Cryptocurrencies have taken a seemingly permanent foothold in the world of technology and banking; more and more people are reaching out and investing or making transactions with Bitcoin and similar online coins. The potential impact that these decentralized coins have on our society is enormous for laypeople and tech enthusiasts alike.
Why is decentralization a big deal?
Throughout all of history, from the great Roman Empire to modern-day United States, money has been backed, affiliated, printed, and controlled by a governing body of the state. Artificial inflation rates, adjustable interest rates, and rapid economic collapses and growth are all side-effects of a governing body with an agenda controlling the money and its supply.
Bitcoin, for example, is one of many online cryptocurrencies, and has no official governing entity. This is completely uncharted territory, as not only is it not being manipulated artificially, but it is not associated with any governing body or any regulations and laws that may come with it. The price is determined solely on the open market – supply and demand.
No other currency has ever been free of a governing body and state like cryptocurrencies are today. The major effect of this is what it will do to the banking industry. Banks rely on governments to control interest rates, and they rely on there being a demand for money, specifically a demand for money to be spent and saved. Banks are intertwined with our identity, it is assumed everyone has a checking account and is a member of a large bank, and thus the forfeiting of all of our privacy and personal information that goes along with creating a bank account and identity. The opportunity to choose whether or not to be part of a bank, and further to be your own bank and hold your own cryptocurrencies in your own locked vault, is a privilege none of our ancestors were ever granted.
The implications of a mass of people determining to be their own bank is catastrophic for banking entities. Purchasing and transacting things will become more secure, and more private. People will not be able to be tracked by where they swiped their credit card, as Bitcoin by it’s very nature is anonymous and leaves no trail. The demand for banks will go down and change the entire workings of the very foundation of our government – if enough people choose to take this route.
What’s the catch?
A heated discussion is currently present on the usability of cryptocurrency in today’s world, this is a topic that is under heavy scrutiny as ultimately it will determine how successful it is for cryptocurrencies to be the major player in today’s economy.
The con’s of cryptocurrency currently lie in the usability for small and/or quick transactions in today’s society. In order for Bitcoin to be able to be used, it most be supported by both a buyer and a seller. That means that business owners must have a certain threshold of “tech saviness” to be able to even entertain the thought of accepting bitcoin as a payment.
In conjunction with needing to be supported on both ends, the fees for transacting are determined by how quickly the transaction needs to “go through” the network – see this article on how bitcoin transactions work on the tech side – and how big the transaction is monetarily. For example, a $100 transaction to another person that needs to get to that person in 20 minutes will likely be significantly more expensive than a $100 transaction that needs to get to that person in a 24 hour period. This spells trouble for small transactions, like your local coffee shop. If a coffee shop wants to accept bitcoin, they have two options. They can either take the gamble and allow a longer period of time for transactions to process – running the risk of someone not actually sending a transaction and skimming a free service from them – or require a quick 20 minute transaction but have higher fees for the buyer, and in turn a possible drop in sales via bitcoin.
The last point is crucial to understanding and predicting the future of cryptocurrencies in our world. If the fees and time for transactions to complete are lowered and made more efficient, Bitcoin will almost inevitably take a permanent resting place in our society as a whole, and perhaps be the most used currency, changing the game and freeing money up from regulation, agendas, and politics.