Interesting Guest post by Fernando Sanchez, see his blog here Life Mirror.
Le petit argent, the French call it. They even made a movie about it, so they did. Small money. Loose change. You get the idea.
Now, imagine a world without any of that. Real money, that is. Imagine a world where banknotes and coins are relics of an age long since past, now neatly catalogued and displayed inside glass exhibit cases in a dimly lit museum wing labeled Curiosities of our Ancestors.
What is real anyway? To paraphrase Morpheus, how do you define real? Without sounding too Matrix-esque, real money is, to you and me, a 50€ note or a 20c coin. The things that burn inside your wallet and weigh your pocket down. The tangibility of currency is what defines the value of money to the man in the street.
But what if all that were to disappear? The demise of money, an extinction event of greater magnitude and significance than the untimely exit of dinosaurs from the Earth stage.
Real v digital: The dilemma of a future past
Money, in itself, is largely worthless. It is simply a piece of printed paper or cheaply made coin used as a token to represent a given transaction.
Yet, despite the apparent insubstantiality of money, few things stand shoulder to shoulder to absolute reality today than cold hard cash. From bankers, to retailers, craftspeople selling their wares, or agents of the nefarious underworld, the undeniable reality of money speaks loud and clear. Today’s world is bound by monetary ties, and cash flows like lifeblood around these binds.
But what if one were to shuffle these mortal coils, as Hamlet would put it? Can we do it? Should we do it? Would we better off without the very thing that enslaves us from birth?
There are a few alternatives to real money. Enter virtual currencies.
Bitcoin shuddered into existence back in 2009, just as financial markets floundered amidst one of the worst economic recessions in recorded history. Bitcoin’s origins remain as unfathomable as the canyons of Mars. Popular lore attributes its inception to a single individual or a conglomerate of programmers working under the moniker “Satoshi Nakamoto”. Whether this is the name of a man, or an anagram for something else, remains unknown.
Bitcoin is a form digital currency, a concept that has been around almost as long as the internet itself. Digital currencies were originally restricted to niche markets, such as virtual assets in online gaming, though they are slowly filtering down to more mainstream applications.
More specifically, Bitcoin belongs to a subset of digital currency known as cryptocurrency. It is so deemed because it relies on cryptography to facilitate secure transactions, as well as the creation of new currency units to be added to an ever-increasing ledger.
Bitcoin is doing big business, too. As of June 2017, total market capitalisation of cryptocurrencies worldwide exceeds $100bn. There is a growing number of entities that accept bitcoins as a form of payment, and even some ATMs dispense it. Still, the utilisation of bitcoin is largely restricted to a bunch of hardcore users. It is far from mainstream.
In a “traditional” financial market environment, the management of money relies on centralised banking done in a single financial institution; the Federal Reserve System in the United States, for instance, the Bundesbank in Germany, and so on. Officials within these organisations place a value on the country’s currency based on market demand, fluctuations, and other economic factors, and print more or less banknotes to regulate the flow.
The cryptocurrency system does away with the centralisation part, relying instead on a global network of people known as miners, who use their computers to validate and time stamp transactions based on a set of rules. The integrity of bitcoin ledgers hinges upon the principle of honesty of worldwide miners, as there is a financial motivation behind this assumed honesty.
The times, they are a changin’: Should virtual currency replace cash?
Bitcoin mining is not easy, nor is it straightforward. A lot of knowledge is required, both financial and computer-related. Bitcoin mining is currently somewhat of an elitist game, and some would say, a skill, played out by a few hundreds of thousands of people around the world. Bitcoin, and other such virtual currencies are precisely that: Virtual. They exist merely as lines of code inside computer networks.
By contrast, everyone knows how to use money. Cash is real. Tangible, remember? You can feel it weighing in your pocket, or bulging your wallet, if you have enough of it. There is no such thing as a pocketful of bitcoin.
Cash is not impervious to calamities, however. Its very tangibility belies its own Achilles Heel. Cash can get lost or stolen, and once it’s gone, it’s gone forever. And crucially, you cannot use cash to pay for goods or services online.
Increasingly, people can use their smartphones to overcome hurdles that only cash could resolve not so long ago. Pay for parking, for example. Gone are the days of desperately rooting underneath smelly car mats for chewing-gum covered coins. US retail giant Walmart has regularly been using Walmart Pay for a couple of years now. Open the app, scan the code at the checkout, and you’re pretty much done. Amazon are trialling out similar payment systems in their physical stores. No dirty cash changes hands at any point. Many people also choose to use debit cards to pay for stuff these days, as opposed to carrying coins and notes of varied denominations. The transition to a cashless society is already well underway.
The complete removal of cash from the financial equation is only a matter of time. In a short few years, banknotes and coins portraying the faces of famous personalities will become a footnote to mankind’s once dogged obsession with money.
As the Internet of Things slowly but surely takes over our daily existence, the relevance of cash will become negligible, turning coins and notes into playthings to be used in a grand game of Monopoly. And even that is likely to be played on a computer or smart device.
So should virtual currency replace cash? Just as DVDs replaced the old, clunky and wretched VHS tapes, and CDs took the baton off vynyl records, there is a time when all things see their long deserved sunset. Cash is people’s biggest catalyst for greed and conflict, and though these traits will never be eliminated by the lack of a physical fulcrum, a cashless society would be a step in the right direction. Widespread adoption of virtual currency is still a long way away, but the writing is on the (virtual) wall.
Edited and prepared by Oscar Michel, Masters in Journalism, DCU.