Currency as a Choice: Part II
Knowing what characteristics to look for in a currency will help us make the best choice
As we get closer to having our choice of which currency to use it becomes important for us to not only know our options but also understand the impacts they have on us and our world. Because this is the first time we will be able to choose a currency, many of us don’t have a frame of reference for what makes a particular currency the “best”. We need to consider how they affect us at various levels from the personal to the global.
In order to understand these impacts we will start with some basic features that have direct effect on our everyday lives as we use a currency. The type of scenarios we are talking about here include buying a cup of coffee or a food from a stand at the market: a simple, small and basic process of transacting we often take for granted.
The obvious stuff
There are a couple characteristics a currency needs to be considered useful when making smaller purchases. These are pretty intuitive and just about any of us would steer clear of payment methods that didn’t have these basic features. But they’re still worth mentioning because some digital currencies don’t provide good experiences in these areas:
The speed of a transaction is something that has been taken for granted with previous forms of payment. Whether cash or credit card, the time for the purchase to be completed is pretty negligible. But for some digital currencies this time increases enough to cause delays and impact the experience.
In many cases the speed is just not suitable for a common purchase. Do we want to wait 10 minutes before receiving our coffee just so we can use a digital currency? Fortunately some options were built with the goal of completing transactions in as little as 2–3 seconds. These currencies will be preferred as they have the smallest impact on our time.
Ease of use
In addition to not losing time a fast purchase time, having wallets and services that are easy to use can reduce time impacts as well. With credit cards a quick swipe or card insert in a machine, maybe pressing some buttons to confirm. With cash you just find the right amount and hand over the bills or coins. But for some digital currencies the process can be trickier.
Is the app for the currency easy to get and use? What is the transaction process like? A simple scan of a QR code and swipe to send? Or is there more to it? Do we have to pay a transaction fee to make it work more quickly (or at all)?
Some currencies make the process more complicated or expensive than other payment methods, so each of these questions is worth paying attention to as you consider options.
The “new” considerations
Our current payment options share many characteristics with the new digital ones, but some features now stand out more because of the nature of the new systems. These “new” considerations will have a broader impact on us, our communities and our world.
Many of the popular digital currencies use what is called Proof-of-Work (PoW) consensus to decide whether attempts to spend money are valid. This process uses an immense amount of energy to accomplish its goal and supporters of these systems claim this expenditure is the best way to prevent malicious acts on the network.
Even with only a very small amount of spending of the currency happening today, the amount of energy consumed by the most popular network is as much as a small country. And that consumption will go up over time to support additional users, eventually using a significant portion of our planet’s energy.
To combat this wastefulness methods to secure networks using other options such as Delegated Proof-of-Stake (DPoS) have been developed. This results in energy consumption millions of times lower than those using Proof-of-Work. As efforts are expanded all over the world to help minimize environmental degradation caused by human activities this type of massive energy waste is in direct conflict with that work. It becomes an ethical issue to choose such a wasteful currency. And it’s not just the planet paying the price, these energy costs also increase fees some currencies charge us.
The costs associated with using payment types like credit cards are often invisible to us since most businesses don’t directly add fees for using these. Even when they don’t add fees these costs are being reflected in the pricing of goods sold, causing items to be a little more expensive overall. This is hard to see happening behind the scenes, but reduces the buying power of our earnings.
Many digital currencies also charge a fee for transacting, but it typically isn’t absorbed by the business or recipient, instead it’s paid by the sender. Many of them will also handle your transaction more quickly if you pay a higher fee, making the process more complicated and expensive.
However, there are digital currencies that charge no fees for transactions and thus function like cash for purchases. This benefits individuals who send money between one another, as well as reduce operating costs for businesses who can pass those savings on to customers.
The bigger question
The characteristics we’ve gone over can help frame our upcoming decision about which currency we want to use, but are only touching the surface of what we should really be evaluating. There is a foundational question we should be asking whenever we spend money even today, whether it is deciding which clothing brand to buy, which stores to shop at or where to spend our hard-earned dollars: who is benefiting from this?
This basic question needs to also be applied to our upcoming choice of currency because it will have an outsized impact on our future. Not considering who or what is benefiting from our currency choice could cause a negative impact on ourselves, our neighbors, and the future of the planet.
In Part III of this series we will expand on our evaluation to take a closer look at who benefits from using these currencies. Determining this will help us decide which digital currencies align best with our values, and which ones go against them. Please share your thoughts in the comments below and follow for updates on the rest of the series.
This article is part of the Currency as a Choice Series:
- Part I — The upcoming decision
- Part II — What to look for (you’re here!)
- Part III — Who is benefiting here?
- Part IV — The moment of choice