Month: May 2016

The Advantages of Digital Currencies

Digital Currency Vision

Digital currency will impact the world in three main areas. This is what I got excited about when I first learned about bitcoin.

Innovation

Imagine if anyone who had an idea for a product could have
customers all over the world from day one.

Due to high friction of payments many good ideas never happen. It does not spread around the world as quickly. This is a major hurdle for launching a business.

In the future it should not matter if you’re a hot Silicon Valley startup, or a 16 year old African with a new idea. If you build something people want, it should be available to everyone on day one.

This goes for both sending and receiving payments – such as in a two sided marketplace.

Efficiency

Payments are slow and expensive with the current banking system.
Why does it take longer to wire money to Australia than to fly there?
Why do U.S. bank transfers take 3 business days and not work on weekends?
Why is there a 2-3% tax on almost every retail transaction in our economy (credit cards) when it is just moving bits from one data center to another.

Each country and payment company is running its own proprietary system (which doesn’t connect seamlessly with others). And the network effects of payments leads to monopolies or oligopolies in each market (which leads to stagnation)

Imagine if every payment in the world was as 
fast, cheap, and global as sending an email.

This would lead to an order of magnitude increase in the number payments sent each day, and the very definition of what a payment is could change.

Equality of Opportunity

About ⅓ of the world lives on less than $2 per day, but 90% of them don’t have access to a bank account.

When people don’t have the ability to save money, the smallest miscalculation or setback (theft, illness, seasonal changes) can be catastrophic.

Luckily, nearly 100% of the developing world now has a cell phone, and by 2020 about 85% of them will have a smartphone.

Imagine if anyone with a smartphone had access to the same 
financial services we enjoy in the developed world.

The traditional banking business model (earning interest on deposits) doesn’t work for people with very little money. Digital currency on smartphones will bring financial services to many people in the developing world, and will help level the playing field.

Digital currency will bring about more innovation, efficiency, and equality
of opportunity in the world by creating an open financial system.