The way we pay for things is evolving. As increasing numbers of people adopt digital currencies and electronic payment systems, the future of money is food for thought. Whether you like to keep your cash in a cookie tin under your bed or manage multiple e-wallets on your phone, changes in how society uses money will affect all of us. Here are some hints about what money may look like in five years.
Will Cash Disappear?
Just like how email has replaced physical letters, electronic payments are taking the place of paper money. Some people have even hypothesized that cash will become a thing of the past in the next decade. While this will certainly be more convenient for people who hate having to line up at ATMs or carry fat wallets, it is unlikely that cash will completely disappear any time soon.
Many parts of the world still lack the reliable infrastructure required to facilitate digital payments, and many people—even in developed countries such as the US—still do not have access to bank accounts or e-wallets. In such situations, cash will remain king. Also, with so many eyes on digital transactions these days, cash is an almost anonymous and untraceable form of payment that is much more discreet.
Will There Be New Currencies?
In the future, we will probably see more currencies emerge because of advances in blockchain technology. Blockchain technology allows for the creation of digital currencies that can be used to make peer-to-peer transactions without the need for banks or other intermediaries. Well-known cryptocurrencies that are already widely in use today include Bitcoin and Ethereum.
Blockchain technology is also facilitating the creation of private forms of currency. Businesses and individuals can now create stablecoin, a type of currency that is pegged to assets such as gold or US dollars. Stablecoins can be used to make secure cross-border financial transactions without the need for third-party verification or the approval of a central authority.
Cryptocurrencies are considered risky and volatile by many investors and consumers. However, stablecoins are viewed as a better and safer option because they are tied to the value of ‘real life’ assets and are thus less likely to crash. With platforms such as Brale that enable the swift and easy creation of stablecoins, there is great potential for the growth of such currencies in the next few years.
How Does DeFi Work?
In a traditional transaction, money and information are exchanged between two parties through an intermediary. This intermediary—such as a bank or credit card company—often takes a fee for providing their service. Decentralized finance (DeFi) is an application of blockchain technology that facilitates peer-to-peer lending and borrowing without the need for a centralized financial institution.
There are two main categories of DeFi platforms: decentralized exchanges and decentralized credit networks. Decentralized exchanges or cryptocurrency exchanges such as Binance and Coinbase Pro provide a platform for users to trade digital assets. Decentralized credit networks allow users to borrow from and lend funds to each other without the need for a traditional bank or intermediary.
DeFi gives consumers more control over their financial assets and more freedom to transact without fear of interference from third parties. This has the potential to help open up the financial system and make it more inclusive and accessible for everyone. People do not need a bank account or a credit history to access capital and they can enjoy lower fees, quicker transactions, and more secure data ledgers.
Which is Safer?
Many people are wary of cryptocurrencies and digital wallets because they do not understand how they work or are concerned about cybersecurity. As a result, they often choose to store their money in traditional financial institutions. However, traditional financial institutions are huge targets that are also vulnerable to cyber-attacks, with many instances of fraud and security breaches each year.
Other people are concerned about the lack of regulation over cryptocurrency markets. In response, many leading financial institutions and central banks are planning to launch digital currencies, which they hope will enable them to tap into the innovative potential of blockchain while remaining compliant with existing financial regulations. Whether this will prove to be successful remains to be seen.
Ultimately, user knowledge plays a huge part in security. Those who understand how to use digital services safely will be more likely to take the necessary precautions to protect themselves—whether it is with fiat or cryptocurrency. Meanwhile, those who are less informed about cyber safety and internet security will continue to be suspicious of digital finance solutions until it becomes more widespread.
Conclusion
Digital assets and cryptocurrencies are often seen as the future currency for major economies across the world. Unfortunately, the current infrastructure is confusing for users and restricted by government regulation in many countries. This poses a challenge to the future of digital finance and means that more time is needed to educate people about the benefits of this disruptive technology.
Although digital currencies are poised to change how we view and use money, it will be a while before we can pay with Bitcoin at the supermarket check-out. Instead, cryptocurrencies will likely continue to exist as more of a niche solution for investors and other tech-savvy users. So, stay tuned for more exciting developments to come, but do not throw away your dollar bills just yet!