Many people wonder whether Bitcoin will eventually replace cash or paper money. In fact, many experts have described Bitcoin and its underlying technology as a revolution that will redefine money. The adoption of this virtual currency has increased rapidly, especially in developing countries where inflation and inefficiency in financial systems are commonplace. The net result is huge buy-in to this growing industry.
The World Bank Global Findex report showed that 1.7 billion people were unbanked in 2017. That means that these individuals don’t have any association with financial institutions like high street banks. Bitcoin and blockchain technology could be the catalysts that these users and investors need to grow economically.
It’s not surprising that many people compare the disruption that these techs could bring to the internet, which changed information transfer and communication. You may have heard tell of WEB3, a third iteration of the internet, apps and blockchain offering truly decentralised tools. This will add to the adoption of Bitcoin, Ethereum and parachains that seek to offer an alternative to conventional currencies.
The Digital Future
For centuries, money has been central to most human relationships. Consequently, the loss of value or faith in conventional money leads to political and economic instability. But the financial technology or ‘fintech‘ has caught the modern world’s imagination by presenting alternative traditional payment methods. Many experts note that this digitalization could redefine money.
Many of us have always seen conventional money as an expression of our sovereignty. Unfortunately, most governments have failed to guarantee the value of traditional money. Take the US FED, for example, they’ve been printing money left, right and centre over the last few years pushing inflation and resulting in hawkish interest rates being announced for 2022. While some experts agree that virtual currencies lack some core attributes of conventional money, the distributed ledger gives them traits that may transform most payment services by eliminating intermediaries and increasing efficiencies.
Essentially, digital currencies could eliminate the central banks’ role and weaken the government’s authority over cash supply. And that’s the political motivation for Bitcoin’s creation. It’s no wonder that some people argue that conventional currencies have already had their day. Therefore, the public will eventually not require a state-guaranteed payment method unless central banks redefine their role and learn to adapt
Central banks could issue a digital token, like many are starting to. But this solution will require careful consideration of policy trade-offs and choices. Keeping an open mind when approaching Bitcoin and other virtual assets is key, as is doing your own research. That’s because these digital tokens come with risks while providing the potential to enhance human lives.
A Shift in the Payment Systems
As Bitcoin gains increased adoption and the world becomes more digitized, we’re all likely to experience a shift in the payment systems we use. Ideally, the world could shift from an account-based approach to a token- or value-based payment system.
An account-based system records the transfer of claims in an account with an intermediary like a bank.
However, a token-or value-based payment system involves transferring the payment object, like paper currency or commodity. The transaction goes through if the involved parties can verify the payment object’s authenticity or value, regardless of the individuals’ trust in the counterparty or intermediary.
This shift could change how people create money in a digital world, from commodity currency to credit money. It could, in theory, allow the opportunity for the world to move into a digital Renaissance of sorts with Bitcoin or other cryptos as a commodity.
When someone buys Bitcoin on a platform like BitIQ and sends it to a digital wallet like Metamask, Trustwallet or Coinbase Wallet, they own it. They can also trade it at their preferred price without a central authority to dictate its value. Truly independent of the archaic concept of a bank.
The increase of Bitcoin’s adoption might change how people perceive money. The conventional currency’s future will also change as the world becomes more digitized. Eventually, central banks might no longer play the intermediary role. That’s because people might not need them if the world embraces Bitcoin and other decentralized currencies.
Disclosure: This article is for entertainment and educational purposes only. I am not a financial advisor and you should always do your own research and consult a qualified financial advisor before making big decisions with your money as capital may be at risk.