Digital Currency Revolution

Digital Currency Revolution

Over 1000 years ago, paper money was first introduced in China to replace commodity money such as gold and silver for better transferability. The same was then adopted by Europe 500 years after. Paper money received high rejections from the local communities when it was first introduced, but as of today, paper money became an indispensable tool.

9 years ago, on 31st October 2008, a japanese man named Satoshi Nakamoto introduced a peer-to-peer electronic cash system, Bitcoin. Bitcoin is a digital asset where it is designed to work as a medium of exchange using cryptography to secure the transactions and to control the creation of additional units of the currency. Being perfectly secured, transactions could take place between peers directly without an intermediary.

Bitcoin Value and Acceptance

Bitcoin was not accepted by most people within the first 2 years after introduction due to its nature of being intangible and is purely made of a series of alphanumeric characters. In the year 2013, Bitcoin’s value started to climb from $0.06 to over $2,700 per unit in 2017 due to its ability to keep users anonymous and the underlying blockchain technology that is capable of ensuring all transactions are completed securely.

The usage of Bitcoins and over 1,000 other cryptocurrencies are accepted by over 50 countries around the world, including The United States, Denmark, Sweden, South Korea, and Singapore. Bitcoins is also accepted by many merchants and giant companies, such as Amazon, Lamborghini, Expedia, Microsoft, and Zynga.

In 2014, Bitcoin receives over $335 million in venture capital investments, which indicates the long-term positives and adoption potential of the currency (Source: Annual Bitcoin Report by Coindesk):

  1. The largest increase in bitcoin trading volume.
  2. The number of Bitcoin wallets grew from 3 million to 8 million.
  3. Large corporations, such as Microsoft, Dell, Expedia, and Dish Network, have joined the list of merchants accepting bitcoin.
  4. The number of merchants accepting bitcoins grew from 36,000 to 82,000.
  5. The number of ATMs grew from just 4 to 340 worldwide.

The Future of Bitcoin

The Financial Industry is extremely concern over the adoption of digital currencies, as it has the potential to eliminate transaction fees incurred. As credit card companies charges 2% to 4% on retailers, the charge-free Bitcoin could be the game changer, especially for small and medium size businesses running on thin margins. Zerohedge cites findings by Goldman Sachs analyst:

“In 2013, money transfer fees would have fallen by 90% if Bitcoin had been used. Global transaction fees at retail point of sale, meanwhile, were $260 billion on over $10 trillion of sales. Using Bitcoin those fees falls by almost $150 billion to $104 billion.”

Bitcoin’s potential is not limited to transaction cost savings. Comscore published a finding by its Senior Market Analyst stating that smartphone adoption has surpassed 80% of population, but more than half of world’s population does not have a bank account. Imagine, with Bitcoin, payments through mobile apps that could enable transactions over remote distances at no extra costs.

Another secret of bitcoin’s success lies on its underlying blockchain technology. Blockchain is a secure public ledger of all Bitcoin transactions ever been executed. Blockchain facilitates in agreement by all public parties as to who owns how many bitcoins. Every bitcoin wallet holder will have an exact replica of the blockchain which virtually overrules any attempt of counterfeit.

The same blockchain could also act as a public record where it is utilized to record transaction details to include title deeds and transaction details. This could nullify the cost of title registration, ownership, and record keeping.

Beyond Bitcoin

Besides financial transactions, Blockchain technology can potentially make many things more secure and accountable: IoT applications, corporate audits, health records, and many more. Thus there is a need, especially for Tech giants to be up to speed on blockchain.

Blockchain being the “distributed ledger” technology offers a way of recording transactions and digital interaction in a securely manner, whilst being transparent, highly resistant to outages, auditable and efficient. Mass adoption of blockchain could overturn current business practices, such as accounting, auditing, and enabling new business models. Strategists, planners, and decision makers across industries and business functions should pay heed now and begin to investigate applications of the technology to avoid disruptive surprises or missed opportunities. An article by Deloitte University Press emphasised that there are accelerating growth on the interest towards blockchain:

  • A billion dollars in venture capital has flowed to more than 120 blockchain-related startups, with half that amount invested in the last 12 months.
  • Thirty of the world’s largest banks have joined a consortium to design and build blockchain solutions.
  • Nasdaq is piloting a blockchain-powered private market exchange.
  • Microsoft has launch cloud-based blockchain-as-a-service.
  • Blockchain concepts, prototypes, and investments are emerging in every major industry.

Major industry such as Life Science and Health Care sector is starting to show interest in blockchain technology as a means of securing digital assets. Factom, for instance, struck a partnership with a provider of medical-procedure and billing services intends to use blockchain to store healthcare records such as medical bills and client-physician communications to claims and disputes. The security of cryptographic is likely to enhance security of such records, while the immutable, irrevocable nature of transactions makes processing of claims more efficient and simplified. Theoretically, blockchain could make the sharing of health records among multiple providers more efficient while retaining control over those records.

Verdict

Bitcoin by itself over the span of 9 years has managed to revolutionize the financial industry, while contributing towards the development of thousands other digital currencies. However, the larger application of its underlying blockchain technology could further revolutionize business practices by providing better information connectivity among offline users while ensuring accountability, security, and transparency. Being the upcoming generation of the community, the understanding of cryptocurrencies and blockchain technology is no longer an option but a necessity.

Teong Jing About the author