You’ve probably heard about Bitcoin and its enabling financial technology, blockchain, but how exactly does it impact us? Bitcoin has been at the forefront of the news after rocketing to $14,000 by the end of the year, from under $1000 just 12 months earlier. Ethereum, another digital currency, was selling at $8 on the 1st of January 2017, and $843 at the end of the year!
Even non-investors are wondering if they should get onto the cryptocurrency train and enjoy the gains that some speculators have made – but market analysts are wary of what they perceive as being an impending bubble.
For most business people, however, the fascinating element of these new digital financial systems isn’t actually the currencies themselves; it’s the underpinning technology which enables them, known as blockchain. Why is blockchain so important? Because it is facilitating something entirely new; the digitisation of trust. It acts to make digital transactions safe and trustworthy by providing a public and permanent record of every digital financial transaction in a financial way.
Bitcoin may well be the next bubble in the way that many IPOs were in the 1990s when the tech bubble burst, but cryptocurrencies as a medium of exchange are highly likely to become the future of money. Many believe that Bitcoin’s ultimate weakness will be its anonymity and privacy, which would make it impossible for world governments to use as an official currency because of the inability to collect tax revenues.
However, cryptocurrencies are likely to evolve and become more prevalent, and as they do, government interest and involvement will grow with them. China is already developing a digital renminbi. The US may need to move swiftly to digitise the dollar if it plans to remain the world’s reserve currency.
At the same time, blockchain is likely to become a real focus for governments and businesses alike, offering new ways to manage suppliers, payments, partners and even employee payments in an entirely traceable, auditable manner. It’s an exciting new world and 2018 is likely to spell further fascinating evolutions in this rapidly evolving digital payment space.
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