The days of paper banknotes and metal coins may be numbered. People in an increasing number of countries are adopting cashless payments. In Sweden, for example, in 2017 only 1% of the value of all payments was done using cash.
The trend of growing cashless payments is visible even outside of Northern Europe. The whole continent is experiencing a rise in cashless transactions as well as new trends like cryptocurrencies. Is physical money really doomed?
Not necessarily. If you look at virtual currencies, and specifically cryptocurrencies, nothing is certain. It was just about a year ago when the price of Bitcoin first soared to more than USD 20 000 making small and big investors relish the vision of a newly gained fortune. Instead, they were faced with a backlash. Soon after, the value of Bitcoin started falling dramatically and they quickly sobered up. While some fear they may never see their investments back, others have begun to look more closely at what is driving Bitcoin’s value – and the value of other cryptocurrencies for that matter.
There are two basic drivers. The first is quite optimistic: the value of Bitcoin is determined by the forces of supply and demand — in other words, Smith’s fabled invisible hand. Owners of cryptocurrencies are essentially betting that the currency will be popular worldwide and its value will skyrocket. The second response is not nearly as optimistic, suggesting that the cryptocurrency boom may be nothing but a bubble, a repetition of the famous Tulip Mania 400 years ago.
One may need a crystal ball to determine, whether virtual money is our future, or a plane destined to land on its nose. We’ll just have to wait and see. The fact is, that despite the many qualities cryptocurrencies have such as resistance to inflation or decentralization, currently their adoption for daily transactions is very slow moving.
Even if virtual currencies do not catch on, it does not necessarily mean that the technology behind them is flawed. Far from it. Experts rely on the blockchain technology behind cryptocurrencies with ever increasing frequency. Blockchain enables people to create and manage registries and inventories (for cars and real estate, for example). Some countries, such as Estonia, are already using the technology in e-government or the decentralization of the energy market.
The potential of blockchain is not limited to government administration. Far smaller services can benefit from it greatly. Blockchain technology can often be found even in mobile apps. One example is VETRI, an app that allows users to control and monetize access to their personal data to select companies, universities, research organisations and more. As with other blockchain initiatives, this promises to increase the transparency of the market for personal data. People will once again be the true owners for their personal data.