Money is not the problem, it’s what you do with it.
– Bright Enabulele
The global economy is experiencing non-stop digital revolution and transformation. The fear of uncertainty is becoming eminent.
For some, cash is still something they use every day. However, for the younger generation, cash is becoming more and more obsolete as it stifles global purchasing power. The transformation of money is happening now and data is the new cash!
The future of cash is digital. Here is why.
What is Paper Money?
Paper money gets its value from a government order (i.e., fiat). This means, the government declares fiat money to be a legal tender, which requires all people and firms within the country to accept it as a means of payment. If they fail to do so, they may be fined or even put in prison. Fiat money is not backed by any physical commodity. By definition, its intrinsic value is significantly lower than its face value.
This implies the value of fiat money is derived from the relationship between supply and demand and the strength of the government. Most modern economies are based on a fiat money system. Examples of fiat money include coins and bills like US Dollars or Euro. This makes it easier for stronger governments with more military and economic power to have hard cash while weaker economies with fragile government infrastructures especially those in Africa suffer from soft currencies.
How is Globalization impacting money?
Money has become a medium of relationship across cultures. The ability to make and receive payments is fundamental to any individual’s participation in the global economy. We believe that people should be able to use their money in the way they choose with no barriers. We also want that fair and low-cost access to payments should be recognized as a universal need just like water or electricity. In order for this to be possible a new form of global transaction is required. This leads us to what blockchain technology and cryptocurrency is all about.
What is cryptocurrency?
Cryptocurrency, crypto-currency, or crypto is money that does not exist in physical form, a digital asset designed to work as a medium of exchange wherein individual asset or coin ownership records are stored in a decentralized ledger existing in a form of a computerized database using strong cryptography to secure transaction records, to control the creation of additional coins, and to verify the transfer of coin ownership.
Cryptocurrency transactions are borderless and faster than sending email or text messages, unlike fiat money, which is not issued by a central authority, but since cryptocurrencies operate globally they are regulated on a country level. This also means that the regulation of cryptocurrencies will vary from country to country. The state of cryptocurrency is maintained through distributed consensus and works using a technology called a blockchain.
Thanks to the birth of the internet and blockchain, innovations like Bitcoin, Ethereum, and Oduwacoin are born to facilitate the store of value, low-cost transactions, and cross-border settlements. Blockchain is doing to transactions what the internet did to telecommunications.
With the use of the internet, the world has become a global village, with the use of cryptocurrency, the world is becoming a decentralized global economy.
This is the new economic truth that does not depend on manpower and human interference.
Is the current state of paper money sustainable?
Here are the issues we face with the current fiat currency;
- Inefficient, lengthy settlement processes that interfere with cash flow.
- High transaction fees take a significant bite out of the company’s assets.
- Local weak fiat currencies have restricted access to wider global economies, limiting scalability.
- The high cost of equipment for a regular payment gateway increases fixed capital and limited or no access to traditional banking systems and/or microcredit, resulting in financial exclusion.
- The ability to create an unlimited supply of paper money drives hyperinflation and weak fiat currency stifles purchasing power.
- Remittances from outside involve expensive money transfer services and the inconvenience of authorization requirements and long waiting periods
- Currency Manipulation & Price Fluctuations; Involving corrupt monetary authorities and governments.
- Weak Local Fiat Currencies; These are volatile and constantly devaluating.
- Large Unbanked Populations; Due to poor, unregulated banking infrastructure.
- Evils of Cash Transactions; Inefficient, insecure transfers with opaque ledgers.
Why Cryptocurrency is a current solution
Cryptocurrency has taken many by storm and it is disrupting many traditional monetary infrastructures. Digital transformation is catching up with money and the result is so eminent. Though cryptocurrency has created quite a buzz ever since the prices of certain types of cryptocurrencies suddenly rose, its true functionality has been misguided.
Here are the main reasons why cryptocurrencies are really important;
- Cryptocurrency is one of the safest and most trusted virtual mediums of exchange people prefer to use due to the fact that it is irrefutable and immutable by nature.
- There is no double-counting and much better traceability of funds.
- It verifies the authenticity of each transaction and prevents counterfeit.
- You do not need to deal with a third party when it comes to cryptocurrency. Blockchain supports peer-to-peer transactions.
- The likelihood of theft with digital currencies is a lot lower than with physical cash. In fact, cryptocurrency transfers cannot be reversed, one of its safeguards against fraud.
- International Payments are not just convenient but a lot more, this is of critical importance to African countries that have high inflation and acceptance rates.
In a nutshell, we can start saying bye-bye to cash. In a world of Dataism filled with disruption and accelerated changes, the Evolution of Money illuminates this fascinating reality. Blockchain is rewriting the rules of money and has given birth to the transformation of paper money into cryptocurrency. Paper money is making way at a rapid pace. We must not be afraid to accept change, because change is the only thing that is constant in life.