Globalization, or the connection of businesses around the world, could prompt digital currency like bitcoin to become the global standard instead of the U.S. Dollar.
Growing companies in sub-Saharan Africa that trade with foreign organizations often choose to pay their trade partners with physical cash or mobile money rather than send a money wire. When wiring fiat money (government-backed money, like the U.S. Dollar), it can cost between 7% and 12% of the total amount transacted; a bag of cash is often much cheaper to transfer.
The same goes for Iranian students studying in the United States. A friend of mine is receiving her degree from an American university, but the U.S. sanctions on Iran make it extremely difficult for her parents to wire her tuition money. It’s much easier to bring over a portion of her tuition in cash each time she returns from a vacation at home.
For Venezuelans, whose economy is in turmoil and currency is hyperinflating, a digital, globally-used currency — that’s not backed by faith in their government — may lift them out of their economic crisis.
Digital currency can help solve these issues. Which specific currency will accomplish this? That’s largely debated among the crypto community.
Bitcoin and ethereum transactions are much cheaper and faster than international fiat transactions. Unlike traditional money wires, the price and transaction time aren’t dependent on the geographical location of the two parties. A recent bitcoin transaction, worth about $84,000, costs about $10 to send; that money is used to compensate “miners,” a decentralized network of people who confirm transactions.
The most notable digital currency is Bitcoin; it’s popular among those in and out of the crypto world alike. But is bitcoin destined to become our universal currency? Will we be using it to pay for our Starbucks orders?
Nope, probably not. For a few reasons:
Bitcoin is fast compared to wire transfers (a few hours compared to a few days), but much slower than day-to-day transactions in the United States. Visa can process thousands of transactions per second, while bitcoin can handle tens of transactions per second. It could take between 10 minutes and several hours for your bitcoin transaction to go through — not ideal for the coffee house morning rush.
Low Supply = Crazy Deflation
Bitcoin has a super low supply — 21 million coins, to be exact — that creates a high demand and rising prices.
When people spend and receive money, they want to use a stable currency. When they expect an asset’s value to rise, they’ll be less likely to spend it — instead, they’ll hoard it.
Bitcoin is popular, but it’s not a flawless product.Once we have a globally used currency, trade will increase dramatically and the world will feel much smaller. But new cryptocurrencies that move faster and are cheaper than bitcoin, with a much more stable value, are being developed. Many believe that one of them will eventually emerge as the best asset for the world to use.
Roni Rose is the founder of Blockchain Bea, a podcast that teaches non-technical people about the basics of crypto and blockchain tech in a fun and casual way, and introduces them to ventures using blockchain to make a positive impact. She lives in New York with her adorable pup, Bean.