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The Future of Money: Blockchain Stablecoins.
02 de March de 2022
02 de March de 2022
Since the dawn of money, we’ve been asking ourselves the same question: Where does it go? Predicting trends and staying ahead of these is extremely complicated — maybe a crystal ball could be of help. Who could have foreseen, a few decades ago, the boom of cryptocurrencies and the multiple possibilities that digitalisation would bring about? Not even in 2008, when Bitcoin —the first crypto— was created, were we able to see how far digital money would get. Nowadays, cryptocurrencies are just a part of a comprehensive technological revolution.
Money is changing and it’s doing it at a fast pace. Countries are launching their digital currencies and companies are pushing payments with tokens of their own… The most expensive SuperBowl ad no longer belongs to a car or a soda; it belongs to Coinbase. Theorist Nassim Taleb has already warned that “bitcoin is the start of something incredible”; something that’s impossible to predict with precision, but that promises new changes, not only in the value but also in the concept of money itself.
Is It the End of Physical Money?
Digitalisation is still very recent. Bitcoin was launched in 2008. It hasn’t even been fifteen years, but the revolution has been huge. It’s possible to think, then, that physical currencies are doomed to disappear. But wait just a minute. In the last few years, physical currency payments and money withdrawals from ATMs have decreased significantly. The pandemic has accelerated this process, mainly giving more presence to card payments, which increased from 38% to 54% during 2020, according to Nielsen consulting company. Alongside with digital banking and digital money, cashless is gaining ground.
However, physical money still has its place and it’s not expected to disappear in the long term. Among its advantages there are some psychological aspects, like the privacy and security that it still has to offer. Also, not all countries have implemented currency technology at the same pace. Among its disadvantages, there’s its poor traceability —which makes it a weak element in the fight against fraud and crime— and its structural costs and its greater effect on the environment.
Payment Methods Multiply: Online Banking, Fintechs, Corporate Gateways…
So far, paying cash —whether with coins or bills— has been the opposite of paying by card, which offered new ways of paying (like its more recent version, through smartphones). Digitalisation has opened the field of action. Now, money has many ways of moving around a spectrum of more or less traditional environments.
Online banking and fintechs are part of this phenomenon in which commerce and finance are being digitalised as a response to new consumer habits. And let’s not forget about the possibility to carry out operations outside traditional banking platforms. Nowadays, it’s possible to make payments from your phone or company accounts, a trend that’s gaining ground, driven by big corporations such as Amazon or Google.
More Decentralised than Before, but Less than It Will Be Later On?
For the last decade, decentralisation has been the key concept in the world of money. The cryptocurrency boom took a hard hit on the idea that the value and emission of money are centred around government agencies. It’s a new paradigm that, beyond the world of crypto, has spread to more traditional environments.
Decentralisation has presented us with two fundamental concepts: Peer-to-Peer and Blockchain — the latter being the flagship of this change of paradigm from centralised to decentralised. In the crypto world, it’s no longer necessary to have a third party (usually a regulatory body) backing the value of money; it only needs an agreement between the parts and it’s driven by demand and supply. This causes Bitcoin and other digital currencies to move in highly volatile and uncertain contexts and it makes it easier for fraud to occur due to the lack of traceability control.
Stablecoins: Trying to Put Some Order in this Chaos.
During these last years, we’ve seen the rise of stablecoins, which most likely will continue to develop during the coming years. The first decade of cryptocurrencies was a bit like the Old West. Fortunes were made and lost as the hype grew, fell and finally stabilised in the cryptocurrency frenzy.
Now it’s time for regulators — governments, organisations and companies have started taking action, aware of the fact that digital money is unstoppable by now. Stablecoins seek to insert control and stability mechanisms into the blockchain. If a Bitcoin is not linked to any particular value, stablecoins look for support in other values, like gold, a country’s currency or, even if it sounds paradoxical, another cryptocurrency. This value would function as a reference during operations.
But, even if the idea is to bring stability to the whole thing, it’s still quite an unpredictable environment. Governments (China, for example) have launched digital versions of their currencies and multiple big companies have launched their own cryptocurrencies. It is a big decentralisation of money as we know it, but less than it would be in a fully crypto universe.