Modern technologies are changing the rules of the game so quickly and radically that the human mind cannot keep up. As a result, many people risk being financially marginalized for the foreseeable future, or becoming the silent victim of disruptive innovation. The latter now penetrate even those areas that for centuries were considered extremely conservative.
For example, soon millions of people may be left without money. No money at all.
More precisely, without traditional money, which includes not only cash, but also sequences of bits on electronic bank accounts, which turn into a full-fledged means of payment thanks to a piece of plastic with a microchip or a phone with NFC functionality.
The head of the Central Bank of Denmark, Lars Rode, said that his institution is closely studying blockchain technology to replace the usual Danish krone with its electronic counterpart. In his opinion, the country will only benefit from a reduction in the costs of issuing cash and a decrease in criminal cash flows.
The blockchain technology is based on a huge distributed public database that operates without a centralized management and in which blocks of data about all completed operations are stored. In the case of electronic money, transactions are verified by all participants in the financial system, who confirm the authenticity of the actions performed, and then form special information blocks from the transaction records.
Each such block always contains a link to the previous one. All blocks can be built into one chain, which contains information about all the operations ever performed in this database. That is, according to a certain algorithm, it is possible to determine both the authenticity of a specific monetary unit, tracing it to the very first block, and the legitimacy of being with a specific individual.
The main advantage of blockchain over traditional banking transactions is the absence of intermediaries. Now all transactions with money inevitably go through agents. Banks or government agencies constantly confirm the legality and ability to carry out financial transactions. For example, when a card payment is made, the agent bank of the payee sends a request to the cardholder's issuing bank, receives confirmation of the possibility of a transaction, then sends information about the change in the amount of money on the account to the issuing bank and, in turn, confirms it upon request from there.
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The blockchain does not have a central authority, so transactions can be verified by all participants in the system, including the point of sale where payment takes place. This will simplify and reduce the cost of the verification procedure, and ultimately get rid of intermediaries. The network program code is open, and anyone can access it, but the identity and other personal information remain secret. All that the creators of the blocks see is anonymized data for each specific operation.
In the case of the Danish National Bank, it is assumed that each e-krone will receive a kind of unique serial number, which will be registered in each block. This will allow you to track all transactions with it, starting from the moment of issue. Technologically, the Danish monetary authorities have no obstacles to the introduction of such an innovative currency. Moreover, cash payments in the Kingdom account for no more than 20% of all financial transactions.
But there are social obstacles. First, an extremely high level of citizens' confidence in all the country's authorities, including monetary ones, is required. It is very difficult to achieve and maintain, even in such a prosperous Danish Kingdom. Second, more and more people in the West are becoming concerned about being spied on by large corporations to study habits, preferences, lifestyle, etc. Manufacturers in this way try to formulate their marketing proposals for a specific consumer as accurately as possible. But the downside is the risk of leaking this information into the wrong hands.
Third, although it is believed that the main advantage of the blockchain is organic protection against data changes, there is a theoretical possibility of artificially forming duplicate chains of blocks. As a result, one of the owners can give their money to someone unknown to themselves. Current statistics on the turnover of bitcoin - the most famous blockchain-based cryptocurrency - are not yet sufficient to dismiss this opportunity as almost incredible.
Nevertheless, a much higher level of protection against counterfeiting in comparison with traditional banknotes, negligible emission costs and the possibility of total control over the circulation of virtual currencies encourage the central banks of different countries to think over and over again how to put the blockchain at their service. And if so, it will happen, and sooner rather than later.
And what will you feel when you have no iron, paper or even plastic money left in your wallet?