Many have associated cryptocurrency with speculation and profiteering. But the truth is there’s a lot more to cryptocurrency then just wild speculation and fluctuating currency markets. There are fundamental reasons cryptocurrency makes business sense.
And the use of cryptocurrency could massively change the business world. And not just in small ways we are talking about major shifts and disruptions from the adoption of this technology.
Let’s take a look at just some of the ways that cryptocurrency may change our future. These fundamental shifts could alter the way we humans interact with one another along with fundamentally changing our economy.
Cryptocurrency is built to be used as a peer-to-peer currency. This means that intermediaries become unnecessary. Indeed many foresee a future where it will be unnecessary to house your money in a bank because the bank’s core functions will need to be needed.
Not only will banks be unnecessary for housing money but banks may also become unnecessary for transferring money. So much of the money that the banking industry makes today he is from the movement of money: credit card fees, wire transfer fees, various check fees and other expenses related to the movement of money.
Make no doubt the banking industry is very concerned with the possibility of a cryptocurrency world where much of their usage could be bypassed.
As mentioned in connection with banks, the payments world may also radically change with the adoption of cryptocurrency. Not only are banks involved in moving money between people and locations but there’s a variety of other secondary vendors in the market. Companies that help facilitate online transactions, in-person payments or move money somehow may be greatly impacted by cryptocurrency.
With cryptocurrency and the ability to transfer money directly between buyer and seller suddenly multiple layers of intermediaries to process one transaction used today become unnecessary. For many transactions today, not only is a bank involved with some third-party processor is involved. Many in this chain may become irrelevant in a cryptocurrency world.
Cryptocurrency also promises to potentially flatten the investing world. For many of the same reasons that we have banks involved in the process of holding in facilitating the transfer of money, many brokerages get into the investment world and make money off the transactions. And the cost of this brokerage and other holding structure becomes a cost assessed against all transactions.
The pairing of blockchain and cryptocurrency means that we can foresee a world where investors could transfer ownership directly between themselves without going through a brokerage. There are three main things are needed to bypass a brokerage: a way for buyer and seller to find each other, a way to record the transfer of ownership, and a way to facilitate payment.
Cryptocurrency will be a major player in allowing the changing and disruption of how investments were made today.
For the same reason that cryptocurrency can disrupt investing circles it can also make traditional exchanges for securities, commodities and other items unnecessary.
Right now one of the key functions that exchanges offer is the ability to move ownership between people that don’t know each other and facilitate payment. Cryptocurrency, in and of itself, can bypass this payment function that many exchanges today offer. When paired with blockchain and other internet technologies all of the other core functions of exchanges are under attack.
One of the promising aspects of cryptocurrency is that transactions can be paid in large and small amounts. When paired with its sister technology blockchain, we can foresee a world where transactions could be broken down into very small portions shared by many people.
Banks today collect money from many individuals as depositors and then re-lend that money in the form of various loans. We can foresee a future where rather than a bank centralizing all these funds and a borrower borrowing from one warehouse they borrow money from multiple people simultaneously through cryptocurrency and blockchain.
In this new world people who want to lend money to people of a certain credit score or profile what allows small amounts of money to be lent to a variety of people to avoid the concentration risk. Those people, in turn, would be the borrowing from many different lenders. Today, the system is not practical because of the administrative cost and the difficulty of dividing fiat money. But in cryptocurrency world with blockchain we can foresee a world where finances decentralized.
One of the biggest challenges in cryptocurrency and blockchain is getting the privacy elements right. One of the promises of cryptocurrency is the ability to enhance the privacy and anonymity for certain transactions. We expect this will open up entire new Industries and endeavors because people will be able to hide their identity.
Quite simply sometimes when people are buying particular goods or services they don’t want their name attached to the purchase. Cash is typically used for these transactions in in-person settings but online, with the primacy of credit cards, often you can trace a payment back to a particular person. Cryptocurrency could allow for the masking of the identity of some transactions which would increase the universe of available goods and services.
7. More E-Commerce
We talked earlier about payment systems, and it is the case that payment systems go hand-in-hand with e-commerce. As a vendor you have costs to get money from the purchaser when a sale happens. We expect that with the increased use of cryptocurrency and lower per transaction cost that we may see whole new categories of e-commerce open up.
8. Cross-Border Integration
One of the great things about cryptocurrency is that it is typically set up not to be nation specific. This means that we can cross the borders between countries and regions much more easily than today. As we get some universal cryptocurrencies that are well accepted throughout the world transactions can be triggered between parties without having to do exchanges in and out of national currencies. This means we should expect the world where more and more cross-border transactions become easier and easier to execute.
9. Faster Confirmations
Cryptocurrency should also facilitate faster confirmations of transactions. Transferring money between banks can take days for confirmation. Even using wire transfers, it can take hours to do a confirmation (perhaps even more for international transactions).
With cryptocurrency because transactions are done online and electronically, confirmations can happen very quickly. Today one of the big issues during a merger or real estate closing is making sure that money is transferred so title can be transferred (“confirming the wires”). In a cryptocurrency world the confirmations will be built into the transfer the money. This means transaction is going to happen and proceed with less energy being placed into making sure the money actually moves from one party to the other.
10. Stabilize Some Economies
On a broader scale, we expect that cryptocurrency will act to stabilize some economies. Many of the challenged economies today are unstable because of issues with their central government. While not all of these issues can be handled by cryptocurrency having a currency that people trust and people know will maintain its value can really open up some new doors. With the new doors open and people believing in the cryptocurrency (verses from untrusted local currency) we can expect many economies will be more stable.
11. Lower Currency Risk
Alongside stabilizing economies, cryptocurrency will also lower the risk involved with currencies. A good solid cryptocurrency that is well accepted will maintain its value. The holders don’t have to worry about local governments potentially “monetizing” their debt or printing more money. This adds great confidence to the holder that their currency will continue to have value in the future.
We’re moving into an interesting world. In this article we just highlighted some of the possible uses of cryptocurrency and the effects it will have. We expect full adoption of cryptocurrency will have even more effects than what we’ve listed here today. Like the internet, this fundamental technology will have lots of impacts.
While we can’t anticipate all of those impacts, knowing that there is a future for cryptocurrency and some of the likely impacts we can do better planning.
This is an exciting time. I think for those that are able to foresee the future will have great opportunities arise from the adoption of cryptocurrency.
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