The COVID-19 pandemic has made something abundantly clear: We need as many digital solutions for our day-to day lives as possible, not just to support ourselves during this crisis, but also to make our lives as sustainable as possible as the future unfolds.
Our increasing reliance on the internet for shopping, communicating, and learning has created stability during this pandemic where it wouldn’t have existed even 10 years ago – but there’s one major pillar of daily life that needs an update: Money. And not just in the sense of online banking and digital wallets – money as in currency.
Digital currency has already made its appearance on the financial scene, as anyone who’s read up on Bitcoin knows. But its development and integration into the way we pay for (and charge for) goods and services has lagged due some of its technological limitations as well as plain old inertia. You know the saying: “If it ain’t broke, don’t fix it.” In a sense, we haven’t wanted to disrupt the state of affairs as it pertains to the way that money flows through our economy.
Now, however, due to social distancing and shelter-in-place orders, we aren’t able to physically access institutions like banks, who are experiencing an incredibly high volume of calls and emails amidst COVID-19 concerns. At this point in time, our system kind of is broken, as our current currency hearkens back to the analog days of yore. Pressing forward with the Internet of Value (sometimes abbreviated as IoV) provides a potential solution to those in the financial sector looking to create an increasing digital economy in an increasingly digital world.
The Internet of Value, put plainly, is about the immediate transfer of value between individuals or organizations without needing an intermediary or middleman. Prior to the Internet of Value, we’ve had the Internet of Information, which has made the access of knowledge, media, communication, and other forms of content immediate and direct.
When you send a text to your spouse, he or she receives it instantaneously. Your phone carrier may facilitate that process through its technology and messaging platform, but the text message doesn’t need to pass through a third party’s hands to be delivered to you. With IoV, the transfer of value would feel similarly direct – in all senses of the word.
This value can include many things, from stocks to contracts to money itself. While we interact with money digitally daily, being able to send money from person to person through blockchain – the same technology that powers Bitcoin – would be more similar to handing your barista a $5 bill than it would paying with your digital wallet.
The digital money of IoV would be akin to digital objects or instruments in your immediate possession. Instead of needing to a service like Venmo to virtually access you bank account for you and transfer funds from it to your friend’s bank account, you would be able to “hand” over those digital dollars yourself, which exist in your possession in the here and now. Right now, transfers between bank accounts can take 2-5 business days and are often costly, particularly when the transfers are international. In the brave new world of IoV, there would be no third-party costs and very little error rate, if any.
The Internet of Value can be exciting and concerning for a number of industries, as blockchain-based cryptocurrencies are inherently disruptive, particularly in the financial sector. The rise of the IoV doesn’t mean the end of the financial world as we know it, though.
Money Moving Forward
- Christopher Giancarlo, former Chairman of the U.S. Commodity Futures Trading Commission, was recently featured in an interview with Forbes about the future of the digital dollar. Those like Giancarlo believe that the digital dollar will be another form of currency that joins but does not replace credit cards, bank money, and physical money. Like our other forms of currency, it would carry the backing of the U.S. government.
It makes sense that the digital dollar would be the next currency adopted, as money has been a form of technology for centuries. The paper that makes up a $100 bill, for example, has almost no value in and of itself as an object, but represents value that can be easily transferred to others and reliably recorded. And like bank money, the digital dollar would easily be recorded on a digital ledger as well.
Part of what makes the digital exchange of money cumbersome and costly is that networks exist in relative isolation, which hasn’t necessarily been solved yet by cryptocurrency and blockchain. It could be, though, and it likely will sooner than later.
Both banks and blockchains are value registries, and right now, both are pretty incompatible with other value registries. To make digital currency (or any currency) truly efficient and effective, there would need to be seamless interoperability between registries. Most of the solutions pitched so far include a network transfer protocol that would integrate the U.S. dollar into a digital world economy.
Some countries, such as China, have already been developed digital dollars (or yuans, in this case) of their own. Some countries, like Estonia, have used blockchain to simplify and scale the transfer of patient health information, or PHI. These methods integrate into existing value or asset registries, like electronic health records and the traditional worldwide banking system.
For this reason, many at the forefront of finance consider the development of the U.S. dollar crucial for keeping up with the global Joneses. Many at the forefront of progress, on the other hand, consider the integration of blockchain to be crucial to keeping up technology as a whole. Take Imogen Heap, a musical artist who created her own blockchain to transfer her new music directly to her fans.
Blockchain is decentralized and public, meaning that it is an entirely transparent ledger. Contrary to many initial fears, Bitcoin ended up preventing far more fraud and other illegal activities than the public initially could have imagined. This also provides some protection for third-party financial industries who are able to decline bad transactions and provide protections and guarantees.
Overall, the Internet of Value and the digital dollar provides an impressive list of pros:
- Speed of exchange
- Transparency of exchange
However, as with all new technology, there are some cons as well, namely fewer protections and guarantees for consumers that are typically mediated by third parties and the disruption of services that rely on the necessity of intermediation or capitalize on the incompatibility of existing value registries.
Coronavirus or no coronavirus, the Internet of Value is slowly finding a footing the global economy. Many companies in the financial sector will find this shift a boon, while others will need to adapt new revenue streams quickly. For consumers, this makes purchasing and sharing even easier, which is good for everyone. The COVID-19 crisis has perhaps propelled us more quickly into the inevitability of the IoV faster than we’d planned.
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