Cryptocurrency is to VISA as VISA is to the bank check.
There is a lot of confusion about this newfangled idea called cryptocurrency. A lot of people consider it a scam while others believe. Well, the same was said about the banknote 160 years ago when it was introduced by Abraham Lincoln. He figured people were tired of carrying coins everywhere so he authorized a piece of paper with some ink on to be worth the same as the coin. It took a while, but it was eventually accepted as merchants accepted as payment. Fast forward 90 years and bank notes are traded for credit cards, an even easier way to transact money.
Let’s dig into it!
For Decades, The Main Issues with Checks Persist:
and they are are numerous:
- They can take forever to clear
- They can be easily forged.
- They take up physical space.
Credit Cards Suffer From Similar Issues:
The main issues with credit cards are equally numerous:
- They are one of the largest sources of fraud in our banking system.
- Too many companies have lost their credit card data due to theft.
- Banks commonly overcharge consumers for transactions.
So…, What Is Digital (Crypto) Currency?
The above issues with both checks and credit cards are why cryptocurrency was created in the first place. The only reason banks can charge transaction fees is because they control the currency you are using to make your purchases. Since the bank manages the transfer of money from purchaser to the merchant, they get to charge a fee for that. They also get to charge the merchant for allowing consumers to use credit cards in their store. Merchants do that because consumers prefer the convenience so merchants take the hit in exchange for the increase in revenue.
Cryptocurrency does not use banks to process transactions through them. Instead, it is its own community bank where its depositors add to its volume directly and that deposit is only accepted if its own internal network agrees to it. That ‘internal clearinghouse’ happens in seconds. There are no external banks to charge fees. Since the money is as digital as your current credit card transactions but kept within the network, called a blockchain, it is protected against theft. The internal clearinghouse prevents fraud. It is only successful for the same reason that the original check system and later credit card system were successful. Enough merchants agreed to accept the currency for their products. Millions currently use the currency because thousands of merchants accept them around the world.
Why Would Those Merchants Do That?
Just as they accepted checks to avoid having to dispense coins and credit cards to avoid having to manage all that paper, digital currency saves them a ton of money. Any merchant or consumer that transfers money across states or countries can only do so by paying transfer fees to the bank transiting the money and exchange rate fees if the money is going overseas. There are millions of these transactions daily, so the banks make a fortune off them. Merchants are paying that money, and it’s a major expense for them. There are no such fees for digital currency; it moves through its own system independent of those banks.
Eventually, we will see retailers putting charge decals on store windows to expand revenue
Retailers have credit card decals on their store windows for a reason. They increase revenue for the merchant due to their natural convenience for the consumer. However, the high transaction fees charged by the banks can make that decision difficult for some merchants. Right now, the standard decals of VISA, AMEX, MC, Discover and Diners Club cover store windows everywhere. When American merchants are permitted to accept the digital currency, BTC, LTC, ETH and other decals (perhaps Ethereum derivetives) will be added to that list very quickly.
Well, we already transact over the internet so isn’t it time for another change?