Disclaimer:
This is not financial advice. You should always conduct your own due diligence when you make a decision to buy cryptocurrencies. Always read the white paper of each coin or token before you buy, to understand its utility and ensure you truly believe in the project.
The Payment Revolution?
"Viva La Revolution". The Financial revolution that is. That's what numerous crypto enthusiasts are shouting from the rooftops, but more likely their social media platforms expressing their excitement and advocating for the mainstream adaptation of decentralised finance.
With all the hype out there you may be led to believe that the idea of cryptocurrency is just another fad, get rich quick strategy, or just an outright scam. It is sad to say that there have been numerous cryptocurrency scams over the past few years. A common strategy scammers use is where the creators of a coin or token "pumps" the price by encouraging unsuspecting investors to buy their token, only to sell their majority holdings all at once causing the price of the coin or token to plummet. These kinds of scams are called "Pump and dumps" or "rug pulls".
However, there are a handful of legitimate cryptocurrency and blockchain projects that are likely to be a huge contributor to changing the way we pay for things online and how we interact with e-commerce stores in general.
It's All In The Tech: What is Blockchain Technology?
I'll keep the answer to this question very brief as this isn't the post for going into granular detail about how blockchain technology works.
The blockchain is a list of transactions available to be viewed and verified by the public, and that means absolutely anyone. Fear Not! Sensitive information is not displayed only the value of the amount and potentially the wallet address (a string of alphanumeric symbols representing a virtual wallet). You may have come across people talking about the "ledger" in relation to cryptocurrencies and that's essentially what it is.
Cryptocurrency transactions and digital data are constantly being verified by numerous computers, eliminating the risk of transactions being tampered with as it is very difficult to change data inside the chain. This is because, in order to corrupt the chain you cannot just change the data (usually the "Hash" which represents a fingerprint of the data) in one block, you would have to change the data in all the blocks that came after it, plus the constant verifying of transactions would mean the corruption is immediately identified and corrected.
New blocks have to be verified by the computers in the network and are only accepted when all the computers in the network reach a consensus that the block can be added to the chain.
This adds an extra layer of trust for consumers as the blockchain will verify whether what they are buying is what they think it is by verifying the product data stored in the blockchain.
Example Blockchain E-commerce Use Case:
You see a pair of rare sneakers online however they are listed for sale on a website you are not familiar with and you have no way of knowing if they are the real thing or a pair of cheap knock-offs. However, if the product data for the sneakers are stored on the blockchain, then you can verify the authenticity of the sneakers as the ledger will show a chain of transactions for the sneakers all the way back to the 1st block of the chain (genesis block) which would be the manufacturer of the sneakers. Cool right?
Decentralised Finance
Blockchain technology is allowing people to safely transfer funds (value of funds in the form of a crypto token or coin) without the risk of identity theft due to the cryptographic capability of the technology.
The decentralised nature of the blockchain enables people to transact with each other directly without the need for centralised financial institutions such as banks or middlemen like credit card companies. You can even make cross-border transactions without being charged foreign exchange fees.
Consumers can safely pay for products online without disclosing sensitive information and confidently purchase from online merchants globally knowing that their transactions are automatically recorded and verified constantly.
Smart Contracts and Logistics
Most people have gone through the stress of paying for something online only to have the item not arrive. There are many factors that render an item M.I.A, such as it being lost in transit especially if the item has been shipped from overseas, or the item being delivered to the wrong address.
If only there was a technology that would allow you to hold on to your funds until the item is delivered, then automatically release your funds to the merchant when delivery is confirmed. Did someone say "Smart Contracts"?
Smart contracts are built on the Ethereum network and can be programmed to hold funds until the terms of the contract are fulfilled. If the terms of the contract are not fulfilled then the funds go back to the paying party.
A consumer and seller will have complete peace of mind knowing that the smart contract they have agreed to is a) Unchangeable, and b) Distributed (validated by everyone on the network). The benefit to the consumer is that if a product or service was not provided (breach of contract) the smart contract will not allow the merchant to be paid.
The benefit to the merchant is that if the product or service was provided (the terms of the contract were fulfilled) it would be hard for the consumer to prove otherwise and claim their money back.
Smart contracts can be used on a much larger scale such as large container shipments from overseas, to complex architectural projects which would require a number of contracts when dealing with different construction agencies.
Mass Adoption Of Cryptocurrency.
Of course, all this sounds great, however, we won't see the "payment revolution" without mass adoption and acceptance of blockchain technology and the cryptocurrencies built on the networks and protocols. Over the years we have witnessed more and more people warming to the idea of digital currency and it is definitely becoming more mainstream.
Although some cryptocurrency enthusiasts advocate toppling the fiat financial system as we know it, I think the majority of people will adopt cryptocurrency as a form of payment if the old financial banking institutions give it the green light. This won't defeat the object of decentralised finance as the banks won't be able to control the network; they'll probably act as an exchange and charge customers a fee for purchasing cryptocurrency by opening a crypto account/wallet on their exchange. They'll have the attitude of, "If you can't beat them, join them (and make some money out of them if you can)".
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