As the world transitions towards a completely digital, globalized network, one thing that has continued to be rather consistent has been currency. Many people don’t stop to question the current monetary system, or its relevance to such a rapidly changing landscape of business. Yet, a few people have been rethinking the role of currency as we transition towards a truly digital age. We don’t actually trade gold for scarce goods anymore, so why should we still trade dollars and coins? Aren’t those simply arbitrary placeholders for value? We are relying on physical goods less and less, and their scarcity is also decreasing.
Advancements in 3D printing technologies will completely redesign the business models for future societies and economies, forcing us to find value in non-physical, often intangible products. In Pandora’s Millions, by George O. Smith, a ‘matter duplicator’ creates an economic collapse and creates a new form of barter economy for the only scarce product left: skilled human labor. In this scenario, one would need to develop a new, digital currency.
Simone Syed is a futurist and consultant for Bitcoin.com, a new startup technology that could revolutionize the way we do business. I got to ask her a few questions about Bitcoin and find out why it might be a good idea to pay attention to this new form of currency.
- What is Bitcoin, and how does it work?
“Bitcoin is technology that makes it possible to transfer value across a normal Internet connection. This is much cheaper and more secure than using something like a credit card.
For example, every time you pay with a credit card, there’s a risk that the other person copies your card and starts spending your money. With Bitcoin, you’re never giving out the keys to your entire vault – you only transfer exactly the amount you want to pay. This virtually eliminates fraud and thus reduces fees. And with the additional revenue, merchants can lower prices and spend their profit on quality and service.”
- Why should people use it?
“This is really two questions; the first being: “why should merchants use it?” The obvious answer is lower fees, reduced setup cost and ease of use. With Bitcoin payments, the only thing required is a computer or mobile phone with an Internet connection. Additionally, the payments can’t be reversed, which is a major source of lost revenue for many businesses.
Second: “why should the customer use it?” It gives the user the ability to pay quickly without putting their account and identity at risk. When you pay with a credit card, check or other classical payment method, you are placing yourself at risk for identity theft and fraudulent charges.”
- Is it safe?
“Bitcoins are as safe as their storage medium. If you store your Bitcoins in a vault at a reputable Internet bank they can be very secure. On the other hand, if you keep your Bitcoin wallet unprotected, it’s possible that someone steals it from you or that you lose it. This is very similar to physical cash. The biggest risk right now is that Bitcoin is still very new and people are just starting to learn how to securely use and store them.”
- Why couldn’t another copycat come out and make Bitcoin obsolete?
“Bitcoin benefits from something called a network effect. Since a lot of people already use Bitcoin, it’s much more valuable to join and trade with those existing people, than to start a new system and have no one to trade with. Also setting up a network of Bitcoin’s size is expensive: Right now the network ensuring Bitcoin’s security has more computational power than that of the world’s top 500 supercomputer projects combined.”
- Do you think it will encourage criminal transactions, and make it harder for the government to trace illegal purchases (drugs, weapons, etc)?
“Bitcoin transactions are actually more traceable than cash transactions. There’s a public ledger where both participants of every Bitcoin transaction and the amounts sent are recorded. Also, Bitcoin is just a payment technology – all the bits need to be converted back into currency at some point, and all the exchanges are required to strictly comply with the same Anti-Money-Laundering and Know-Your-Customer regulations that banks and other businesses are subject to.”
- Why can’t the Bitcoin go down in value?
“Bitcoin can certainly go down in value. It’s actually been rather volatile lately. But since Bitcoin is mainly used as a transactional medium, the specific exchange rate doesn’t matter to most people. In the end, you are just sending bits across the Internet and at the other end you get the amount of Dollars or Euros that you intended to send.”
- Tell us about your mobile app.
“So far Bitcoins have been mainly used by payment experts and technologists, but we’d like to make Bitcoins useful not just for people who care about the cool tech, but the average person. Over the next few months we’ll roll out our whole suite of merchant and commerce tools on http://bitcoin.com/ and you’re more than welcome to sign up so you can be among the first to give it a spin.”
- Do you fear a crackdown by the Federal Reserve?
“Not at all. I think people are overly worried about such things. When people first started paying using plastic cards, that must have seemed like a crazy idea as well, but after a while people got used to it. It’s quaint that we still use paper checks while the rest of the world has moved on to digital banking, but with Bitcoin we have a chance to leapfrog and truly improve our country’s payment infrastructure, stimulate commerce and create new jobs.”