where do you get them then? After all, Cryptocurrency is this dark and mysterious transaction system used only by criminals and drug addicts.
So you acquiring them would naturally be in a shady place like the dark web – where it is used to acquire illicit things – right?
Not quite and there are publicly accessible marketplaces where one can securely purchase Bitcoins.
Find out more via A peer-to-peer Crypto marketplace
When it comes to providing means of storing, sending, and receiving money, banks and their affiliated institutions, have enjoyed a monopoly for centuries.
They (especially central banks which allegedly are owned powerful families) have the authority to influence countries and their governments. We will not go into the level of control as this paves the way for conspiracy theories which though not proven – are not farfetched.
So, it’s only expected that when some new and unknown entity threatens their prosperity, they start to react.
Blockchain frenzy
How banks are responding is evident by how they are fervently building their own blockchains. This, however, defeats the purpose of a having decentralized system.
Bitcoin and cryptocurrencies get their appeal not just because they are very secure. But because unlike fiat money, they are not heavily regulated and can be mathematically restricted.
The 21 million unit limit on Bitcoin by default places it closer to the status of gold (which is also not infinite). But what happens when all are mined in 2041? Bitcoin’s current ‘value’ of over $30 000 (adjusted),could move up again, according to the traditional laws of supply and demand as it becomes rare.
To unlock more value the creators will split it again. The first major splits (forks) gave rise to Litecoin and Bitcoin Cash. Both cryptocurrencies are racing to newer heights daily.
How banks operate
Now back to the banks – they make money from our deposits and these deposits are backed up by our reserve banks. Reserve banks lend retail banks money which they essentially just print. The banks must ‘turn it’ and pay it back with interest (repo rate).
So, technically we ‘empower’ banks by depositing our money so they can invest the funds in all sorts of mechanisms. Such mechanisms include the credit and loans to you, your businesses, equities, and property.
Then, they also invest in high-risk investment vehicles like currency trading, derivatives (futures). They are essentially the biggest regulated and legal Ponzi-schemes. They also make a significant amount of the daily fees they charge you.
A quick example
Let’s quickly put things into context. A bank with over a million customers transacting daily. Let’s say they charge you a 10 cent (conservative figure) transaction fee for depositing, withdrawing from another bank, or an intra-bank transfer.
They then make 0.10c x 1 000 000 = 100 000 units of the currency on the day. This equates to 1,2 million Euros, Dollars, Rands, or Yen annually. And that is just off your transactional fees!
Then they also charge you monthly service/maintenance fees. Those are to cover the convenience of you having an account and, for services like online banking.
This is what cryptocurrencies can potentially wipe away from banks we all go the digital currencies route. Granted, how you acquire and transfer Cryptocurrencies are not as straightforward as receiving paper money – yet.
That, coupled with the stigma around ‘Cryptos’, means there is still a barrier to entry for the ‘open-source’ monetary system.
Banks will try and bring about their own blockchains to address security concerns around making transactions. For them, however, it would still be business as usual when it comes to the charges.
Birth of Fintech
Some newer financial institutions, however, are already progressing in the favour of you and me – one such is the European based N26 Bank.
We often end up paying for things all month without even having to go to an ATM. It works as a traditional bank would, however, allows the (smart) card to be used as a credit card (backed by Mastercard) would.
This allows you to quickly purchase goods online, book events, flights ticket, and accommodation. Basically, all things you still can’t do with your debit card.
In countries like Sweden and Estonia, card and digital systems have been a thing for a long time now.
Some of these Fintechs are adopting or partnering with Cryptos companies to deliver their services. One such as the relationship the one between a German bank and the crypto Ripple.
Click image topurchaseRipple here
It would be interesting to see what governments and financial institutions do to ‘protect’ their payment systems. Likewise, it will be equally fascinating to observe how they adapt in general to the new digital era upon us.
Warren Buffett once referred to financial derivatives as “weapons of mass destruction” . He warned that they are detrimental to the global economy and financial markets.
Cryptos have a way of creating something supposedly of intrinsic value out of nothing. This is as dangerous as propaganda that leads to conflict or promotes struggle.
They are backed up by a cloud of non-regulatory policies by states who themselves, still traditional monetary policy measures.
And this is despite their full understanding of the instruments of financial wizardry.
In economics, the term creative destruction, however, has a paradoxically positive meaning. It is perfectly suited to the new form of “crypto”- currency (Bitcoin) that is not as mystic as it seems.
A brief history
Money is a concept that probably also met up with resilience when it was first supposedly introduced by the Chinese. They started carrying folding money during the Tang Dynasty (A.D. 618-907).
The instability generated by uncontrolled usage and denomination, however, soon led to rapid inflation. This prompted the Chinese to drop it, only for it to be taken up again later when it got stabilized by the adoption and use by the West.
They developed paper money as an offshoot of the invention of block printing. Block printing is like stamping.
Ironically that very same term ‘block’ is the foundation behind the Bitcoin – which is generated using blockchains (digital public ledger).
We won’t get into the mechanics of Bitcoins. We will, however, attempt to increase awareness on why and how this new payment method could cause positive ripples in the financial global system.
What is Bitcoin?
As per Wikipedia, and as simple as it can get in terms of a description: Bitcoin is a cryptocurrency and a digital payment system.
It was supposedly invented by an unknown programmer, or a group of programmers, under the alias Satoshi Nakamoto in 2009.
Though the anonymity creates an element of distrust about the agenda of its creators, it is surprisingly more transparent than derivatives.
Cryptocurrency uses a system of cryptography (encryption) to control the creation of digital ‘coins’ and to verify millions of transactions.
These transactions include are a basic movement of funds between two digital wallets and get submitted to a public ledger and await confirmation through encryption.
This video is a great and simple way for you to understand the above because it is best understood when explained as a larger picture. Check out this useful and basic video on Bitcoins.
That is quite a feat worth acknowledging because 11 years of existence is nothing compared to gold’s multiple century reigns.
Now 2009 was not long ago considering the Bitcoin is now ‘worth’ well over $20 000 each (updated to 2021 levels).
For centuries, gold has been our standard of trade or backing of all types of currency until it was ‘uncoupled’ by Nixon in 1971.
The future of trade and commerce is in the digital sphere – are you in the know?
Potential currency?
For something to become the standard measure or mode of trade it, however, needs to be stable. So, while the technology behind Bitcoin (the Blockchain) is relatively sound, its actual price needs to find its firm nesting.
Established currencies trade on markets via exchange rates with relatively minuscule increments of change in price and value. In comparison, Bitcoin can jump in value by $1000 within (minutes or seconds) – prompting skepticism about its stability.
Google Engineer Ray Kurzweil, who is revered as a “prophet” for his mysterious predictions, such inconsistency undermines the cryptocurrency’s value as a currency.
The aim is nevertheless to relieve our dependency on money or more so, the iron grip and often abusive control that some banking institutions have over consumers.
You could even argue that the recent surge in its price is being fuelled by agents of the traditional banking industry. They naturally feel threatened by the fact that they may not fully understand it and its inherent potential. So they (cash-flush) could inflate it for an inevitable ‘burst’.
But the currency though very volatile in its movement has remained buoyant. It has now held for well above $10 000 for sustained periods since its inception. Gold is now approx. $1,900.
Bitcoins provide more guarantee than financial derivatives especially because of their open-source approach to its existence and use.
Complexity
The tricky part is simply getting to grips with the vastly abundant information about it and how you could even generate it.
It is still a great backup ‘of a backup’. We rely on technology and more specifically the Internet for transactions and the associated traffic for our daily lives.
A simultaneous crash of a few major servers, however, could send it all tumbling back into the digital abyss. But as with money and other forms of currencies, only time will tell.
Bitcoin will just have to further prove its resilience and stability in the long run.
Getting attention
It is certainly not a ‘fly by night’ thing because it has sparked the interests of both public and private institutions globally. China even made a bold move to block the Bitcoin market from trading within its borders at some stage.
Bitcoin also gets its collective strength (intrinsic value) from its limited quantity in circulation (19 million out of a finite 21 million).
Spillover effects
Bitcoin has also paved the way for others such as Ethereum, (mostly used for smart contracts and by developers) which is also seeing good growth. Then there is Litecoin, which was formed as part of a controversial yet civil split from the originators of Bitcoin to use ‘variant technologies’.
All these platforms (companies) now use the blockchain to create all types of cryptocurrencies to capitalize on the spoils of this digital revolution.
There are also several institutions that are offering late-comers a chance to benefit from the spoils of using and investing in digital currency.
Naturally, all these schemes with their investment packages would require a ‘buy-in’ and marketing to attract more takers.
Such Crypto ‘companies’ are likened to a pyramid scheme and subject to many investigations by fiscal and criminal authorities. But that is how Bitcoin, its promoters, and the market were initially treated.
Interested? Check out the following useful links to their official websites to help you get started.
