In this article, we will try to explain how Crypto Currencies have the power to revolutionize every industry similar to how the computer age did in the last two decades. This post is a review and extension of this 1729 post to explain the Crypto revolution.
Just think twenty years before, could anyone really imagine how much computers and mobile phones would change the way we live, almost all the industries had to integrate their systems to include computers to compete with others due to advancements in efficiency and performance.
This change was brought due to the exponential improvements in technical performance, efficiency, and reduction of cost over two decades of computer chips. As everybody started to realize the true potential of computers and the price of personal computers was low enough that a mom and pop shop could afford it, everything started to change around us.
Many reputed people in the tech industry believe we are at a similar stage with the advent of virtual currencies and something called the “blockchain”. Leaving aside the volatile fluctuations in the price of crypto assets and currencies, the true value lies in the technology and how they are designed to function without needing the support of pre-existing services and third-party organizations for trust, security, and regulation.
Crypto in Finance
Let’s take a simple example of how lending works in the current banking system, banks, and other organizations gather money from people [Lenders] who want to lend their money in exchange for some interest and services for easy access to their money. Now, these banks and organizations are free to decide whom to give out loans and what percentage of interest they will charge to the Borrowers. And then they give a cut back to the lenders of the profit they gain from collecting back the money with interest from borrowers. In this system, the risk is taken by the banks (mostly).
Now one might already see there is room for some manipulation and discrimination when we give the power to the banks for lending our money. Like the bank employees can deny lending money to some people of a specific race or type, while they might be less risky and logically better for the bank and lender.
Now imagine a system where we remove the bank as an intermediate in this lending process, the Lender decides whom to give loans to and at what rates. The first issue that comes up is that the risk will be directly on the lender now and it will be difficult for an individual to manage loans and carry out money collection.
Crypto can solve both these problems, but the lender may choose to take their own risk and they may want to manage their borrowers on their own, crypto systems allows this because the best part is flexibility and the power to opt-in into integrating intermediaries back into the system in places where it makes sense. This is broadly known as “Decentralized Finance“.
Crypto for E-Commerce
Consider this simple example of a product Vendor and a Buyer, suppose a buyer wants to buy a carpet which is made on a different continent, now in the current system they can place an order on the vendor’s website or on an aggregation platform or a marketplace site like Amazon, where they usually pay via their bank cards.
In this system, a simple online transaction for a carpet can will go through so many intermediaries like marketplace sites, banks and then reach the vendor’s bank account. At every step of this transaction, some fees would be deducted as service charges of the platforms and each platform comes with its own set of restrictions and rules for commerce.
But what if we could remove all these intermediaries and facilitators and carry out the exchange without banks or amazon like sites to circumvent platform fees and restrictions. It can be done if the buyer and the vendor could build trust and security for the value exchange. This is possible via something known as public Databases which both vendor and customer maintain and own. All other functions of the marketplace and banks can be replicated through the use of blockchain-based services which are immutable and not owned by a central organization.
Crypto for Ownership
You might have heard about the rise of “NFT’s”. They are a type of digital assets/ art whose ownership, cost, and trades all happen with the help of crypto platforms and virtual currencies. Just imagine the fact that an anonymous person sitting in any part of the world could create some art and any other person could have part ownership in that piece just by sending him some virtual currency that has some tangible value.
Let’s take another example of a house, say you want some quick money for an emergency but you can’t mortgage anything but your house, now if you need a couple of hundred bucks you wouldn’t go and mortgage your whole property.
This problem arises because houses and real estate is not a liquid asset and it very difficult to sell/buy/ mortgage in parts. Now with the power of crypto, you could mortgage a part of your property, like 10% to any individual with a system that will automatically reinstate that part in your name just when you repay the loan.
The use cases of this type of part ownership or tokenization of assets/influence can be used in numerous ways, one other example is Youtube creates can sell the ownership of their Youtube channels so that the AdSense revenue will be distributed to their supporters who own a chunk of their channel.
Crypto technologies have great potential for disrupting all the industries to further remove inefficiencies and making robust systems that automatically perform specific tasks.
While there are many problems in the way of Crypto being a true revolution for all industries, we are seeing quite rapid development and interest from people from different industries from all over the world. There are some obvious problems in the design of crypto systems like – piracy, security, identity verification, reputation evaluation, customer service, dispute resolution. But with great minds who are keen to solve these problems, there is hope for a more fair and open world with the power in the hand of the individual.
Crypto directly challenges the rules set by society to enable opportunities for people who might get restricted in the normal society. For example, a child under the age of 18 cannot do anything impactful without the support, association of an adult, but in the crypto world there are no rules, they can create the best app or project to become the number one in its category and potentially earn millions because this is a truly open market with no restrictions.
At last, just remember to keep an open mind and keep reading about what’s happening in the exciting world of crypto.
Read more: Cryptocurrency and the Great Unbundling