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The Future Of Digital Money

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Mobile Fiat Currency, Bitcoin and Digital Money

What will happen when the way we buy, sell and pay for things change? Perhaps, we even remove the reliance towards banks or currency exchange bureaus? That’s the radical promise of a world powered by cryptocurrencies like Bitcoin and Ethereum.

Digital Money

It is no longer a riddle that needs to be solved anymore. YES! Money had changed its form and functionality over and over from commodity money to digital money. As the population has increased, some previously-used units of exchange have become unfeasible. We’ve made money more and more abstract in the pursuit of convenience.

Remember the time when our great grandfathers carried around kilograms of gold everywhere to buy some groceries and the barter system that needed you to negotiate between a cow and 60 kg of carrots. Those times are the epitome of value for money.

However, our cash system is now much more abstract that is referred to as ‘fiat money’. But what is actually fiat money? In brief, it’s the paper money that we are still using now in year 2017. It says that fiat money will experience its downfall and will be replaced by digital money or known as digital currency. Both virtual currencies and cryptocurrencies are types of digital money.

Many countries have now made money even more abstract than the cash system that has dominated the past few centuries. Take Sweden for example; just 2% of their economy is represented by physical money. The rest is viewed as ‘guaranteed’ in the same way that a circle of people can sit on each other’s knees.

Since the early of digital age, expertise has hailed virtual currencies as the future of our civilization’s money. While it may be difficult to imagine a cashless society, it’s important to understand that money is merely an agreement to use something as a medium of exchange. The function and purpose of cash is therefore, assigned by our cultural and social systems, not any intrinsic value. So as our society evolves, and our physical and digital economies converge, how does our monetary system evolve along with us? Whether exchanged via virtual words, social games or mobile applications, virtual currencies hold real implications for our global economy, fundamentally altering how we conduct transactions with one another.

To better understand the virtual currency landscape, we might observe four broad trends emerging: mobile fiat currency, corporate value currency, virtual world currency, and peer-to-peer currency. Although the nuances of these categories may blend together, I draw distinctions at their core function — why and how the currency is created, circulated, and adopted.

Mobile fiat currency

Mobile Fiat Currency allows consumers to send and transfer legal tender using their mobile phone. Now, people can easily pay With Square by swiping a credit card through a plug-in device on iPhone. However, if you want to really see the mobile payment in widespread practice, look no further than India, where the lack of credit card penetration has brought Mobile Fiat Currency innovation to the forefront. India is home to the world’s largest unbanked adult population with 420 million out of the two billion adults without bank accounts live in India. Thus, even they do not own bank accounts, so how credit card could become popular in India. Another type of mobile fiat currency involves “carrier billing” whereby consumer pays using their phone numbers rather than their credit card number and the charges are billed directly to their phone bill.

Corporate value currencies are rewards or credits that are acquired by engaging with a company or participating in loyalty program. Corporate value currencies are often associated with gamification movement, helping people quantify their progress and unlock new achievements. Denominated in points, mileage, badges and credits, these currencies are inextricably tied to a company’s product or service, rather than official tender.

Presently, with computerized cash turning out to be more pervasive than ever, it’s an ideal opportunity to investigate how digital money cash is changing our cash today:

  1. Many individuals who like having something tangible, or have issues evaluating abstract things will most likely spend nonsensically later on. Take a look at Malaysians – the credit card for instance.  Malaysians failed to make credit card payments causing 4% of the people has bankrupted between year 2007 until 2013. 58% of them age from 26-35 years old and fresh graduates like to spend on luxurious things such as hand phones and shopping excessively.
  2. The economy is more efficient. This one’s pretty straightforward. Imagine being a bookstore owner who is no longer has to contend with cash till and giving back change. There is speculation that our cashless money will someday be able to be accessed by unique identifiers such as our fingerprints or iris.
  3. With digital money, it will help the poor to protect their money. Most countries, banks are only accessible to the rich and powerful, and it is hard to protect funds – mobile digitalized payments will help them retain earnings. In Kenya, this is important. Estimates suggest that 60% or more of commerce there takes place using mobile phone credits as a medium of exchange. While the phone can be stolen, the money cannot be accessed, allowing for more money to be spent on trading and less on protecting.

We’re about to enter a new phase of money. The future of money is programmable and when we combine software and currency, money has become more than just a static unit of value plus we don’t have to rely on institutions for security. In a programmable world, humans and institutions will be removed from the loop and transactions will not be feeling like it was. Money will be directed by the software and will arrive securely at to whom in charge.

Article by Nabihah Jasri

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