Friday, March 29, 2024 | Ramadan 18, 1445 H
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EDITOR IN CHIEF- ABDULLAH BIN SALIM AL SHUEILI

The future is in cryptocurrency

Stefano
Stefano
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In my years invested analysing trends and innovation, I came across countless examples of technologies that the market misunderstood. In some cases the technology was laughed at, but eventually succeeded.


Perhaps some may not remember that owning a mobile phone in the ‘90 in some parts of the world was seen as ridiculous. I perfectly remember the first time I went to a gathering of friends with my brand new (bulky) mobile phone. I was the only one with such device. My friends were all but impressed. They teased me over and over asking who was going to call me. A few years later, they all had a cellphone in their pocket.


Back in the beginnings of the ‘90 an Italian comedian made fun of video conferencing. At that point in history, video call products such as Skype or Zoom were pure fantasy. Certainly there were geeks who knew that eventually we would have all made use of such technology, but the masses were sceptical.


Other technologies and innovations such as 3D, virtual reality or e-learning, on the other hand, have always being widely welcomed, but until now are struggling to have a massive distribution.


Scepticism is indeed a feeling that drives many individuals in challenging the development of ideas into possibilities. Dreamers are those who make things happen. In recent years a new tool in finance went from underdog to key tool in the industry evolution. It is called Cryptocurrency and until now it is a much harder technology to explain than to use.


Bitcoin was the most famous forerunner in this new ways of making transactions. My best guess is that the suffix “Crypto” tends to build up scepticism by default. However the logic behind cryptocurrencies is rock solid. It is just a matter of time before cryptos will enter in everyone’s day to day life.


With thousands of cryptocurrencies to choose from, it is hard to know which one will be the winning horse. Most likely there will be many, serving different purpose in different parts of the world. However some of them, in recent year, had the audacity (and the capacity) to reintroduce the Gold Standard tied to a digital currency. Such practice was discontinued by president Nixon in 1971 and it is now being reengineered for the cyber generation. Digital gold is definitely something that may gain traction faster than cryptocurrencies in general.


The great scholar Nicolaus Copernicus, who lived some 500 years ago, experienced an unprecedented economic boom in Europe which resulted in being driven by fiat currency. Copernicus deducted then that “bad money drives out good”, hinting that any paper currency not backed by a physical asset is volatile and tends to prevails over genuine currency backed for example by gold.


So the circulation of fiat currency (the bad one) has become a standard. It is cheap to produce and to circulate. However, with the drastic and constant increment in international transactions, “exporting” fiat currency has become a dangerous game. First of all it is a slow process that does not know well the concept of real time. Secondly, with currency exchange rate, there is always a loss in value. Thirdly, each international remittance is charged heavily in commissions.


International remittance is a multi-billion dollars business that has been growing consistently. One of the world’s biggest players is Western Union, which collects in revenues $5.5 billion yearly. To emphasises the magnitude of the remittance business, one should put in context that a country like Mexico receives approximately $25 billion a year in remittance from citizens living abroad. That sums up to be about 2 per cent of the country’s GDP. Remittance to the Philippines, with nearly 10 billions annually, contributes to about 4 per cent of the GDP.


All of these transactions generate great profits to intermediaries. Here is one of the finance areas where cryptocurrencies are going to proof to the sceptics that real time virtual currency transaction with no intermediation (thanks to the blockchain process) is eventually going to succeed over a slower and less secure transaction.


The blockchain is in fact one of the strongest security assets of cryptocurrencies. It is in simple words the ability of tracking on a ledger and guaranteeing the validity from transaction to transaction without gaps. For decades now, the most merciless hackers have been trying to hack cryptocurrencies, but nobody ever succeeded. Every attempt that went close to success, caused the suspicious link in the blockchain to simply being dropped.


In the end, cryptocurrencies will succeed. They are already succeeding, despite the fact that are still too difficult to explain to the average Joe. My best guess is that in future we will not really care much about how blockchain and cryptocurrencies work, but rather on the advantages and the benefits that users can benefit from.


— By Stefano Virgilli


— vs.voxlab.net@gmail.com


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