Are Cryptocurrencies Our Future?
In 2006, I had an innovative electronic wallet from the payment system StormPay. With it, I could not only receive money from anyone over the internet but also withdraw cash using a plastic card. For 2006, this was an unprecedented opportunity.
How I Lost My Money on the Internet
One day, I read on several forums that StormPay was mass-disabling wallets. I grabbed my StormPay card and rushed to the ATM. I inserted the card, but only to discover there was no money on it.
I returned home, went to the StormPay website, tried to log into my account, and received a notification saying that the account didn’t exist. I contacted support, asking what happened to my account and where my money was. Even now, 18 years later, I still haven’t received any response.
My account, along with my money, had disappeared.
Why Was This Possible?
Before cryptocurrencies, the only way to receive money over the internet was through a trusted intermediary like an electronic wallet provider (PayPal, eGold, Moneybookers) or a bank. The middleman had full control over our money. If I received money online, I had no proof of this. To confirm a payment, I had to rely on the payment service, which could easily deceive me by claiming the money wasn’t there.
Of course, there were laws and regulators in place. But laws have never stopped scammers, and regulators, while they may catch thieves, can’t help if the money is already gone.
What Changed with the Arrival of Cryptocurrencies
In 2009, Satoshi Nakamoto launched Bitcoin, allowing electronic money to be transferred directly from sender to receiver, just like cash, without the need for an intermediary.
- A record of my transfer is stored on thousands of computers worldwide.
- These computers are connected via a peer-to-peer network that synchronizes their databases.
- If someone tries to alter or delete this record on their computer, the network will detect the fraud easily.
What’s even more remarkable is that I don’t always have to rely on these thousands of computers. I can download the entire database (blockchain) onto my own device and verify all transactions myself. I don’t need an intermediary to store records of my transfers.
Moreover, intermediaries no longer store the money itself. With Bitcoin, everyone can see who owns each coin. And to control any coin, one simply needs to present the private key associated with the address where the coin is recorded. The network verifies the key, and if valid, updates the records to show the coin belongs now to a new address.
The concept of “storing money” now means “storing keys to addresses that hold information about the money.” Anyone can store these keys independently — there’s no need for banks or payment providers.
How can Alice send money to Bob anywhere in the world using cryptocurrencies?
- Alice buys cryptocurrency with her fiat money.
- Alice transfers the cryptocurrency to Bob’s address.
- Bob sells the cryptocurrency and receives fiat money.
Money starts with Alice and ends with Bob. Mission accomplished.
As more people realize that storing money in cryptocurrency is more secure and convenient, the need for the first and third steps decreases, especially when stores accept crypto as payment. The only necessary step remains the second — transferring cryptocurrency from one address to another.
If Alice prefers one cryptocurrency and Bob prefers another, they might need a crypto swap. This is exactly what we do at Rabbit Swap: we exchange any cryptocurrency for any other at the best rates available online. And we’re seeing increasing demand for exchanging different cryptocurrencies.
Is the Future Already Here?
Such a future has already arrived for those who have chosen it. Here are a few examples:
- Alice tried to withdraw money from an ATM in a foreign country. The bank denied her due to the high-risk status of this operation. Next time, Alice took cryptocurrency with her instead of a card and exchanged it for cash there.
- Bob attempted a bank transfer, but the bank required phone confirmation. After waiting on hold for 30 minutes, the call dropped. Frustrated, Bob withdrew his money and switched to cryptocurrencies for seamless transfers.
- Carol went to the bank to withdraw a large amount, only to be asked about her spending plans. Displeased, she opted to deal with private crypto exchangers, where such intrusive questions don’t exist.
- Dave received a bank transfer, but the funds were delayed because the bank needed documents to verify the source. After wasting a lot of time, Dave told the sender to use crypto for future payments instead.
I, too, after my StormPay experience, prefer dealing with transparent blockchains over murky financial institutions that can deceive me.
But not everyone needs this future.
- Governments want to maintain control over our money, and cryptocurrency transactions can be executed without oversight, making it impossible to seize assets.
- Financial institutions thrive on secrecy around money flows, and the transparency of most blockchains threatens their ability to operate in the shadows.
- Many people, organizations, as well as government institutions don’t want their transactions to be publicly traceable.
The Future: Crypto or Fiat?
Most likely, there will be room for both cryptocurrencies and fiat money in the future.
- Cryptocurrencies will be used where security and freedom of transfers are crucial.
- Fiat money will dominate where government control or transaction confidentiality are needed.
The most important thing is having a choice. In 2006, I didn’t have that choice. To receive money online, I was forced to use custodial e-wallets. Now, I have the choice, as do many other crypto users. For some, the decision has already been made; for others, it’s yet to come.
