Could Digital Currencies Replace Cash in the Future?
By Lukas Wiesflecker on The Capital
Why trade cryptocurrencies?
When you trade cryptocurrencies, you speculate on whether the market you choose will gain or lose value. Some of the advantages of trading crypto-electronic currency include:
When buying real estate, for example, there are usually some third parties involved (lawyers, notary), payment of fees and delays. In many respects, the bitcoin cryptocurrency blockchain is like a “large property rights database.”
Recognition at the universal level
Since the cryptocurrency is not tied to exchange rates, transaction fees, interest rates, or other fees of any country, it can be used internationally without problems. The cryptocurrency works at a universal level, making transactions quite simple.
There are usually no transaction fees for exchanging crypto-currencies.
Access for everyone
There are about 2.2 billion people with access to the Internet or mobile phones, and these people are ready for the cryptocurrency market. For example, Kenya’s M-PESA system, a mobile phone-based money transfer, and microfinance service, recently announced a Bitcoin device, and one in three Kenyans now own a Bitcoin wallet.
When you give your credit card to a merchant, you give him or her access to your full credit limit, even if the transaction is for a small amount. Cryptocurrencies use a “push” mechanism that allows the holder of the cryptocurrency to send exactly what he or she wants to the merchant or recipient without further information.
A global network of computers uses blockchain technology to share the database that records Bitcoin transactions. Developers have done an excellent job here. This means that Bitcoin is managed by its network and not by a central authority. Decentralization means that the network operates on a user-to-user (or peer-to-peer) basis.
How digital currencies can replace cash
Senior economist Marion Laboure believes that once a regulatory framework is in place in key regions of the world and the government-backed move towards cashless societies continues, cryptocurrencies have the potential to replace cash by 2030.
The two most important markets will be China and India, both of which have taken a strict stance on trading cryptocurrencies. However, India is keen to move to a cashless society, and China plans to introduce a “blockchain” version of the yuan.
For cryptocurrencies to replace cash, Laboure says three hurdles must be overcome. These include the acquisition of legitimacy in the eyes of governments, the need for a robust digital financial system that can contain cyber attacks, and other potential risks for a purely digital payment market; and building alliances with the wider payment industry.
So the cryptocurrencies are just defying the ancient monopoly of the central banks over the issuing of money. With the central banks threatened by the prospect of digital tokens replacing fiat currency, they are now exploring the idea of a digital currency issued by the central bank. Put simply, a CBDC (Central Bank Digital Currencies) is a digital currency that is backed or guaranteed by a reserve bank and can be used as a means of payment and unit of account. In this way, there is nothing to prevent cash from being replaced, but this will take a few more years. Prepare yourself for this change!
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