Is cryptocurrency changing the way we use money? — a TedX Talk
In May 2018, I gave the above-titled talk in Dubai, UAE. Below is the script, which was prepared just before the event. Thus, some information may now be old.
Good afternoon. My name is Kemal and I am a certified bitcoin professional and currently finishing my MBA with a research focus on blockchain use for financial transactions in the UAE. Today I am going to talk about cryptocurrencies and their role in changing the way use money.
One year ago, I first began to study blockchain in general. I quickly realized how huge blockchain is and that cryptocurrencies are just a small part. Each question I had led to another and another. So I took a number of online courses, read many books and articles and attended numerous blockchain events. I have learned a lot over the past year, but for others, it is still a new concept and one that may be difficult to understand. Many may still look like this.
I hope that today, in my short presentation, we can take a quick and simple look at what cryptocurrencies are, how they work, and the impact they may have. Before we can look at cryptocurrencies, we need to consider what exactly ‘money’ is.
Going back through time, early transactions were often formed around trading, but this had its challenges. Consider the fisherman who uses the day’s catch to ‘purchase’ some household supplies. What if, on the day of a catch, he doesn’t need anything? The fish is not exactly going to keep. On the other hand, he might need to get some things, but had an unlucky day with the fish. Thus, the next step was to use something more stable, and coins and paper money were created. Here, our fisherman could trade his fish for some coins, which he could store for a future day. This is where banks would become more important. Moving into the more abstract, we get credit, which is like stored fish that he hasn’t been caught yet. With the invention of the internet, we see things like apple pay, online shopping, etc. Money continues to become more abstract. The logical next step is virtual money, which is where cryptocurrencies come in.
Money has three main functions. First it is a medium of exchange when something is used to purchase something else (like a good or service). It also stores value, so unlike the fish, it doesn’t go off, though that value may change over time. Finally, it is a unit of account, which helps for comparing. For instance, 10 lemons = 2 fish.
Getting back to the present, globalization has meant a shift in how and where people live and spend their money. While face-to-face transactions are still happening, it is now possible to move money around the world in ways not possible in earlier times. But these still have their issues.
So let’s take a typical money transfer. This is familiar for most I think. First, we look at how much money are we sending? Is there a minimum? A max? What currency are we exchanging/sending in? How does that affect possible losses? What are the fees for sending the money, at both ends? In some cases, people might shop around a little to ensure that they are getting the best possible deal. Even then, we might still feel ripped off by the costs and fees. In doing some personal research, I contacted a local UAE financial exchange service to ask about sending $100 to India, as some who work there may wish to do. I was told that I must send a minimum of $150 and that there would be a total of $30 additional in fees and tax. While these numbers may differ from country to country, it can be difficult for someone who only wants to send a little overseas.
Once we decide to send it, then there are other things to consider: how long will it take? What if it ‘gets lost’ along the way? Just last year, I was trying to send some money from one bank to another within the same country and a simple problem meant that our money went into some black hole for 2 weeks before it was finally returned to the original bank account and I could try again. Compare that experience to this: In April 2018, $99 million worth of Litecoin was sent in a single transaction that took 2.5 minutes to clear and cost only 40 cents in fees. How does that work?
Cryptocurrency is simply a digital or virtual money that is created from code, rather than paper or metal. It still has the three main functions — meaning it is a medium of exchange, it holds some value, and counts as a unit. Where it gets interesting is in the encryption where the data goes into strings or “hashes” which allows it to be tracked: who (in some cases) sent what, when kind of thing. Through its encryption, cryptocurrency transactions get recorded in permanent ledgers, which means better communication and records so the money can be traced more effectively.
There are other ways in which cryptocurrencies are awesome.
As mentioned just now, with its traceability, cryptocurrencies are transparent. We know exactly who sent what and when in some cases (e.g permissioned and consortium blockchain types have all that information). This also increases security because it is more difficult to cheat with it.
In addition, it allows us to get rid of the middleman. In traditional transfers, people send money from one account to another but have to go through the banks. Without that middleman, the transaction is simpler, faster and cheaper. We don’t need to pay bank fees if the banks are not involved. Compare the 40 cents to send 99 million to the $30 to send $100.
Finally, because these cryptocurrencies are all programmable, there is lots of room to develop and improve them. If an issue arises, it can be resolved. And future development means that cryptocurrencies will hopefully be able to do more.
Bitcoin was the first one. Ethereum, Litecoin, and Ripple are examples of other important cryptocurrencies. However, too much of a good thing can be a problem. Just in the last year or so, we’ve seen an explosion of cryptocurrencies. When I first started studying this topic at the end of 2016, there were roughly 700 cryptocurrencies. Today, that number has more than doubled to just under 1600 (As of August 23, that number had reached 1878 https://coinmarketcap.com/all/views/all/), and not all of them serious. Just google “funny cryptocurrency names” and you’ll see what I mean :)
So we’ve looked at the positives and why cryptocurrencies can be so useful. There are other considerations to make, from an individual level up to government.
We’ve talked about transparency for individuals and being able to trace transactions. But what about larger institutions? How transparent is it for them? How much can the government see regarding these transactions?
With the great increase in cryptocurrencies and with concerns of ‘good vs bad players’, the question of regulation is surely to come up. The question is though — how regulated do we want them to be? What happens if they become over-regulated? Do we then lose what makes cryptocurrencies work so well?
So for instance, on an individual level, how might these regulations protect against scams? Individuals now have more choices than ever when it comes to deciding where to put their money. How can they know what’s real and what’s safe? On the other hand, if it becomes too regulated where fees and such return, then how is that different from transfers today? Another consideration is what happens if more and more people switch over to cryptocurrencies for all their investment needs?
What is the impact on the larger investment companies if people choose to invest in cryptocurrencies? Some investment companies see cryptocurrencies as risky because of the huge fluctuations in their prices, while others are starting to embrace it. Either way, cryptocurrencies will be keeping investment companies on their toes.
Finally, looking at the big big picture, what are the implications for the global economy? The US dollar currently is the primary currency that connects the global economy. Because cryptocurrencies are decentralized and not really connected to the US dollar, this may result in de-dollarization and a shift in the economy in general.
Before we look at the future and what the next 10 years may bring, let’s recap the exciting things that are happening now.
Cryptocurrencies are changing the way that we can send money, and in a way allowing us to ‘un-bank.’ At the same time, some places, like Germany, are actually de-taxing bitcoin and other crypto-coins used for purchases. More places are accepting cryptocurrency as forms of payment. Recently, on a trip to Singapore, I observed some people using cryptocurrency to purchase drinks at a cashless café. Additionally, people are using it to buy properties, cars, etc. (there are thousands of examples out there… and growing)
As the technology behind cryptocurrencies continues to improve, more choices become available, for good or for bad, and the potential of this tech is only going to go up. So now, what’s exciting for the next ten years? Well, definitely the development of new tools and infrastructure. Did you know that in 2017, according to the World Bank Report, 31% or 1.7 billion adults around the world did not have access to bank accounts? So, cryptocurrencies and similar tech have the potential to benefit millions around the world.
We’ve already seen new forms of payment, with apple pay and others, in recent years. I think we’ll continue to see new options coming up as cryptocurrencies continue to expand. They’re already being accepted as forms of payment as I mentioned previously, and I’m quite sure there will be more ways for my wife to spend my money in the coming years.
Finally, there is a lot of potential for financing projects. This is already happening through various government schemes and crowdfunding, but cryptocurrencies can make the process easier, faster, and more transparent.
There are also implications for banks and how they can be run. For instance, Binance is a crypto exchange company that was founded in 2017, runs with 200 employees, and earned 200 million in the second quarter of its existence (a 2800% increase over its first quarter). As was reported, this performance outdid Germany’s largest bank, which is almost 150 years old, runs with 100,000 employees and earned 146 million in the same quarter.
These are all positive changes. But what might the challenges be? Some say that the technology behind cryptocurrencies, blockchain, might result in job losses as its efficiency improves. I think this is true of so many tech jobs and just the nature of the world we find ourselves in today. While some jobs may cease to exist, new ones are being created every day. According to the World Economic Forum, an estimated 65% of today’s children will end up working in careers that don’t even exist yet. This is an issue that is present everywhere, not just in blockchain or cryptocurrencies. Adaptation, innovation, and collaboration are key, and through these, we can more fully participate in the incredible progress being made.
Finally, I’ll close my presentation with a quote from FundYourselfNow which was published on The Mission, an online newsletter for “accelerated learning”:
Bitcoin, Ethereum, Ripples, Litecoin and many other cryptocurrencies continue to experience massive growth in price, market capitalization, and mainstream adoption. The cryptocurrencies are providing features and functions that are changing (maybe even improving) the way we do things. It is no longer a question of whether cryptocurrencies are disrupting the global economy, but by how much and what does the future hold. Time will tell how far this revolution will go. (Jan 10, FundYourselfNow)
As you can see, so much has happened since 2009 when the first bitcoin came out, and truly, time will tell how far this revolution will go.
Thank you.
https://www.youtube.com/watch?v=1i0jtmoToKU&t=141s
About the Author:
Kemal is working towards graduation from the Executive MBA program at Strathclyde Business School. He has completed business school modules in Dubai, Abu Dhabi, Bahrain, and Singapore. His MBA thesis is focused on the implementation of and strategic implications of blockchain technology in the financial sector in the MENA region. He is a Certified Bitcoin and Blockchain Professional, and a member of Bitcoin Foundation and Digital Currency Council. Additionally, Kemal is a mentor at KryptoLabs in Abu Dhabi. He has been working with a few blockchain and ICO based start-up companies as a Blockchain Consultant and Strategist since Dec 2017.