The flipside of our traditional coin
The tech community are currently working on building an economy that doesn't deal in middle-men or allow the state to siphon off a percentage of this or fees for that. Problems with existing systems have been normalised by an unempowered society; but the tools that might change this - cryptocurrencies, virtual wallets and digital economies - can be pretty confusing. In some corners, however, people are already getting to grips with innovative businesses that change the way we spend, save and handle our money - and the movement seems to be gaining momentum.
During this time of change, Nesta is holding a Hot Topics event to discuss the social, ethical and regulatory issues surrounding emerging and disruptive technologies operating in the financial sector. To start with, I thought this would be a difficult topic to research; it appears to require specialist technical knowledge that I don't have. However, not only is the subject itself fascinating and exciting to learn about, the community surrounding it is the most enthusiastic and helpful I have come across.
Most of the key players in this post-institutional landscape offer us a new take on services we already use. But they make them easier, more transparent, and cheaper. TransferWise provide us with international money transfers at a fraction of the cost associated with banks or the Post Office. Abundance are streamlining the process of investing in renewables, blending the principles of crowdfunding, renewable energy, small-scale investment and community building. None of these services actively replace banks; they operate on a different level, reflected in the growing use of the term 'second economy'.
Out with the old
As well as this large-scale democratisation of services, there is currently a media storm surrounding alternative currencies. There are costs and charges associated with accessing and transferring cash that must be costing us millions each year. Alternative systems have been making progress toward the disintermediation of these processes, with far fewer calamities than the critics would have us believe.
It would be remiss of anyone writing about digital currencies not to mention Bitcoin; although founded in 2009, this 'cryptocurrency' has only recently been getting the attention that it deserves. To ease the discussion on this topic, I feel that there are some key points that must be understood before proceeding:
- Bitcoin is not owned by anyone - the peer-to-peer network regulates Bitcoins issuance and transactions.
- Suitably configured computer systems 'mine' Bitcoins for the user by solving algorithms. These become more complicated and produce less reward as more users take part, and no more than 21 million Bitcoins will be issued in total.
- Bitcoins are saved in a virtual wallet and can be sent to other users or accepted as payment by participating vendors.
- This process is largely anonymous, leading to concerns over the use of Bitcoins for illegal purposes.
- You do not have to mine Bitcoins to take part; they can be bought for currency at exchanges or received from other users.
Bitcoin has, of course, experienced some teething problems. Until recently it was labelled as nigh-on useless, owing to the fact that very few vendors would accept them as payment. A virtual currency that was unable to buy real world products meant that it was easy to portray as nothing more than crypto-anarchist's utopian dream, with no real place in society.
However, as the number of business accepting this currency is increasing every day, it is becoming more "sex, drugs and rock 'n' roll" by the minute. You can purchase illicit substances, pay for IVF treatment or buy a bungalow using the currency - or just order coffee, cupcakes and pizza, if that's more your style.
As the industry seeks to become legitimate and conform to regulatory protocols, the future is far from certain. The cryptocurrency phenomenon is not yet understood by society, resulting in polarised clusters of critics who are forced to sensationalise their claims in order to win supporters.
What is needed is dissemination of accurate information and an easy path into the system. Otherwise the majority of us will stick with the devil we know. Volatility and uncertainty are currently the major obstacles, as are fears over money laundering, fraud and tax evasion. However, these issues are not exclusive to digital currency, and will arise whatever systems are in place.
The Bitcoin community is keen to share knowledge and create the discourse required for progress to be made; it will be exciting to see how regulatory requirements and this libertarian means of exchange adapt to each other's influence.