Cold, Hard Cash Will Soon Be A Distant Memory
The ‘blockchain’ technology, the very basis on which the bitcoins were created, is likely to become the backbone of the future digitization of money. The importance of the technology was asserted in the 16th Annual International Conference on Policy Challenges for the Financial Sector; a three-day convention which was held on June 1st through June 3rd in Washington, D.C.
It was attended by representatives of the major Central Banks, across the world. The subject for this year was ‘fintech’ and the first day was dedicated to studying the ‘blockchain’ technology which is the framework on which the popular digital currency bitcoin has been built.
FED Chairwoman Janet Yellen was the introductory speaker and she said that, “central bankers don’t normally like the word “disruption, but it’s not something to fear.
Technology has played a role in solving problems in the financial system in the past, and she encouraged her fellow bankers to learn everything they can about this new technology”, reports the Wall Street Journal, from comments relayed by Perianne Boring, the president of the Chamber of Digital Commerce.
“This truly shows the technology has reached the highest levels of society and government,” Ms. Boring said.
Participants on the network use cryptography to edit the ledger online without the involvement of a central clearing authority. This ledger contains all the data of transactions from the start of the first block to the latest block.
As there is no necessity of a centralized authority to oversee the transactions, it creates a transparent, simple and fast transaction environment. As the data is available to all of the members, and any modification requires the permission of the majority of the members, it is better equipped to handle the onslaught of cybercrimes.
As no one can bypass the rules, the members can be assured that no single authority can deviate from the protocols. Due to direct transactions between two parties, transaction costs will be negligible.
The interbank transactions, which currently take days, can now be cleared in a matter of minutes, 24/7 and without the restrictions on working hours.
“Soon, the phrase ‘cross-border payment’ will make about as much sense as ‘cross-border email’,” said Mr. Adam Ludwin, co-founder and Chief Executive of the ‘blockchain’-focused startup Chain, during his keynote address.
Hence, a new more advanced and complicated system needs to be generated on the same ‘blockchain’ principle which can duplicate the ease of the use of current assets in a newly digitized model.
The ‘bitcoin’ is a small asset class with only a small quantity of bitcoins in circulation as compared to the trillions of transactions that take place daily, around the world. The computing power needed to handle such vast transactions is humongous. Such a setup requires billions of dollars, in investments, which may not be feasible to many.
Nonetheless, there are a number of entrepreneurs like Todd McDonald, co-founder and Head of Strategy at R3CEV LLC, a consortium of more than 40 financial institutions that are working towards the application of distributed ledger technologies to global financial markets.
“We can monitor compliance in real-time. We can answer questions about collateral ownership and hypothecation that were at root in the run on the system in 2007,” said Mr. Ludwin.
The reason I have started to cover bitcoin and digital currencies (Alt Coins) is because I believe they will become main stream much sooner than you think. In fact, there are already hundreds of new digital currencies available, though many are not and will not become key currencies.
I am watching, tracking and analysing many different digital currencies based on different metrics: how many online communities are focused on various alt coins, which ones have the most search engine searches, growth in market cap, have strong price charts, and which ones are focusing on working with large banks like the one call Ripple.
This new asset class is definitely disruptive, but I believe digital currencies add diversification not found anywhere else in the financial markets. They are a speculative play, safe haven during next financial crisis, and allows many people around the world to transfer money without being tracked and to possibly avoid taxes for those who want to side step government.
Either way, more people and companies are accepting digital currencies and the demand and value they offer will eventually be priced into each each currency.
I have learning and slowly identifying some exciting opportunities in this new asset class which I feel everyone should some exposure to in their portfolios. Soon I will unveil some of my top currencies and where to buy and store them – Stay Tuned!