Electric Transaction: The Fall of Traditional Currency
"The one thing that’s missing, but will soon be developed, is a reliable e-cash” as predicted by Nobel Prize-winning economist Milton Friedman in 1999. Fast forward almost twenty years, digital currency is here, and as it looks like, is here to stay. Ahead of his time, Milton Friedman predicted the transformation of currency. The advent of bitcoin along with other forms of mobile currency and payments has caused us to “rethink the concept of money”.
What exactly is bitcoin, you ask? To put it simply, it is a transaction of trust between two parties over a ‘untrustworthy’ internet. It doesn’t have any backing such as gold and is not tied to the dollar, pound, or any other paper form of payments. All you need is a computer, mobile phone, or tablet for the transaction to take place – no bank account, cash, or credit card required.
Bitcoins are traded person to person with no middle man. It’s an international currency with no transaction fees. Digital currencies such as Bitcoin have leveled the playing “between currency conversion rates, commission fees, and transfer limitations that come into play with traditional monetary systems”. These digital currencies are disruptive – consumers can now transfer money with the click of a button while avoiding fees from large banks & government institutions.
In today’s global economy where markets have been volatile (see Brexit), consumers are not totally losing trust (jus yet) in the financial systems in place; but alternatives such as Bitcoin have been presented as solutions when, and if, the current system fails. The transference of commerce may give rise to a global currency that is rooted in the internet. Anyone, anywhere, in any part of the world can have a stake in Bitcoin.
“The value of flat currency is not determined by the material it is made of, rather it is the economic laws of supply and demand that dictate its value”. An argument that skeptics of bitcoin like to present is that it isn’t back by anything such as gold or a government. But yet, it can be countered due to bitcoin’s high demand amongst people globally and it is a world currency that they can trust. Especially in undeveloped countries that do not have a reliable currency.
The decentralization of currency and rise of bitcoin, along with mobile payments, and other technologically backed forms of commerce has been inevitable and can be credited to the rise of the internet, and especially mobile phones. As the ubiquity of the internet and mobile phones continues to grow and innovate, more consumers are using their phones to pay for goods, access their bank accounts, and transfer money.
The digital currency and payment world has now grown from just bitcoin to players such as Apple Pay, PayPal, Square, and Venmo.
Consumers are now embracing digital payments in a rapid manner. Less and less people carry cash, especially Millennials. Now imagine not having to worry about your credit card. All you need is your phone, oh what a time to be alive.
The potential of the mobile phone as a form of commerce has yet to reach its peak. I believe that this is just the beginning. With the rise of the IoT, payments will transform from mobile into wearables. There’s potential that you could pay for that latte from Starbucks with your Fitbit.
As more retailers become on board with mobile payments, you will see the inevitable fall of traditional payments. Thanks to mobile and digital payments, the user experience for transactions has become easier, with higher demand proceeding.