With the proliferation of Crypto Currencies, comes the inevitable failure of some and the loss of confidence that this can cause. We’ve seen Bitcoin reach the heady heights of $1200+ and fall back, recovering somewhat to its current $240 or so. The crash in value followed the Chinese Government decision to effectively ban it’s use in China, there was a very rapid fall in the value – which continued further than people thought it would. The first reported or recorded transaction seems to have been a Pizza purchase, for the princely sum of 10000 Bitcoin – I hope it was a really good Pizza. So where will these Crypto Currencies go in the future, some will inevitably fail that much is obvious.
But what will happen to the ones that are successful, as I said we’ve seen Bitcoin being taken up and becoming very valuable. Only to be dropped by people when there was governmental interference, in effect banning the trade in Bitcoins – causing people to lose confidence in the currency. It happens with physical currencies as well, but probably not for the same reasons. There are concerns with the lack of traceability of Bitcoins, there is absolutely no need to provide any identity details to have a bitcoin wallet. In essence the currency is completely untraceable, not something that governments are very happy about. There is no need to have any banking system involvement, not something that the banks are happy about.
But think about it pragmatically for a minute, these very things mean that there is no need for conversions from one currency to an other. Probably a massive overhead for some small coffee farmer in say Kenya, so maybe there’s an advantage to him! I used to work in the commodity market place, looking after the systems. And I had a problem explained to me as follows;
- A supermarket chain buys Bananas in Deutsch Marks, from a trader.
- The trader buys the Bananas in Dollars from a Central American Trader.
- The Central American Trader buys the Bananas from the farmer in Bolivia in the local currency, the Boliviano.
- He arranges shipping with a reefer company and pays the shipping in Sterling.
There is no problem with the above, these transactions go on all the time – sometimes much more complex as well. But for a moment think if all the transactions had been carried out in the same currency, even if you had to have the same logistics for the supply of the Bananas. Most likely the people who are completing the conversion transactions would be unhappy, not really any need for them – the whole thing could be replaced with some kind of escrow agreement. So who would this benefit, everyone really, well except the people who rely on currency conversion to make a living.
The truth be told, the most likely beneficiaries of Crypto currencies, will be the poorer people of the world. The simple fact of the matter is that they alleviate the requirement to have a bank account, the crypto currency also allows the direct payment instantly – so no waiting for cheques to clear etc. I would like to see crypto currencies become more accepted, for all of the reasons above and a couple more if I’m truthful.