Are bitcoins and other forms of digital currency going to change how we do business forever?
We’ve seen a lot of revolutions in the last century. Political revolutions aside, I’m talking specifically about revolutions of technology—from good ol’ refrigerators to smart phones. But none may be as dramatic as the bitcoin.
The six-year old digital currency has been plagued with controversy and scandal, most notably that it’s not backed by gold or silver like our paper currency. And while it may not survive in its current iteration, it seems digital currency is our future in one form or another.
“In fact, that technology will become ever more influential as developers create newer, better versions and clones,” reports the Wall Street Journal.
“No digital currency will soon dislodge the dollar, but bitcoin is much more than a currency. It is a radically new, decentralized system for managing the way societies exchange value. It is, quite simply, one of the most powerful innovations in finance in 500 years.”
That’s a bit like imagining smart phones even before we had rotary dials in every home. The sharing economy and other alternative forms of currency aren’t exactly new concepts. So what makes bitcoin so appealing and how in the world is the bitcoin, or any version of it, going to become so valuable? Again, the Wall Street Journal:
If applied widely to the inner workings of our global economy, this model could slash trillions in financial fees; computerize much of the work done by payment processors, government property-title offices, lawyers and accountants; and create opportunities for billions of people who don’t currently have bank accounts. Great value will be created, but many jobs also will be rendered obsolete.
Of course, this isn’t going to happen overnight, and many of the obsolete jobs will most likely be transitioned out of financial institutions over decades, if not longer. So that doesn’t seem like a pressing issue in moving us towards a society largely dependent on digital currency. What’s going to be most challenging, beyond hacking attempts and other security issues inherent to the internet, is that, bitcoins exist “purely as entries in an accounting system—a transparent public ledger known as the ‘blockchain’ that records balances and transfers among special bitcoin ‘addresses,’” reports the Journal. “Owning bitcoin doesn’t mean having a digital banknote in a digital pocket; it means having a claim to a bitcoin address, with a secret password, and the right to transfer its balances to someone else.”
Digital currency can make transfers (like a purchase at your local supermarket), happen in a fraction of the time current payments process. For businesses, there are big incentives in that there are (currently) no additional processing fees common with credit card purchases.
While bitcoin is still too unstable, with values fluctuating wildly from one week to the next, developers think digital currency will become more stable over time, which will make it a more dependable and trusted form of currency in the not-so-distant future, “the rise of digital currency may be a matter of evolutionary destiny,” reports the Journal. “The Internet has disrupted and decentralized much of the world economy, but the centralized world of finance remains stuck in the 15th century. Digital currency can help it adapt and survive.”
Find Jill on Twitter @jillettinger
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