Bitcoin itself could become disintermediated if it doesn’t ‘step up its game’ as cryptocurrency technologies, business processes and alternative currencies and protocols emerge, or become adopted by existing players in the financial and mobile payment sectors.
* with reference to the success of M-PESA in Kenya that
New players, from a Bitcoin perspective, will compete with the vast resources of the incumbent players in the financial sector, to win the regulators over (or at least build a common understanding) and to provide room for the evolution of this disruptive innovation, and last but not least, convince the consumers that this can work for them. Ultimately, these are the drivers for the Bitcoin business models and ROIs to make ‘enterprise Bitcoin’ sustainable.
As there are many loyalty schemes, token systems, voucher offerings, etc., there will be many similar and unique altcurrencies. Service providers such as gyft already have relationships with a number of large retailers, whose consumers participate in ‘gyfting’ each other via a blockchain protocol-backed platform, as part of their loyalty and reward programs.
HYBRID DIGITAL FINANCE What this implies is a ‘hybridization’ of technologies, and meshing of centralized, decentralized and centralized platforms and delivery channels. There are a number of reasons why this dual economy is likely to emerge, including the ease with which Bitcoin can unite global consumers and merchants, the low cost of Bitcoin payments, and the openness of consumers to new innovations; as well as the growing influence of technology companies, according to Gareth Murphy, director of markets for the Central Bank of Ireland, speaking at the recent BitFin 2014: Digital Money and the Future of Finance Conference, in Dublin. He envisions a hybrid Bitcoin-Fiat future, where “The existence of a ‘euro-denominated economy,’ and a ‘virtual currency economy,’ raises the prospect of an internal balance of payments between two sub-economies, where suppliers may prefer one currency over another as a means of payment (for different goods and services).”
“However, unlike these examples, rapid advances in information and mobile technology suggest that such a virtual currency could evolve. The factors behind this might include: the ease with which transactions can occur between counter-parties located anywhere in the world;
the relatively low cost of effecting payment and transmitting funds;
the fact that many large technology companies are household names that are recognizable and trusted;
and the possibility of engaging a large market with a broad demographic span, particularly in terms of age, which is open to new innovations.*”
Ripple, Ethereum, Open Transactions and Stellar are examples of current and emerging cryptocurrency platforms offering hybrid digital value exchange solutions, embracing the principles of the decentralization and distribution of credit, debit or assets. Ripple, specifically, is making significant traction as a Bitcoininspired payment network, allowing institutions to conduct low-cost international money transfers without the intermediation of banks. It has created a network of gateways for the LATAM region, and recently signed up two banks in the US, and Fidor in Europe, which should allow them to offer significantly cheaper foreign exchange and bank wire services to their customers. I predict there will be many more ventures in this strategically critical space in the near future, including integration with legacy banking offerings. The foot race for consumer adoption and inclusion has just begun, with PayPal—which has partnered with BitPay, Coinbase, and GoCoin to provide Bitcoin support to its millions of users; and Apple Pay positioning itself in the lucrative market for mobile payments, and customer loyalty apps, indicating fresh approaches to new and existing markets. There are many lessons here, for Bitcoin and cryptocurrencies specifically, and digital finance solution builders in general. There are already many reports of future potential ‘plays’ by leading financial institutions in Canada and the US—either to adopt cryptocurrency-like protocols, or to reinvent or enhance their current platform offerings. Many advanced partnership discussions are taking place behind the scenes, between cryptocurrency ventures, and established financial institutions, and mobile transaction players to scale offerings into their existing and new markets. In the end, there could be thousands of currencies/ coins (think of enabling platforms for colored coin, mastercoin, zerocoin, etc.) that are offered by individuals, groups, countries, and retailers—to provide an exchange of value or to provide rewards to an underlying base of users/customers/citizens, not to mention denominating coins/tokens to represent other stores of value such as contracts, physical goods, digital services, shares, gold bullion, etc. Then there is crowdfunding, gifting, brand promotions (remember the old soda bottle top competitions?),
Crypto Biz Magazine
ALTERNATIVE CRYPTOCURRENCY OPTIONS—GOOD OR BAD?
October.2014 Page.25
He continues, “Multi-currency economies are not unusual. For example, the US dollar is accepted in many economies alongside the local legal tender. Also, there are a number of regional currencies in existence in parts of France and Switzerland that aim to encourage transactions in local goods and services.”
shows the potential for this technology to reach a large market