When we describe the world of tomorrow, perhaps one of the most exciting things to envision is the idea of the interconnectedness of the devices we will use and the idea of conducting transactions at costs of near zero. Smart refrigerators that will be able to detect that you are running low on eggs and automatically order them from Amazon, and have drones deliver them within a short space of time! This aspect of the world of tomorrow is usually its selling point. In order to enable the consumer to experience this kind of convenience when it comes to shopping, a reinvention in the way payments are conducted must occur. The World Economic Forum & the Allen MacArthur Foundation recently released a report titled Intelligent Assets: Unlocking the Circular Economy Potential where the possibilities of the Internet of Things as an enabler of the circular economy, was discussed. Nicholas Cary, Co-founder of Blockchain contributed by exploring the kind of financial technology necessary to bring the vision of the world of tomorrow, to life.
In order for the Internet of Things to have the desired, transformational effect on society, it would need to be accompanied by a similarly cutting edge financial system. The development of Blockchain, the technology underlying the cryptocurrency Bitcoin, has presented a huge advancement in the development of the financial technology system enabling people who do not know or trust each other can complete economic transactions without the assistance of financial intermediaries.
The importance of such a system is depicted most clearly when one analyses credit cards and other inflexible, conventional systems of payments. Online fraud is widely reported to be growing even faster than the growth in the e-commerce system! The main factor making these methods of payments so vulnerable to this type of fraud is the centralized data storage systems they use combined with the 90 day settlement period that applies to credit cards. An environment like this creates a honeypot for hackers who are reported to have had a great year last year when hundreds of financial institutions sat compromised due to increasingly large breaches of personal and financial data.
The issue of credit cards not being accessible to the vast majority of society also presents a limiting factor to this old system. Credit cards take a base fee of 2-3% of every transaction. There are about four billion people who simply do not qualify for credit cards and the legacy banking systems to this day, have been unable to scale to the point where they are able to support an economy where micro transactions dominate the vast majority of the transaction volumes.
The financial system of the future will differ in design completely to the design we have become accustomed to today. This system will leverage decentralization as one of its core principles and the system will allow anyone from any corner of the earth to be able to create economic value on the Internet, using a system that allows all players to manage their own funds. Blockchain is one of the game-changing innovations of our time because for the first time in history, people holding bitcoin wallets can now conduct transactions with any other bitcoin wallet holders in the world, without having to use financial intermediaries. A few lines of computer code are now doing and will ultimately replace, the purpose banks served for the last thousands of years. The technology underpinning blockchain possesses the potential to reshape the way in which capital flows in the world whilst also making supply chains more efficient.
The future is indeed exciting, and this type of technology should be embraced. The industry should continue to evolve in terms of the technical work we have yet to accomplish such as creating an ease of use and convenience for consumers when they do use digital currency. On the public awareness front, greater effort is required in educating those responsible for policy-making, the influencers and the consumer about this great advancement in technology.