The battle for power
With the advent of the Internet and digitalisation more generally, an incredible battle for power has taken shape.
Most people are familiar with this battle in the context of governance. On the one hand, digitalisation has given us access to an ocean of information, virtual spaces to form communities, and channels to communicate and mobilise one another. On the other hand, governments and corporations have acquired unprecedented insight into our private lives and the means to direct them.
A similar battle is taking place with respect to our monetary systems and financial infrastructures. Ultimately, it’s a battle for freedom, privacy and autonomy.
From cash to digital money
While in principle we may agree with some traditionalist communities who reject any and all types of tokenised money and yearn for a return to actual gold and silver coins, there is actually a lot to be said for modern cash in terms of fungibility, lack of traceability, and the privacy it affords. It is not, however, the most convenient form of money.
It’s no surprise then that digital money is taking the world by storm. China, a country once lightyears behind Octopus-savvy Hong Kong, seems to have leapfrogged credit and debit cards and gone straight from cash to digital money. Now, electronically paying by WeChat is the norm rather than the exception. With WeChat-accounts linked to bank accounts, people can pay for taxi rides, groceries, snacks, share bills, or send ‘red envelopes’ with the click of a button. We can see similar solutions in cash-based economies around the world. It’s certainly convenient, but by no means ideal.
Firstly, these types of payment systems are like new trains running on old rails: banks, corporations and governments maintain their positions of power. In fact, this system only strengthens their hold on it.
In this particular ecosystem, users’ payments are all recorded, analysed and potentially fed into whatever other database is out there compiling personal profiles. This may seem harmless if it only serves to optimise marketing strategies, but once your information is out there, it’s practically available to any government-turned-sour or other rogue actors who could benefit from using your information against you.
Also, if we do fall into this trap believing digital money is pure progress and surrender to it completely, it’s not hard to see how we lose out big time in financial autonomy. We could see the implementation of transaction fees, the automation of taxes, fines and sanctions, all executed with a simple update. Just as we’re experiencing now with data privacy, this way of financial digitalisation leaves only the top dogs unscathed, while the rest of us toil in our
The promise of crypto
By no means should cryptocurrencies be mistaken for the former type of digital money. Whereas digital money is centralised and easily redirected, confiscated or frozen, a currency such as bitcoin is decentralised, peer-to-peer, and censorship resistant.
Yes, cryptocurrency transactions are recorded on public ledgers, showing wallet addresses and their transaction histories, but this data does not reveal much in terms of personal information. As such, crypto delivers both transparency and anonymity at the same time. It suits an ‘open society’, facilitating cross-border transactions and financial inclusion, and simultaneously affords privacy, autonomy and independence. In that sense, cryptocurrency is arguably our best bet for a global, modern monetary system.
Of course, bitcoin and altcoins are currently associated with investment and speculation. There is nothing wrong with that. In fact, it’s vital as it attracts attention, populates the market, drives liquidity, and in true capitalist fashion pushes innovation. In this regard, the role of exchanges (both centralised and decentralised) is crucial. They create gateways from fiat into crypto, across currencies, and back. However, not until crypto becomes embedded in people’s daily lives can we expect mainstream adoption.
Perhaps, as digital money takes precedence over cash and more and more people start to realise how their privacy and freedom erodes as a result of it, we will see a mass movement towards crypto as a viable financial alternative.
If anything, in anticipation of such a time, now is the moment to build the infrastructure, develop the technology and innovate feverishly to turn the extraordinary into the ordinary.
When it comes to integrating crypto into daily habits and enhancing its real-world value beyond speculation, there are a bunch of very promising initiatives.
Amongst those working towards mainstream adoption are companies such as bitcoin.travel, which offers travel services and products that can be paid for with crypto, and Living Room of Satoshi, which enables users in Australia to pay utility bills with bitcoin. Nevertheless, as bitcoin and altcoins today are still highly volatile and therefore unattractive for everyday payments, disruption is minimal.
This is where stablecoins come in. These coins belong to the family of cryptocurrencies which are pegged to fiat currencies such as USD, EUR, JPY and RMB. Like bitcoin, they exist on a blockchain, offering the same advantages in terms of security, anonymity and autonomy, but like fiat currencies they are stable and therefore suitable for storing value and payments.
One of the companies which has built a bankless money transfer system around stablecoins and hard cash is Hong Kong-based Bitspark. Specifically, they work with crypto-collateralised stablecoins. Unlike Tether and similar stablecoins where the collateral is (supposedly) held in fiat by a central custodian, crypto-collateralised stablecoins are sustained by a smart contract on the blockchain, backed up by around double the amount in crypto, and therefore true to the principle of a decentralised economy.
Users of Bitspark’s services are able to exchange cash for a stablecoin of their choice and transfer it to their relatives overseas who can then revert their crypto back to cash in their own currency. Not only are banks effectively cut out of the equation but, more importantly, this system completely bypasses slow, complicated and expensive currency exchange mechanisms.
Another example of how crypto serves communities in the form of stablecoins comes from the work Okra Solar is doing. Providing off-grid solar solutions, this Australian tech start-up has partnered with Bitspark to enable unbanked populations in a remote region of The Philippines to pay for their utility bills with peg.PHP, a crypto-collateralised stablecoin pegged to the Phillipine Peso.
And yet another start-up whose work showcases the manner in which crypto can both financially empower and include communities is Switzerland-based Bancor. In Kenya, local communities that struggle with low, sporadic cash incomes, often seeing their funds seep out of their neighborhoods faster than they can replenish it, have been resorting to locally created paper vouchers that exist alongside the national currency to keep local commerce in basic goods and services flowing.
Now, with Bancor’s assistance, these local currencies have become digitised to exist as crypto-assets on the blockchain, providing intra-local liquidity. Although at the moment these local cryptocurrencies cannot yet be traded for other currencies such as bitcoin, stablecoins or fiat currencies, it’s not hard to imagine that this may soon be the case. Such a feat would effectively catapult these communities straight from being unbanked to being able to participate in the global economy.
For the time being, it’s great to know that the first payment ever made on this network was for nothing less than the humble tomato.
Towards a decentralised economy
From these examples we can see how crypto, and particularly stablecoins and local currencies, have the power to cater to the unbanked and creatively leverage digital technology for good.
If Bitspark succeeds in creating stablecoins for the world’s 180+ fiat currencies, which are then free to flow across borders, and continues to grow its network of cash-in cash-out inclusion points across the world, and if companies such as Okra Solar and Bancor manage to get local populations on the blockchain and work to leverage crypto to solve everyday problems, we may well be seeing the digital revolution take a turn for the better: ushering in a decentralised economy true to the spirit of Satoshi.
In such an economy, a rich variety of global and local currencies are at our fingertips, flowing from phone to pocket, from wallet to desktop, unhampered by complicated exchange mechanisms and sufficiently dislodged from surveilling entities. With a digital market enriched by tokenised real-world assets, in addition to conducting everyday payments, users will be able to engage in simple investments and participate in the global economy alongside institutional traders.
Local communities, cut off from banks, would no longer be stuck in diseased currency pools and able to store, circulate and grow wealth commensurate to their own efforts. And for travellers, mobility would finally be matched by monetary agility: it’s a global economy, minus the problem of centralisation; it’s digitalisation, without the sacrifice of privacy and freedom.