What is the potential of digital currency?
Before we can look at the potential of digital currency, we need to understand what it is first.
What is digital currency?
According to Wikipedia, digital currency or digital money is an Internet-based medium of exchange distinct from physical currency (such as banknotes and coins) in that it exhibits properties similar to physical currencies, but allows for instantaneous transactions and borderless transfer-of-ownership.
In this article we will focus on the digital currency Bitcoin, however this is just one digital currency available. Others include Ethereum, Ripple and Litecoin to name a few.
Most of us have heard the word Bitcoin thrown into a dinner conversation at some point and we are sure many have found themselves simply smiling and nodding along politely while thinking; “what is Bitcoin and how does it work?”
What is Bitcoin?
Bitcoin is the first decentarlised digital currency that allows people to send a value directly from one person to another via the Internet, with no intermediary.
During the Net Prophet 2016 conference earlier this year Marcus Swanepoel CEO of BitX, was asked; what is Bitcoin and why is it beneficial to me? Here is what he had to say; “What Bitcoin really does is, is it allows people to send a value on a peer-to-peer basis, directly from one person to another.” Marcus goes on to say that; “Bitcoin is one big ledger of debits and credits,” furthermore, “this ledger sits across the entire Internet and when I send that value to you it replicates across all the computers in the world at the same time and everyone has that same record of ownership.”
For a more detailed explanation watch this video from We Use Coins.
What does this mean in terms of banking?
As the Internet evolves and becomes more engrained in our daily lives, digital currencies could be the next step in this evolution. Bitcoin transactions are fast as they take place directly from one person to another, and you do not have to wait for the bank to process the transaction. As an added bonus, because the currency is Internet based, you can use it worldwide and it has the added benefit of exceptionally low processing fees, unlike traditional banks.
Digital currencies are used to purchase goods or services online anywhere in the world and all transactions using Bitcoins are tracked and recorded on a public leger called ‘The Blockchain.’ This means payments can be verified immediately, making payments as easy as sending an email. By cutting out the middleman you are saving time and money.
Geo Groenewald, a community team member at BitX says, “Bitcoin allows a whole new way of building and providing financial services and could very well be the basis of the banks of the future.”
To read more about how Bitcoin will help shape the future of finance, why not spend a few minutes reading this article written by Marcus.
What the experts think.
Michael Jordaan, Founder and CEO of Montegray Capital and former CEO of First National Bank, commented on what he liked about the Bitcoin process during his discussion at Net Prophet 2016; “The process can be free, it’s possible for one person to transfer value to someone else at zero cost, or from one country to another”. Michael believes that the likes of digital currencies such as Bitcoin have the potential to “make banking free.”
Marcus added, “What Bitcoin has certainly done is it has raised awareness about how money works, what money is, and how governments control it”
To watch the full discussion with Michael Jordaan and Marcus Swanepoel on the evolution of banking and the future of finance from Net Prophet 2016 click here.
We asked Geo what he thought the potential of Bitcoin as a currency in Africa is, and this is what he said, “Given the expensive and inefficient banking systems in Africa, as well as rapid mobile adoption, the value proposition of Bitcoin is certainly higher in emerging markets than in developed markets. We are already seeing people in Africa use Bitcoin for paying for things online, sending money to friends and family or as an alternate store of value, especially where there are weakening local currencies. Bitcoin might end up being used as a currency in itself or as a ‘rails’ for other local currency transactions, so there is a lot of potential. In the long run it might also be one of the best ways to bank the millions of unbanked. “
So what is the potential of digital currencies?
We believe that digital currencies are the future of commerce, and if the consumer decided to move away from traditional banking and buy into digital currencies, then it will change the way we view and use banking, in a similar way in which Henry Ford revolutionised transportation with the Model-T Ford car.
Other articles you may be interested in:
What happened at Net Prophet 2016
Is there any trust on the Internet?
Click here to chat