Blockchain, cryptography and new visions of money

Why linear thinking is no longer enough

Blockchain and cryptography are changing not only our thinking and monetary system but our social models. What impact can it have?

As Ian Goldin often says during his talks, “Welcome to the slowest day of the rest of your life.” The current era is characterized by volatility, uncertainty, complexity and ambiguity (VUCA). This leads to accelerated development with unforeseen consequences. Linear thinking and the assumption that the future will be as the past was are giving way to more interdependent networked thinking and events. In the future, it will not be enough to think linearly when it comes to life planning and money transactions. Rather, the signs are pointing to a completely new vision of money, digital money presumably based on the blockchain.

Securitization of assets on the blockchain (tokenization of assets).

Today, the blockchain is already capable of making all assets tradable through tokenization and breaking them down into completely small units. Today, digital assets are already so easy to create that we take them for granted. Anything that exists in binary data and is self-contained and uniquely identifiable is a digital asset. This can be MP3 music files, YouTube videos, PDF documents, even real estate and companies. New business models can also be financed with the help of cryptocurrencies and new forms of crowdfunding. Of all the digital assets that have emerged since the beginning of this millennium, cryptocurrencies will be the most disruptive. If they establish themselves as a store of value and a medium of exchange, they could replace the FIAT money we know and completely change our banking industry.

Decentralized trust versus intermediary

At the same time, this means the transition from centralized to decentralized systems. Traditional banking is a centralized system through which money transactions flow (so-called financial intermediaries). Banks earn money from every transaction made. Cryptocurrencies, on the other hand, are based on a decentralized transaction system. No banks are needed to make a transaction or hold money. In the crypto world, money is stored in the cloud using blockchain technology and each owner is actually his own banker. He can always access his cryptoassets by combining the public key, which is visible to everyone, with the private key, which only he has.

This new division of transactions combined with technological progress and digitalization does not stop at traditional companies. In this time of change, the winners are those who are ahead in digitization.

Build windmills and not walls

When the wind of change blows, you have to decide. Do you build walls or windmills. The companies that didn’t build windmills disappear from the market. For example, in the last 20 years, half of the Fortune 500 companies have disappeared from the market because they were too slow to adapt. They were either bought out or wound up.

For example, most large corporations, international institutions, and even the Bank for Settlements BIS in Basel are investing in blockchain technology. Blockchain, a technology that has found its first major application in cryptocurrencies, will be used far beyond this area in the future and may accelerate the path to a cashless future. It could also accelerate the sending of money around the world, as a transaction from cryptocurrencies to the other side of the world can reach the recipient in just a few minutes. The different currencies are producing their own technologies and processes to increase security, stability or speed.

9 billion people – but what about humanity?

And this technology has one more positive aspect. Our planet will support 9 billion people, the blockchain will help us better use the resources together. At the same time, we have an open source protocol (of the TCP / IP infrastructure of the web) for our digital life that must be expanded to be able to deal with the current complexities of our society.  Today, FIAT money, is still the de facto measure of power and value in all economies. However, whether it will remain so with the rise of cryptocurrencies, the majority of which rely on peer-to-peer processes remains to be seen. In any case, crowd-funded cryptocurrencies can help bring new business models into being that focus more on balancing financial interests with the goals enshrined in the United Nations’ Sustainable Development Goals.

Now nearly 10 years into their existence, cryptocurrencies have seen remarkable growth in recent years. Awareness and market capitalization as well as trading volumes have risen sharply in a long-term comparison, but most recently have plummeted massively since the beginning of 2018, and so one may ask the question: Are cryptocurrencies the future ?

Karen ist Serienunternehmerin, Wissenschaftlerin und Herausgeberin von Sustainable Finance. Sie berät Unternehmen in der digitalen Transformation, die Nachhaltigkeit in ihrer DNA beinhaltet. Sie wurde von Prestige Awards als „Investment Bankerin“ des Jahres 2020 ausgezeichnet. Sie hat Osteuropa Strategien für Top Tier Banken und ein erweitertes Ratingsystem entwickelt und die Umsetzung verantwortet.

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