Jordan French is a multimedia journalist and the Executive Editor at Grit Daily News.
If you haven’t been paying attention to digital currencies, now is the time to start.
With the advent of high-profile efforts like Facebook’sLibra, digital currencies are ready to make a splash, albeit with unintended consequences. Central banks are considering their own digital currencies. The BRICS nations have tossed the idea around of creating a digital currency for their trading bloc. Even China has reversed its earlier antagonistic course and is getting into the mix, pushing to unveil its own digital currency in 2020.
Cryptocurrencies have hit mainstream recognition now. Ask the average person on the street what Bitcoin is these days and you’ll probably get a decent answer. As understanding of digital-only money has grown among the populace, so has the chance for digital currency to gain a foothold. And it’s only going to increase.
Digital currency is simply currency that exists digitally, not physically. For many people the first thing that comes to mind will probably be cryptocurrency like Bitcoin, which is created by using a computer to solve cryptographic puzzles.
But decentralized cryptocurrency is only one representation of digital currency.
Bitcoin’s decentralized structure made it unusually durable when compared to some of the previous forays into digital currency, like e-gold. But you could also refer to something like the Microsoft Points used to purchase games on older Xboxes as a digital currency as well.
In fact, you could more or less refer to a large chunk of the world’s monetary system as digital currency. As the world transitions to more and more of a cashless society, most of the transactions that take place may not even involve any physical money changing hands — just numbers shifting between different digital ledgers.
The future of finance lies with digital currency, not physical. Though cash is still in circulation in most countries, the transition to a fully digital currency may be closer than it seems for many industrialized countries. That’s because of something called blockchain.
Blockchain technology is the underpinning behind cryptocurrencies like Ethereum and Bitcoin. It’s what makes a cryptocurrency possible. But it has possibilities far beyond just that.
At its most basic level blockchain is a digital distributed ledger, a record of transactions and assets scattered across a distributed computer network. Theoretically it’s very secure — it would be possible for someone to execute an attack against it, but it’s hard to do and the only way of reliably doing it is to control over 51 percent of the computers that store the ledger.
This becomes harder and harder as a blockchain’s network grows.
Banking, healthcare, food and transport sectors are all “interested” in blockchain, and a lot of money is getting poured into making it more secure and reliable. One of the entities that’s invested deeply into the future of blockchain and digital currency is Fintech Bermuda, which came on our radar (no pun intended) at TechBeach Bermuda. A straightforward name, Fintech Bermuda is a venture backed by the government of Bermuda that’s creating a sandbox for experimentation with both.
“Digital payments are expected to top 700 billion dollars next year,” commented Fintech Bermuda, “and we want to be at the forefront of the next wave of technology that makes that possible. Bermuda is committed to researching, testing and developing an open financial ecosystem. With our Currency Standard initiative we’re trying to democratize finance, allowing greater access to financial services and providing an example and test case for the world.”
Blockchain has grown in importance within many different organizations worldwide. One Deloitte study says that 53 percent of respondents put it in their top five priorities for their organization. The dual technologies of blockchain and digital currency carry the potential to vastly decrease friction and increase the efficiency of business across the world. Small wonder that people are excited.
Like any new technology, there are bold and sometimes overhyped claims going around. But the underlying concept is sound, and businesses and governments alike are taking notice.
While Bermuda’s initiative is focused on creating a more open financial future, other countries are focusing on blockchain’s potential as a means of tracking and centralizing financial information. Chief among these is China, which is working towards a fully-fledged digital currency that would allow them to have oversight of just about everything that happens in the country.
Blockchain is flexible enough to allow for both. There’s a middle ground somewhere between the anarchic, freewheeling spirit of Satoshi’s Bitcoin and the People’s Republic’s One Bank to Rule Them All. But whatever the future of digital currency looks like, it’s a safe bet that blockchain will be integral to it.
The future of finance and business is being worked on right now all around the world. Currencies like Bitcoin and small-scale blockchain proof of concept projects are only small harbingers of what’s to come — a future that looks a lot more efficient than the world we live in right now.
Innovation is driven by shared information, ease of cooperation and quick transfer of data. It’s nurtured by stable, trusted governments and systems. That’s where digital currency can make a big difference — breaking down barriers, speeding up information transfer and making a more connected world.
Are you ready? It’s (probably) coming but not the way you might think.