Cryptocurrency is the next step toward a cashless society, a global payment system that enables near-instant, low-cost, and highly anonymous financial transactions. Blockchain, the technology that underpins cryptocurrency, is an increasingly popular means of transferring money across the globe, especially between people in different countries. Now businesses are looking to the technology to solve a wide variety of problems, from the ability to track shipments to the ability to send money to your loved ones.
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The future is here! It has been predicted that the world will move towards a cashless society. Why? Because doing so will allow businesses to save on costly fees to move money around the world, and eliminate a large amount of ‘black money’ that is currently used to commit crime. But… what type of currency will be used in this cashless world?
Cryptocurrencies are the future, and we’re poised to become a cashless society. In the past decade, we’ve gone from being nearly completely cashless to almost completely cashless. Now that we’ve entered the crypto age, it’s only logical to expect that we’ll transition completely cashless once again. But how?
From QR code payments to mobile banking apps, consumers around the world are increasingly relying on digital payment solutions, especially as mobile technology becomes ubiquitous. Government efforts to develop a cashless economy have been a major factor: In countries like Singapore and the Philippines, central banks pushed for the introduction of contactless payments at the height of the COVID-19 pandemic. As a result, the use of digital payment platforms is showing promising growth, reaching 5,000% in the Philippines alone. Related: Digital Europe : Transition to a cashless world This unprecedented growth in cashless payments is also paving the way for wider acceptance of cryptocurrencies, with about 106 million cryptocurrency users worldwide in January. While this is an impressive 15% increase in one month, it is still a drop in the bucket compared to the 4.7 billion people who have access to the internet. But as cryptocurrencies continue to make headlines, what will it take for them to be adopted en masse?
New affordability model
Billions of people around the world today do not have access to the most basic financial services through traditional channels and therefore cannot save and manage their money safely. In times of economic turbulence, such as this year when the global economy was rocked by the effects of VIDCO-19, the wide gap between rich and poor becomes apparent. The global pandemic has only exacerbated the lack of an inclusive financial infrastructure, leaving about a third of the world’s population without financial protection to fall back on. However, with crypto wallets, anyone can transfer their crypto currency worldwide without having a minimum balance in their account, as long as they have an internet connection. Because crypto applications are built on decentralized blockchains, transactions are peer-to-peer and there are no traditional intermediaries like bankers or brokerage firms. This leads to significant savings in transaction costs, as traditional charges for small value cross-border transfers can be as high as 7%, taking into account intermediation costs on both the originator and receiver sides. In contrast, the same charges for cryptocurrencies are often less than 1%, regardless of the transaction amount. Related: Understanding the systemic transition from digitization to tokenization of financial services. Furthermore, highly decentralized platforms are permissionless, meaning that anyone with a cryptocurrency wallet and an internet connection can lend, transfer or exchange their cryptocurrencies without confirmation from a central authority or intermediary. Instead, transactions are executed by smart contracts that automate them when pre-coded conditions are met. Remember to save not only money, but time as well. Transferring money can take days, while cryptocurrencies can be transferred in minutes. However, most cryptocurrency platforms still require some form of formal identification as part of their identity verification and know your customer (KYC) process. This could be a phone number, photo ID or proof of home address. Some platforms use a tiered approach: the more information the user provides, the more services they can receive. While this is necessary for KYC compliance and anti-money laundering, it creates barriers for users who do not have official identification documents. However, some decentralized exchanges, or DEXs, still adhere to the principles of anonymity and untrusted operation by not providing KYC to their users. Eliminating the need to verify the account and wait for approval has attracted many people to this type of DEX – such as PancakeSwap, Uniswap and DEX by DeFiChain – and has made finance truly accessible and inclusive for all. In addition to easy transactions, recent innovations in cryptocurrencies promise a much more equitable financial system in which the non-banks and under-banks can get more resources to build wealth. While deFi products such as token storage and DEX betting may be a bit too advanced for this user group at the moment, simplifying centralized and decentralized financial services (CeDeFi) and improving financial literacy will ultimately help open the door to these inclusive wealth creation opportunities.
Education is the key to widespread acceptance of crypto-currencies
The widespread adoption of digital payment technologies such as QR codes and biometrics is certainly a promising sign that consumers have become more digital than ever. In Asia-Pacific, more than 90% of respondents said they would consider at least one new payment method in the next year. Alongside new payment technologies, the proliferation of retail investors has led to a paradigm shift in the investment landscape, with trading activity doubling in the past year. Convenient platforms like Robinhood and their well-known counterparts in the cryptocurrency space – like Coinbase – have made investing much more accessible to non-institutional investors. Related: Mass adoption of blockchain technology is possible, and education is key The historical growth of cashless transactions and retail investors has increased the opportunities for the public to deal with different types of assets. However, in the United States, a whopping 84% of adults are not interested in cryptocurrencies or have never heard of them. While this is due to seemingly scary technicalities, we are now in a good position for a gradual transition to a more cryptocurrency-driven society. Right now, there is still a lot of work to be done to help ordinary consumers better understand cryptocurrencies. Cryptoprojects, for example, would do well to invest more resources in creating educational content to close the knowledge gap – whether it’s guides or detailed explanations. At the same time, a more transparent approach to debunking misconceptions and ensuring users are aware of the risks associated with cryptocurrencies will make it easier and safer for them to navigate the space.
As the discourse on cryptocurrencies evolves, governments are taking note. While cash is not disappearing, 86% of central banks worldwide are considering using central bank digital currencies to move to cashless payments. The world’s first central bank digital currency (CBDC), the Sand Dollar, was announced by the Central Bank of The Bahamas back in 2018 and officially launched last October. The technology team behind the project was led by U-Zin Chua, who later co-founded DeFiChain. Related: Will CBDCs have an impact on the crypto space in 2020 and what’s next in 2021? The experts’ response Although CBDCs are regulated by a central authority, their introduction will send a profound message to market participants about the legitimacy of digital currencies. Thus, the introduction of CBDCs is a much-needed springboard to catalyze the widespread adoption of cryptocurrencies. In the short term, cryptocurrencies will not replace the existing financial system, but create their own ecosystem tailored to a new generation of digitally oriented and financially savvy users. While it will take time for consumers to get used to cryptocurrencies, over time this burgeoning technology will prove its worth by providing cheaper, safer and more comprehensive financial services for all. This article contains no investment advice or recommendations. Any investment or business transaction involves risk, and readers should do their own research before making a decision. The views, thoughts and opinions expressed herein are those of the author and do not necessarily reflect or represent those of Cointelegraph. Julian Hosp is CEO and co-founder of Cake DeFi, a platform that provides access to decentralized financial services and applications. He is also the president of DeFiChain, a DeFi platform built on the Bitcoin network. Julian is an active speaker at the Washington Speakers Bureau and is an advisor to blockchain groups in the EU. Julian holds a doctorate in human medicine from the Medical University of Innsbruck.It is becoming increasingly clear that the future of money lies with cryptocurrencies. They are easier to use, quicker, and cheaper to produce than fiat money, but what is the future of cryptocurrencies? Are they still a fad? Or are they here to stay?. Read more about chainlink lawsuit and let us know what you think.
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