In this beginners guide series to cryptocurrency, I'm going to strip away the jargons and break down what is cryptocurrency all about and why you should be onboard if you aren't already.
The question I got a few days ago was this:
If bitcoin is digital currency and is used to transfer money or buy things online, how is that any different from PayPal or Amazon?
The aim of bitcoin is to decentralise control of how money exchanges hands. Traditionally, you depend on banks and other intermediary like PayPal/Amazon to make the transfer for you. These businesses are the trusted authority and it helps you pay or transfer money with confidence. You know your money is going to get to the other person and in return the goods that you buy will come over to you.
In return, these businesses charge you a fee for the service.
What if... What if you could bypass the middle man, and somehow programme an app that you can send directly to the other person. Say you want to buy a t-shirt from a designer. And instead of buying it through Amazon and paying him through PayPal, you send him this secured programme that contains your money, and the money is released to him once he sent over the t-shirt. That way the transaction is directly between you and the seller. There is no middle man fees. You can be anywhere in the world, and still trade with people who is connected to the internet without relying on credit card machines or a PayPal account.
Now the question is, if this is so good, wouldn't this spell trouble for traditional businesses and - god forbid- the end of PayPal?
There are still many more years before this sort of payment gain mainstream recognition. There's been a petition to get Amazon to accept bitcoin but so far it's been slow moving on that front. I suspect it has more to do with Amazon's close relationship with PayPal that makes it hard for Amazon to jump on the crypto train.
The financial industry will be disrupted for sure, like what Uber did to taxi services, and they will have to innovate to remain relevant to their customers. Gone are the days that banks can just get rich bloating on transaction fees and exchange rates.
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