Transformation of money: Fiat to Crypto

So once again, yet another proponent of fiat currency is announcing that stablecoins and crypto payment processors are dead (Nimiq). Why? Because they have developed a new platform that makes fiat currency and crypto compatible, providing a bridge for fiat to look and act like crypto. This, they say, could be the end of the line for tokens and crypto platforms.

They are missing the entire point of stablecoins and crypto payment platforms in the first place. Namely, the value is not in trying to fit crypto into the outdated fiat currency system. The true value of crypto and most importantly, stablecoins, is in the payment process itself, which allows for a truly customer-centric experience. This is the value of the Element Zero Next Generation Payment Network, which offers a one-to-one customer-centric experience that fiat currency cannot nor should it try to duplicate.

For example, a customer decides to purchase from a brand, using fiat currency’s best representative for most people’s day-to-day lives, a credit card. The credit card costs them anywhere between $65 and $450 a year for the “privilege” of making purchases with that card. The financial institution that issues the card takes as much as 3% transaction fee from the purchase price, which the brand must absorb. The bank may take a processing fee when the customer pays the credit card bill out of its checking account. (By the way, did you know that the global payment industry revenues are almost $2T a year?) So the consumer pays for the convenience that the cards offer and the underlying currency, controlled by the government, can impact the customer’s true purchasing power through inflation. This is not customer-centric, this system leaves people vulnerable.

Now take that same transaction to the Element Zero Next Generation Payment Network. This time, the relationship is one-to-one. The customer purchases directly from the brand. There is an instant settlement of the transaction with a nominal processing fee. No third-party approval. No foreign currency fees. No payment processing fees. No chargebacks. Just a one-click integrated shopping experience in which the transaction remains between the brand and the customer.

Equally important in this Element Zero Next Generation Payment System scenario is the stability of purchasing power for the brand and customer. Today, traditional fiat currencies, stablecoins pegged against fiat currency, and even future digital currencies created by a government can all suffer from a loss of purchasing power due to inflation. Element Zero does not use a currency peg or collateral or any predicting method to ensure stability. Element Zero’s stability protocol is based on a smart contract algorithm that is designed to completely eliminate the possibility for any volatility in the first place. This is achieved by preventing the user from selling the stablecoin above or below the current (fixed) face value. Unlike all other cryptocurrencies that can process a one-way transaction, this protocol is designed to process a two-way transaction. On one side the sender can send a stablecoin to a receiver but on the other side the receiver must send back in return another cryptocurrency or, an invoice or receipt with same declared value as the stablecoin. In the event that the value of the exchange does not match, the smart contract steps in to balance the face value between the sender and the receiver by returning the extra value to whom it belongs. The two-way nature of the smart contract means that the Element Zero stablecoin cannot be traded speculatively, since its value is enforced. That’s purchasing power protection that protects the customer and the brand.

In a fiat currency-pegged stablecoin transaction, the value of the stablecoin will be compromised by the centralized, unstable environment in which currencies — especially those issued by a government — are subject to due to fluctuating market conditions.

Many other benefits that can be built into a stablecoin, such as escrow and arbitration replacing today’s expensive and labor intensive credit card chargebacks, being able to communicate with all holders of your coin, and the ability to provide immediate benefits or rewards to users. The security features are huge — no longer will users be required to share so much personal information that in today’s world seems to be hacked or corrupted regularly. And this is just what we know today, the possibilities for a feature-rich payment solution are massive — and not something governments will ever be motivated to provide.

Is there value in making fiat look and act like crypto?

So, is there value in making fiat look and act like crypto on one platform? As a step towards transformation yes. As a singular solution, absolutely not. As the financial world transitions from its current — and often volatile — centralized state, to one that builds confidence in trust in a people-driven, decentralized system, it’s probable that numerous options will evolve. But with the addition of government-backed digital currencies this need will become obsolete. And as the world of payments and digital assets develops to meet the ever-evolving needs of buyers, sellers and investors, we will see many currencies in play that are truly customer-centric, industry specific cryptocurrencies and payment solutions; solutions that serve the key stakeholders in the transaction — the buyer and the seller. It’s time our wallets and currencies caught up to our lifestyle and needs from a payment solution.