A New Global and Parallel Financial System

Matvey Danilov, our author and expert, shares his opinion on the future of the global financial system that a smartphone with a built-in crypto wallet has started

The other day, HTC presented its first crypto smartphone to general public — a gadget equipped with a hardware cryptocurrency wallet. Exodus 1 has a Snapdragon 845 processor, a 6-inch display, two cameras of 16 and 8 megapixels, a 3,500 mAh battery, 6GB of RAM and 64GB of storage space. The crypto wallet is secured by the Secured Enclave technology thanks to which the data stored cannot be used by the operating system or by any other applications. The gadget is compliant with the IP68 standard and, according to its features, is very similar to the well-known HTC U12+ smartphone.

Exodus 1 will be available to customers in December with the price tag of 0.15 BTC or 4.78 ETH, or 960 USD (the company decided to price its new product exactly in the above specified currencies). The gadget will go on sale in 34 countries simultaneously; however China will not be in the list: cryptocurrency trading is banned there altogether. According to local residents, though, everyone deals in cryptos there as if no ban existed.

HTC is not the only, and more importantly, not the first company that decided to converge a toaster and a refrigerator, that is a hardware wallet and a smartphone. Sirin Labs, a company with roots in Kazakhstan and Israel, stunned the public in 2016 with a luxury and super-protected flagship crypto-phone, Solarin, sold for approximately $14,000. The sales were predictably not impressive and the gadget quickly left the market. Last year, however, Sirin Labs announced that they were working on another smartphone featuring an integrated cryptocurrency wallet, Finney.

On October 23, right after HTC’s announcement of Exodus 1, the management of Sirin Labs apparently realized that their competitor may leave them behind. As early as the very next day, the company announced a partnership with Amazon, which implies that the world largest online retailer is starting to sell Finney crypto smartphone on December 15 in the UK, France, Italy, Spain, and Germany. The gadget will be officially presented on November 28 in Barcelona. Now, that’s scary.

The absolute majority of news sites reported these two stories in this or similar fashion. Well, a smartphone with a crypto wallet is no big deal at all! Apple has just release a dual-SIM iPhone, that’s a real event unlike some mobile phone with crypto — what a nonsense.

In the meantime, these two events, well one event and two newsmakers, are extremely important. And namely: the first serious technology step was made toward popularization of cryptocurrency payments among general public.

Let me explain. To pay with crypto for anything today you’d have to perform a number of mumbo jumbo actions that are quite obvious for someone who is considered an “advanced PC user” (I can almost hear people who used to hack automatic number identification features of landline phones in the 1990s now laughing out loud) but absolutely unnecessary to master and completely unclear to someone who got used to pay for purchases by holding the phone over the payment terminal.

I obviously have not yet had the chance to closely study the build-in wallets of the announced smartphones, but I’d presume that at the moment they probably aren’t much more easier to use than the rest, meaning those that are stand-alone devices. I agree, some geeks who use cryptocurrencies would appreciate the idea, but that’s about it. An average consumer won’t be impressed as well as the majority of industry observers.

These two news stories, however, indicate one thing. Despite the meltdown in the crypto market late last year, continuous promises of the authorities to “strangle the damn thing at its birth” (think to ban crypto settlements), numerous arguments of established and not very established people that cryptocurrencies are just another bubble that is going to burst soon and will be buried under the dust of history, despite all the above the process of crypto system’s penetration into the everyday life has just begun.

These gadgets will likely see limited use for some time. However, the experience of first users would give R&D experts of smartphone manufacturers the necessary ground (I emphasize that I’m referring to all manufacturers rather than HTC and Sirin Labs only) to make the conclusions that marketers could use in bringing new models to the market. And after iteration №20 or so, we’ll see the cumulative effect in action where every producer will integrate crypto wallets in their phones. Just in case.

With gradual improvements in wallet interface and usability, consumers who use cryptocurrencies in their daily life will get accustomed to the fact that all their money, and not only fiat, is always in their pocket.That is to say, over time, and I suppose it will happen sooner than later, a smartphone would become one of the standard methods to receive and send cryptocurrency payments.

After a while, with major flaws identified and a lot of testing behind, some major industry standard will arise, following which a crypto wallet in a phone will be a routine function, rather than a cool new feature, just as we now consider a Bluetooth module that no modern phone can be imagined without. And it’s absolutely of little to no importance, whether or not the gadget owner uses the wallet; the crucial point is that users will have that functionality in their pockets by default.

Do you remember when Android operating system came into existence? I do. It wasn’t long ago, a little over 10 years, on September 23, 2008. Back then the first device running that operating system was presented (the Dream smartphone developed by — surprise, surprise — HTC for the carrier T-Mobile). And it’s hard to imagine the world today without Android.

This case is quite similar: the global cryptocurrency system continues to evolve regardless of the feelings experienced by orthodox financiers. We are now witnessing the start of the next quantum leap in the whole crypto story: as a matter of fact, mobile hardware producers following in the footsteps of manufacturers of power adaptors and graphics processing units acknowledged that cryptos are here to stay. And some embodiment thereof, that might very well be nonexistent yet, could beсome its permanent manifestation. And manufacturers are going to take advantage of that.

Making predictions is a thankless job, even more so when neither a team of great analysts nor a decent big data analysis system is available. Therefore, no predictions here, just a speculation.

It is perfectly possible that in a couple of years, to a surprise of many, on top of the traditional global financial system a new one will emerge exhibiting no classic policymakers to report to, fully transparent and almost completely anonymous, and available to anyone with a smartphone and Internet connection. People paying one another with some incomprehensible means from anywhere to anywhere in the world directly from a phone to a phone, and being happy about it — that is a total nightmare for any bank.

That does not mean that there will be no policymakers, no citizens or communities capable of governing or affecting the global crypto-financial system. It could well be the case, however, that those policymakers, citizens and communities will be unorthodox and totally unfamiliar for us. And, by the way, the picture I’m painting may not materialize at all. The probability of me being eventually right, however, has increased substantially over the last couple of days.

In short, it’s getting “curiouser and curiouser” as Alice cried.

And just for the record, it’s us who is to live in that “curiouser” reality very soon.