Cryptocurrencies and DeFi (decentralized finance) are real. They are the present, not the future, according to the panelists at ‘The Future of Money is Digital’ session at the MWC Barcelona connectivity trade show.
Cryptocurrencies are going to be part of the ecosystem of the future of money, the panelists said. Cryptocurrencies are the ones that can be traded in the new digital environment – Web3 and metaverse. Most consumers will use a mix of crypto and fiat money.
Fiat money is a government-issued currency that is not backed by a commodity such as gold. Most modern currencies, including the US dollar and the euro, are fiat currencies. A cryptocurrency is a completely digital, decentralized currency that is built using principles of computer science, cryptography, and economics.
The crypto landscape is very similar to that of traditional finance, said Showcasing CEO and Founder Lars Willemse at the session. In place of bank accounts, you will have crypto wallets where you store cryptocurrencies instead of euros. When making a bank transfer, you provide your Ethereum address and not your IBAN number. Shopping on Shopify is not much different from going to OpenSea, the largest NFT marketplace. As mass adoption is coming, the security and customer experience will improve. It is still early on, so it’s a good moment to step in with a creative business model.
Cryptocurrencies are offering several advantages over fiat money, said Julia Carbajal, Global Head of Telekom and Media Strategic Partnership at cLabs.
Key factors driving consumers to adopt cryptocurrencies
The level of trust in a given cryptocurrency.
Usability and cost: how convenient and expensive it is to use a particular currency.
Accessibility to financial services.
Currencies had been backed by gold before, now they are backed by the government that issues them, Carbajal said. However, in many countries, especially in developing countries, people don’t trust the government due to mismanagement of the economy, the inefficient financial system, high transaction fees and high inflation. Thus, local currencies can be weak, unstable and not trusted. People don’t want to have their savings, for example, in Argentinian pesos.
The 2008 crisis was also a trust crisis of the financial system that brought to light the lack of transparency and accountability of centralized financial systems. She pointed out that the Bitcoin Whitepaper was released in 2008.
The Bitcoin Whitepaper, or research paper, was published in October 2008 by Satoshi Nakamoto. It is a nine-page proposal for the structure and function of a peer-to-peer electronic currency. Satoshi Nakamoto is a pseudonym, or a false identity, of an individual or a group of individuals. No one knows their true identity.
The Whitepaper envisioned a currency where users do not rely on financial intermediaries or trust anyone to make transactions with each other. Users are not required to use their real-life identities; instead, they are represented by addresses, strings of random letters and numbers. The blockchain removes the human factor from the concept of trust, it is transparent, everyone in the community has access to the ledger. Changes can be validated by all users.
Blockchain and cryptocurrencies democratize access to financial services in a world where millions are unbanked and have no access to financial services. This makes the crypto community attractive to consumers. Cryptocurrencies are the first financial assets to which you can have access without a bank. You are your own bank.
Usability and cost
When people buy cryptocurrencies, they get access to a wide variety of innovative use cases and they are providing substantial returns. Cryptocurrencies are ideal for business applications, such as payments, remittances and money transfers. Transacting with them is much cheaper and faster than with fiat currencies. They have cross-border interoperability, they remove the need for FX, which is one of the big drivers of cost. It is programmable money which is allowing innovative use cases.
There is a difference between those cryptocurrencies that are volatile and those that are not. Bitcoin and Ether are volatile because it is a young industry and as such, it is experiencing high growth. Stablecoins, on the other hand, are pegged one-to-one to fiat currencies, like the euro and the dollar and are fully stable. A stablecoin is a type of cryptocurrency that relies on a more stable asset as a basis for its value. Most commonly, stablecoins are linked to a fiat currency, such as the US dollar, but they can also be linked to precious metals or other cryptocurrencies. Some examlpes for stablecoins are Tether, USD Coin, Day and Binance.
Bit2Me to promote crypto adaption
Bit2Me is a Spanish digital asset company founded in 2014 that focuses on crypto education and adoption. Their crypto academy provides free education in crypto and blockchain in Spanish to millions of students. They have several tools, services and products to foster crypto adaptation. They are also launching ICOs for other companies. Initial Coin Offerings are a way for the crypto industry to raise funds. Bit2Me also helped launch the ICO of Spanish neobank Bnext.
Bnext has a digital app that lets users send, receive, and request money using blockchain technology. Bnext offers its users blockchain-based international money transfers leveraging the commercial and migratory relations between Spain and Latin America. The market is currently worth €7 billion. The Bnext app is easy to use: customers select the person they want to send money to from their address book, confirm the transaction, and it is settled in just a few minutes. “What actually happens is that Bnext uses the Algorand blockchain 'from the back' to send USDC to the destination, then off-ramps to a Bnext account in the local currency,“ according to the token issuance white paper.
Bnext is a rival to Western Union, where people would pay up to 10% fees for international transactions, Bit2Me partner Koh Onozawa said at the session. Bnext wants to disrupt this market to get the transaction fee under 2%. “We don’t want products only for the crypto natives, we want more traditional folks to understand the power of technology. The challenge here is banking the unbanked in South America to help them receive money from their families. They don’t even know it is on the blockchain. We want to create applications that seem so normal and intuitive and still it’s all crypto and blockchain.”
In our normal life, we stopped caring how things work, he pointed out. We don’t know how the combustion engines in our car or planes work and we don’t care. And we shouldn’t. It doesn’t really matter to the end-user that there may be blockchain or DeFi under the product.
GameFi: a new way of earning an income
GameFi, or play-to-earn, refers to blockchain-based games that allow their players to earn real-world financial benefits.
“During Covid, many people lost their jobs and started playing games and they made more money by gaming than in their jobs," Onozawa said. It is changing the lives of several people in countries like the Philippines. The users are not only kids but also retired people who cannot depend on pension programs, they need to find another source of income. "These people can cover their basic needs, put food on the table by gaming from a simple phone in poverty-stricken countries.”
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