3x founder based in New York City. Currently scaling Darkroom and NERA.
An economic shift has been underway for decades — a transition from physical cash to digital forms of payment. More and more consumers are starting to use smartphone pay, as well, further decreasing the amount of physical money used to pay for goods and services.
This trend will undoubtedly continue as our societies become increasingly digitized.
The transition from cash to cards and smartphone pay was rapid over the last decade. In the next 10 years, digital currency — also called cryptocurrency — will probably be the next big shift in how people transact.
According to Deutsche Bank, cryptocurrency may replace traditional money completely in the next decade. I tend to agree that crypto will become more normalized as companies, like Lolli, usher crypto into the mainstream. As an amateur enthusiast, I’ve been fascinated by the topic of digital currency, and you should be, too.
As a quick review, cryptocurrency is a peer-to-peer electronic cash system that operates based on accounts, balances and transactions. In layman's terms, when funds are transferred, a record of the transaction is maintained across a decentralized network of computers; this system is called the blockchain.
A blockchain is a list of records that are distributed, decentralized and available to the network. When a transaction is made, encryption techniques regulate the currency and transfer of funds within the system. Since cryptocurrency is an internet-based financial system, it operates independently of central banks.
Adoption to cryptocurrency is quickly increasing. With increased security, regulations and overall popularity, crypto growth shouldn’t slow down anytime soon.
As more and more institutions, small businesses and other vendors accept cryptocurrency, the more popular and well-known it becomes. Institutional investors have also started to bring more money into the ecosystem, furthering its adoption and availability (this has been going on for quite some time now).
You might wonder if widespread adoption is in the future for cryptocurrency. In my opinion, until the volatility of crypto decreases, it will not be wholly adopted into the mainstream. For the average person to use digital currency in everyday transactions, it needs to be stable.
Americans are increasingly becoming distrusting of big businesses and are trusting banks less and less as time passes. Since cryptocurrency is stored in a decentralized network, it doesn’t require the agency of a single entity, such as a bank, to operate.
The ability to bypass the traditional banking system is enough to draw in users. On top of this fundamental feature, cryptocurrency doesn’t carry traditional banking fees and oftentimes has transaction network fees that are a fraction of traditional banks (even with things such as international transfers), another incentive for users.
Since the system is digital, anyone with an internet connection can theoretically “bank” with crypto. Users are also attracted to the fact that in addition to having increased agency over their money, they also benefit from lower transaction fees.
In virtually every other electronic money system, your account is undoubtedly owned by someone else. For instance, even when using something as “modern” as PayPal, you are subject to the rules and regulations of the company — they can freeze your money and suspend your account at will (people tend to forget this).
Unlike every other digital cash system, cryptocurrency is the only method where you actually own your account and have executive control and privacy.
Additionally, cryptocurrencies, such as Bitcoin, are arguably the first type of money that can easily be used internationally. Since the money is not subject to exchange rates, transaction fees and other rates associated with international traditional banking, it can be used around the world with little problem.
However, Bitcoin has mainly proven to be super valuable as a store of value, meaning transacting with it would not necessarily be the smartest if you think it is going to increase in price.
It is important to note that digital transactions at the moment are not always practical as many people use digital currency as a store of value (as mentioned above), meaning they believe in the value appreciation over time.
With these users, transacting with anything other than stable coins (coins tied to currency, or less volatile inherently) is impractical because you are forfeiting an appreciating asset.
Efficiency is important. In the past, when you wanted to complete a bigger transaction — like buying a property — efficiency seemed almost laughable. When you deal with several parties at a time, such as a lawyer, bank and notary, it can take a long time for anything to get done.
On top of this, most traditional financial institutions have holding periods. When you make a payment, the transfer of funds can take around three business days.
With cryptocurrency, you wait for no one.
There is a certainty for the sender and receiver of funds as soon as a transaction is pushed through. The second you decide to transfer money, you don’t have to deal with time-consuming delays or work with third parties.
With a growing track record of how consumers successfully use cryptocurrency, companies are becoming more interested in making their payments with digital money. Can you imagine getting your wage in a cryptocurrency? This shift won’t occur overnight, but a few decades from now, it may be a reality.
Some institutions are already using cryptocurrency to pay their workforce. When employees are paid (and choose to be paid) in those currencies, it’s because they believe that the projects will yield future benefits. In other words, employees believe their crypto payment will be more valuable tomorrow than today.
Still, it will likely be a few years before this payment method becomes more popular.
There are a lot of advantages to paying with digital currency, but in the current financial environment, there are also some setbacks. Since cryptocurrency is still finding stability, receiving payment in digital money means you’ll be subject to volatility (I know about this all too well from first hand experience).
Tax season can be more of a headache than usual if you’re paid in cryptocurrency because there are few laws and regulations addressing its taxation requirements. However, like traditional taxes, there’s software available that will tally up your crypto taxes in minutes. Still, even with these limitations, many workers are open to accepting their payments in cryptocurrency.
The world is becoming more and more digital with each passing decade …
As part of this shift, cash and debit use are decreasing and cryptocurrency is rising in popularity. Although the day you get your paycheck in digital currency might seem far off, within the next 10 years, there’s a chance this phenomenon will be a reality for many workers.
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