From Bartering to Bitcoin: Three Fundamental Reasons Why Crypto Commerce is Here to Stay
January 13, 2018
The recent feeding frenzy for the demand of Bitcoin and other cryptocurrencies has led to much criticism -- from those pointing to its early elicit use in the dark commerce drug trade (e.g., Silk Road), to global banking CEOs claiming its nothing but a fraudulent bubble waiting to pop, and to market participants, who have expressed frustration with the constipated nature of transaction processing at crypto exchanges.
News flash! Most all markets have some amount of fraud. Most all markets experience some level of dark commerce. And, most all markets end up frustrating consumers in some way or form, such as not enough product on shelves, ATMs being down, or perhaps unsatisfactorily slow response times when you're trying to reach a live representative to discuss an issue with your credit card. I think we've all been there. Yet, the markets endure.
It's important to remember that while the dotcom bubble of the early 2000's brought a lot of pain in the form of companies that had no profits to show for the hype they created, it also created enormous value by way of those innovative companies that did succeed in generating entirely new channels of profitable commerce. Furthermore, those who took the risk to jump aboard fared well -- not to mention the huge windfall the US Government received in tax revenues from corporate growth spawned from this period. But drawing a tight parallel between Bitcoin and the Crypto Revolution, and the Dotcom era is not entirely accurate. Here's why.
First, the trend in cryptocommerce is much about Trust. Consumer's faith in their financial institutions (e.g., banks, mutual fund companies and retirement plan providers) has been low for several years. A 2016 survey conducted by the National Association of Retirement Plan Participants found that only 8% of respondents felt they had faith in their financial institutions; a decline from 13% in a previous survey done year earlier. While it's safe to say that many consumers choosing to participate in today's crypto market are doing so without knowing all the risks, they feel a sense of empowerment and ownership that they have not felt in more traditional ways of investing or placing their funds. Add to this the general lack of trust that consumers have in the stability of their own currencies in places of the world like Greece, Venezuela, Iran, and China, and cryptocurrencies serve a whole new purpose.
Second, it's about utility and changing Culture. For many rural communities in the developing economies of sub-Saharan Africa, for instance, access to financial services is simply non-existent. An explosion of wireless telephony throughout this area of the continent, however, has brought telecommunication capacity into rural areas. According to a study done by the World Bank, with a basic smartphone costing as little as $25, digitizing payments could help to reduce the unbanked population in sub-Saharan Africa by 125 million. In countries like Kenya, Tanzania and Uganda, more than 10 percent of adults receive agricultural payments into accounts which often include mobile money accounts. Consequently, the use of cryptocurrency transfers for bartering and trade in these communities is, and will continue, to play a vital role in reducing poverty and improving financial inclusion.
Which Brings me to my third argument - it's about Technology and the jobs it will create. Think for a moment: when was the last real breakthrough innovation in technology. Maybe the smartphone? Or perhaps the silicon chip itself? Let's not forget that the very "blockchain" technology upon which Bitcoin and other cryptocurrencies are built (e.g., verifiable distributed ledger transactional database systems with very secure protocols) is still nascent. The applications of these systems, platforms, and network communities for commerce are still in the discovery phase and have been scarcely tested. Surely, there will be fallout from failures -- but that is a cheap price to pay for the value of innovation that will push society forward. Opportunities exist for combining the use of cryptocurrencies and their blockchain technologies with other aspects of the IT value chain -- mining vast amounts of Big Data to identify market demand for a specific good or service; integrating with artificial intelligence (AI) solutions to help drive timely supply chain decisions; or combining high performance computational algorithms with the monitoring of cryptocurrency traffic flows to serve as early warning indicators to foreign exchange traders who may be curious about the stability of governments and their economies. The possibilities are many.
The cryptocommerce revolution is here. With it will come risks as well as opportunities. Some would prefer to cast it off as some fly-by-night fraud that will see a quick death. However, like other innovations before it, Bitcoin and cryptocurrencies deserve their day in court. We need to pay it some serious attention and listen to how this new form of commerce and its underlying technology will dramatically change culture, give people of the world a voice, drive invention, and perhaps also incentivize financial institutions to look to regain the perception of trust and confidence that they have lost with many consumers.
