The existence of cash began thousands of years before we even started counting years, where metal objects were used to represent value. Over time the concept of cash developed into the physical value representation it is today, controlled by an issuing body and extremely hard to replicate or forge.
Today cash is the most widely used payment method in the world. Meanwhile, electronic payments are growing. Fast. Our society is becoming increasingly digital and with that, increasingly cashless. Digital payment volumes are shooting up.
A Fed survey showed that cash transactions in the United States dropped from 40.7% to 32.5% of all transactions in 2015. Similarly, a survey conducted by the triennial Federal Reserve Payment Study showed cash transactions in the US fell from 84.8 billion per year to 69.4 billion around that time. It is thought that over time growing numbers will opt to use electronic payment methods instead of cash and the acceptance of cash will decline in the near future. But still, the prevalence of cash isn’t diminishing and in general the demand for cash is growing, even if electronic payments are growing faster.
What’s so great about cash anyway?
Despite the growing presence of electronic payments, cash remains the dominant asset. This is because cash is extremely simple to use and it is highly robust. It requires no technology to process transactions and no technical knowledge to use. Furthermore, cash enables anyone to conduct private transactions and there are no digital risks such as cyber crimes or bank failures.
Really, cash enables any two parties to transact in a peer-to-peer manner with no third party involvement, no fees and fast transaction times.
Of course, cash has weaknesses too, which are partially the reason digital payments are rapidly growing. Businesses that accept cash carry greater risks and as such must pay for insurance, cash management services and more. Theft is an issue with cash since it is largely untraceable. Holding cash also exposes one to the risk of inflation, something that occurs within all cash systems.
In the last decade there has been a push towards alternative digital systems that aim to address the problems, risks and inefficiencies of cash and other digital payment systems, one of which is cryptocurrency.
Using distributed ledger technology, the first cryptocurrency Bitcoin was created to act as a peer-to-peer version of electronic cash which would allow online payments to be sent directly from one party to another with no third party involvement. Sound familiar?
Using Distributed Ledger Technology for cash
Distributed Ledger Technology has a number of key characteristics that are extremely suitable for creating a digital cash alternative:
- Decentralization – no third party controls the supply or has undue influence over the network
- High security – when designed correctly, cryptocurrencies are extremely secure
- Fast, cheap payments – cryptocurrencies can be sent anywhere in the world in seconds with minimal transaction fees
- Immutability – the network ledger is final and cannot be modified
- Transparent or private – depending on the network set up, a cryptocurrency can be entirely transparent or it can facilitate completely private transactions
No one is denying the potential of cryptocurrencies. Many think they could play a prevalent role in the future of money and finance. That’s why companies like Walmart and Facebook are poking around, interested in creating a cryptocurrency of their own.
However, the issue of volatility continually arises. Bitcoin, the most popular cryptocurrency, is too volatile to become a global payment method today. Maybe down the line when the asset has become more stable. Or perhaps stablecoins are the solution?
A stablecoin is a cryptocurrency that shares all the same intrinsic benefits as a regular cryptocurrency, but it is designed to maintain a stable ‘value’. Some are pegged to assets such as USD, some control the supply with algorithms to maintain stability and others are based on the global economy. But as of yet, no stablecoin has achieved adoption and proper recognition as a payment method in the real world.
Currently, one of the most viable use cases for using cryptocurrencies as a representation of value is branded currencies.
A branded currency is something you’ll be familiar with, even if you haven’t heard the name before. It is a store of value and a medium of exchange for goods and services from a specific brand or merchant. Examples include coupons, loyalty points, gift cards or any other physical or digital form of payment from a merchant or brand.
DigitalBits is a cryptocurrency project that is working directly with brands to support the development of branded currencies, while facilitating the transition of legacy programs to blockchain. The project aims to allow brands to make an imperceptible leap to blockchain technology, where their customers notice a huge improvement but are unaware of the underlying reliance on blockchain and cryptocurrency.
What this means is that brands are able to utilize the power of cryptocurrency to enhance their loyalty offerings by connecting with an entire ecosystem. With the integration of DigitalBits, suddenly customers don’t just hold loyalty points that are useless and at risk of expiring. Instead, they hold true value that represents their loyalty as a customer which can be exchanged for anything within the DigitalBits ecosystem. This vision is furthered by the development of branded stablecoins, branded currencies backed by legitimate value such as US dollars.
Best of all, the power of cryptocurrency and blockchain would be totally concealed, operating silently under the hood. Customers would only experience the benefits of blockchain. They would know the offering had improved – but it wouldn’t matter to them how the underlying technology works.
This is the key to mass adoption of cryptocurrency, especially in the short term. Existing businesses are able to jump on board and leverage blockchain and cryptocurrencies to strengthen the consumer-brand relationship. DigitalBits is leading the charge in this regard with a working product and strong partnerships.
Learn more about DigitalBits:
- The Daily Chain Primers: DigitalBits Introduction
- BlockFyre Coin Research: DigitalBits
- DigitalBits + Pundi X Interview with Ashton Addison
- Bringing DigitalBits to the World
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*Disclaimer – DigitalBits are our Media Partners and therefore this content is sponsored by them. The fees paid by this project are used to pay for The Daily Chain salaries, dev work, hosting services, travel expenses etc.. that are required to make this company a success and continue to provide the community with great content on a daily basis.