World Economic Forum suggests cryptocurrency is about to go mainstream
COVID-19 may have solidified cryptocurrency’s place as heir apparent to the world financial system.
COVID-19 has completely changed the world we live in. Businesses scrambled to reorganize disrupted supply lines; consumers faced job loss and economic hardship; entire communities face a looming eviction crisis unlike anything in the modern era.
To make ends meet, many businesses have shifted their attention to e-commerce, a trend Satoshi Nakamoto envisioned in his white paper proposing a “peer-to-peer cash system” 10 years ago. As more transactions move online, digital security will be a top priority for all businesses. This is exactly what makes blockchain — and cryptocurrency — so lucrative for the world economy.
Blockchain’s hash-based proof-of-work system provides an accessible, decentralized security force that ensures small businesses can participate in a tech-dominated marketplace like e-commerce. The technology works by securing transactions through cryptography and then signing them with private keys. Users rarely see these private keys. Instead, they are given seed phrases that can retrieve a single transaction with a matching code. This process forms a digital record that must be completely rewritten to create a fraudulent transaction.
Since being introduced over a decade ago, blockchain technology has made a home in every industry, from payment processing companies like Ripple — who is currently partnered with Visa — to retail and even journalism ventures like the partnership Donald Trump Jr. formed with Overline Media Partners.
In short, its ubiquity is exactly why the World Economic Forum formed a newly-seated committee dedicated to studying blockchain and cryptocurrencies. Known as the Global Future Council on Cryptocurrencies (GFCC), the committee seems to have a singular focus: making cryptocurrency a mainstream monetary system.
“Cryptocurrencies have the potential to create new markets and forms of value exchange that can fuel growth in the global economy,” Cuy Sheffield, head of the cryptocurrency at Visa and GFCC co-chair, said in a statement. “This council is focused on finding ways to make cryptocurrencies comprehensible, accessible, and inclusive so that more people can benefit from the innovations that emerge through them.”
As GFCC concluded in its inaugural report published December 17:
“While cryptocurrencies are most often recognized as new monetary systems and financial networks, the public blockchain networks that they secure can be used to power diverse use cases and create new applications across industries. These networks are constantly evolving through an opensource software ecosystem with globally distributed communities that upgrade, maintain and operate them. Innovators, entrepreneurs and engineers are rapidly building and bringing to market new products and solutions that provide access to or leverage these new networks.”
Council members include executives and risk managers from leading cryptocurrency companies, financial professionals, experts who study the intersection of technology and civil society, and academics. So, while it’s not unusual for persons with these backgrounds to publish works on cryptocurrencies and their potential impact on financial systems, the simplicity of its inaugural report suggests the Council is evidence of their intent.
Keep It Simple
A report by The Bitcoin Market Journal from November estimated over 100 million bitcoin wallets with some value now exist.
So, while public use and attention surrounding blockchain and cryptocurrencies seem to be at an all-time high, it is strange that GFCC would publish such a simplistic report.
Essentially, GFCC’s report establishes a common vocabulary for those outside the FinTech industry. The report provides the basic details of baselayer blockchain and cryptocurrencies like Bitcoin, Litecoin, Ethereum, etc., but also introduces second layer protocols and financial products available.
But, as the group wrote in the report, their goal is “to educate and advocate for this technology while serving as a trusted resource to navigate this new fascinating, emerging ecosystem.”
While FinTech workers won’t find much joy in the report, introducing such a complex system in simplistic terms could be successful in inviting more people to use cryptocurrency.
A New World Order
Increased usage equals increased economic participation. However, the global economy is currently tied to state power. Without the state’s blessings, no soup for you.
Blockchain and cryptocurrency were designed to sunder this relationship. Unfortunately, most major economies only allow cryptocurrencies to be traded speculatively as investments. Only nine countries around the world allow the technology to be used for retail sales.
In the US, cryptocurrencies were legalized in February 2020, thus allowing companies like PayPal to offer their customers crypto wallets. However, the law included the same trading limitations.
But, one positive sign is that large economic players like China and Russia are opening up to blockchain and cryptocurrency as well. This could help propel cryptocurrencies into the mainstream economy.
In October 2019, President Xi Jinping said China needed to “seize the opportunity” afforded by blockchain, adding it is an “important breakthrough for independent innovation of core technologies.”
In June of this year, Vladimir Putin signed a bill that allows Russia’s banks to trade in cryptocurrency as long as they meet certain criteria and are properly registered with the Bank of Russia. However, these criteria are very steep, reflecting the skeptical stance of the country’s central bank.
When Will Crypto Go Mainstream?
While GFCC’s report contains no timetable, blockchain and cryptocurrency are teetering on becoming viable means of trade.
However, the technology isn’t yet capable of processing as many transactions as most current credit and debit card companies can. Currently, blockchain processes about 4.6 transactions per second while Visa processes 1,700.
To analysts at GFCC, cryptocurrency doesn’t represent a new means of exchange. Instead, it’s a new way to solve old problems. As their report concluded:
“The advent of cryptocurrencies has led to the creation and operation of new global, decentralized networks that have been used by over 100 million people across the world to transfer trillions of dollars of value. Bitcoin, for example, is more than just a technology — it is a powerful social, political and cultural movement that asks us to imagine money, banking, and payments in new and novel ways.”
