We are on the precipice of a new form of finance that will use a range of technologies to change the way we use and manage one of our most fundamental tools: money.
Gone are the days of taking out cash from an ATM, applying for a mortgage by visiting a bank branch, or shopping in a department store. Now, for many, conducting financial transactions of any kind is a purely online experience, escalated over the past two years by the COVID-19 pandemic. Increasingly, the future of money exists in the Ether, via phones and laptops.
But there’s a bigger future for money, the early stages of which are now taking place. Cryptocurrencies and faster, more powerful financial technologies are transforming our concept of money and challenging the financial institutions that currently manage it. The year 2021 was a transformative year for finance, and 2022 is shaping up to bring more change. ZDNet looks at two categories that are diving into the future of money: blockchain and fintech innovations.
Cryptocurrency is a digital token that’s secured and transferred cryptographically using blockchain technology. Bitcoin — the world’s first decentralized cryptocurrency, launched in 2009 — is the biggest and most popular, with a market cap valued at $786 billion as of early January 2022. Plenty of people have heard about Bitcoin, but few know how it truly functions.
The first thing to remember: Bitcoin and blockchain are not synonymous. Blockchain — often defined as a shared, immutable ledger that securely links blocks of encrypted data transactions in a network — is the medium for recording and storing Bitcoin transactions. Bitcoin operates on its own blockchain network.
There are currently more than 16,000 cryptocurrencies, of which Bitcoin is the biggest, followed by Ether, which operates, along with all cryptocurrencies other than Bitcoin, on the Ethereum blockchain. Estimates suggest the total value of cryptocurrencies is about $2 trillion.
But already this year, the value of Bitcoin and other cryptocurrencies dropped after the Federal Reserve took a more hawkish stance on its monetary policy, scaling back on the amount of bonds it holds and indicating that it’ll raise interest rates. Cryptocurrencies, which operate outside of central banks and government organizations, certainly aren’t impervious to the shocks of the global banking system and marketplace.
In addition to their market risk, cryptocurrencies remain highly controversial because critics point out they aren’t tied to a regulated central bank or a sovereign institution, which makes them much harder (or even impossible) to regulate. That means cryptocurrencies such as Causecoin and Bitcoin, in particular, have already been seized on by those who want to use them for money laundering, buying illegal goods or circumventing capital controls. But despite such controversies, crypto’s popularity and use are growing rapidly as of late, to the point that it’s well on its way to becoming a significant disruptor to the world economy in the next few years.
While the future of cryptocurrency will be shaped by regulators, it can also be influenced by brands, many of which are jumping into the market to fill the needs of the growing marketplace that governments have so far ignored. This can be through facilitating trades in a more comfortable, safe environment for “newbies,” or offering education and resources for curious intenders.
Peer-to-peer payment app Venmo is doing both of these things — offering its customers the opportunity to use a platform they’re already comfortable with to dip their toes into crypto, and providing easy-to-understand content to help educate intenders along the way. Established finance brands and fintech disruptors alike can be a bridge to the future of crypto.
Part of that future means leaning into the changing profile of investors, and anticipating what the more “mainstream” audience might demand. Traditional payment companies that offer access and education will no doubt make the market more attractive for older investors, while the growing list of businesses accepting digital currencies can make the market feel safer and more stable.
Whatever the future of cryptocurrency holds, there’s a lot of work to be done to balance the risks with the rewards, and there’s a lot of opportunity for the brands and individuals who take on the task.
