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The Future of E-Currency

Records that keep track of payments, accounting, contracts, certificates, confirmation of ownership, etc. have been the basis of business for centuries. Occasionally there are leaps in technology that revolutionize society. There are many indications that such a revolution is ahead with the advent of distributed ledger and cryptocurrencies .

Records that keep track of payments, accounting, contracts, certificates, confirmation of ownership, etc. have been the basis of business for centuries. Technological developments such as paper, computers and the Internet have revolutionized their management. Even today, the files are central, ie. one party (eg bank, district commissioner or insurance company ) manages them, writes and is responsible for updating them. This involves the risk of error and fraud and important records are therefore reviewed by lawyers, district commissioners, regulators, auditors and a number of other experts.

Instead of centralized files, you can maintain a distributed file, a distribution file, of which all parties concerned have a copy. Distributed files are based on distributed ledger technology , which enables business parties to update the distributed records without the involvement of others. Persons with access to the files can monitor their rights. Traders can thus transfer money and other assets to each other without the involvement of third parties. In this way, intermediaries such as banks , insurance companies, lawyers and internal and external regulators can be released . Then it is possible to program the files and thus increase business automation. This creates great savings and efficiency. The risk of errors and fraud will be insignificant.

The world’s first widespread distribution catalog was introduced with the world’s first electronic currency, Bitcoin , in 2008. Bitcoin ‘s management has a blockchain distribution technology , where the correctness of payments is confirmed by so-called mining. Numerous e-currencies have come into view since then, and almost all of them are based on blockchain distribution technology. In addition to the above factors, electronic currencies have the advantage over traditional currencies that transactions are more recognizable, they carry no credit risk and their payment intermediation is faster than most nations’ payment systems and international payment systems.

However, blockchain technology has limitations, for example in the form of limited bandwidth (the number of transactions) and how much electricity its maintenance requires, with the associated environmental impact. It is possible that a new distribution technology that does not have these shortcomings will replace the blockchain in the future. In 2019, for example, a new technology was introduced, hashgraph, which does not use a punch, but a gossip, and has all the properties of a block chain. Hashgraph distribution technology requires negligible energy consumption and the first hashgraph electronic currency, Hedera, can handle 10,000 transactions per second, compared to 5-7 in the first version of Bitcoin .

Society has not been spared the effects of distribution registers and e-currencies. The black market took e-currencies with open arms, partly due to anonymity. Investors have also shown increased interest in them, many profiting significantly and others losing (with price fluctuations and lost hard drives or passwords). Naturally, the government and regulators have been closely monitoring and responding to the setting of rules and constantly reassessing how open they want to be to the advent of this new technology. But in the long run, technology does not ask for policies, borders or laws. Distribution registers and electronic currencies have already shown their usefulness in the management of real estate registers, in the management of inputs in production, settlement of transactions in interbank markets, etc. With the development of distribution technology and increased awareness of its usefulness, it is clear that they will be implemented in a much broader way in the future.

Chris Crespo
Chris Crespo
Chris is a Founding Partner and Chief Editor at Nordic Fintech Magazine, where he simplifies complex financial ideas into easy-to-understand content. With nearly 20 years of experience in management consulting and financial services, including leadership roles with some of Europe's largest banks, he offers profound industry insights. Previously serving as the Chief Futurist at the largest bank in the Nordics, Chris has sharp views on the Future of Financial Services, Money, Disruption, and Ethical AI in Finance. He is also a guest lecturer at Stanford University, Singularity University and Copenhagen Business School, where he frequently discusses the future of Money, Finance, and Entrepreneurship in Financial Services. As a Behavioral Economist, Chris is passionate about studying how human behavior and decision-making relate to risk. He also delves into the connections between psychology, leadership, and technology within financial services.