Could Blockchain Be Used More Appropriately To Facilitate Cashless Society?

Thinking out loud is often done in a haste hints the nature of it.  Thus my thinking out loud in this post isn’t solid, but I like to dabble on here.  One thing people fear about a cashless society is that once the digital numbers are being erased somehow, their worth would be gone without any trace for recovering.  Thus, people are definitely still preferring cash as a mean for emergency backup.  After all, if their digital world is being shut down, they got cash to help them survive daily such as buying foods and whatnot.

Bitcoin is probably going to be an enemy of the banks since banks want to be the middlemen of the transactions.  Bitcoin takes out the middlemen role and allows people to have a direct transaction between the two parties.  In order for the bank to receive commission and gain liquid fund, the bank needs to be able to insert itself into the deal.  Simply put, Bitcoin is against a traditional bank which isn’t accepting Bitcoins!

Banks can accept Bitcoins, but people won’t use banks as of how they would use a traditional bank.  Bitcoin users may want a bank to behave as a trustful Bitcoin exchange to facilitate the Bitcoin transactions in safety manners.  This way any Bitcoin bank can still insert a banking role in a non-traditional way into the deal.  Since Bitcoin will be more transparent — plus demoting a traditional banking role somewhat, I don’t think the banks will be able to create more creative derivative means for creative investments.  I could be wrong since this is thinking out loud session.

Bitcoin is also very similar to a cashless society because it isn’t cash and it’s digital medium.  Taking away Bitcoin, underneath it all is the technology itself which is the blockchain.  The blockchain technology is more important than the clothes it is wearing such as a crypto coin (i.e., Bitcoin).  Why?  I think blockchain technology is good at keeping transactions honest.  This honesty is rather important for cashless society don’t you think?  Nonetheless, current Bitcoin way isn’t helpful for blockchain technology since the implementation is rather crude, allowing people to hack and steal each other Bitcoin without a clear way to trace back to the original owner of the lost Bitcoins.

If I’m not wrong, a will be successful cashless society could use the blockchain technology to keep cashless money honest so the original owner of the money won’t fear the tyranny of a cashless society shutdown event.  By that I mean the only way for a person in such a society to lose wealth is being incriminated with evidence and wealth get confiscated by a court of law.  In such an orderly way the blockchain technology could be used to keep track what money belongs to whom before the exchange takes place and long afterward so a cashless society shutdown event which occurs by any other mean besides the legal ones such as the one I stated just a moment earlier would be a futile effort.

I think people would be able to accept a cashless society when their wealth won’t be suddenly disappeared overnight in a mysterious event.  Of course, people are still going to fear that if they’re innocent and being convicted wrongly; their wealth got confiscated in such a rude event — they could be helpless as they would not be able to survive daily when their digital wealth got shut down in a cashless society.  I think once one accepts a cashless society, one has to accept such possibility as there won’t be any legal cash laying around to act as a legal tender for acquiring daily things.

By writing this blog post, it doesn’t mean I support a cashless society!  I just merely thinking about the possibilities and effects of it all when such a society occurs.  Although China isn’t a purely cashless society, because paper money is still going to be a legal tender within China.  Nonetheless, China is one of those countries that is leading the race in facilitating the use of money through digital devices such as the smartphone.  I think once the money becomes digital numbers, money is indeed facilitating a cashless society.  A cashless society is definitely taking some shapes or forms around the world, and so I’m writing this to amuse myself with both negative and positive possibilities of such a phenomenon.

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Feeling Like A Broken Record, But I Admit Cryptocurrencies Are Really Broken! I Don’t Trust Bitcoin!

Why I trust the bank and not Bitcoin or any other cryptocurrency?  Simple!  Origin’s traceable trail!  What do I mean by this?  The time you deposit your money into the bank either through electronic means such as mobile or you could deposit your money in person, a third party, in this case, the bank is there to take the responsibility of safekeeping your money.  Sure, the bank could have a system hiccup where your bank account would show up with a wrong value, but the bank has the responsibility to generate other traceable trails of your money such as paper statement, online bank statement and so forth.  Bitcoin or any other cryptocurrency is a different matter because there is no third party that is responsible for your money!  When something goes wrong with your electronic wallet such as corruptive memory on your device would destroy everything you store!  Cryptocurrency exchanges could be the third party to be responsible for your crypto coins, but these are new institutions that you could not trust and they got hacked too often!

In China, people are going cashless by using their mobile phone as the main medium to pay for things.  Still, their digital currency in their electronic wallet is tied to a medium of cash and a whole lot of other mediums such as check and so forth that could eventually generate into very noticeable trails of origin.  With such noticeable trails of origin, the owner of the money could always demand some sort of compensation when everything goes wrong such as the value of money is suddenly being misreported somehow.  These people, although in cashless society (almost), would be able to morph their medium of payment effortlessly — cash to check to digital numbers on their mobile to whatnot — with some sort of confidence that some sort of traceable trails of origin would back their transaction up clearly.

Although cryptocurrency’s blockchain is very rigid and vivid in showing transaction trails, the sender and receiver of the crypto-coins could hide behind the transaction which in the end could hurt their claim of the transaction.  What’s worse is that they could face a perfect storm when their device got corrupted or hacked and their wallet somehow was rendered broken — they won’t be able to open their wallet to show that they got the traceable trail of origin to back up their transactional claim so they could receive any compensation from whatever party that they’d dealt with.  As of now though, even if they’re proving that they’re the owner of a crypto wallet that sent out the crypto-coins, they mostly like are going to face anger and confusion as once the crypto-coins leave their wallet — these crypto-coins are gone forever and nobody would be able to compensate for the lost crypto-coins.

I think until the cryptocurrency tech could address the worries and weaknesses of the transactions that are being made by the blockchain and the frontend technology such as the cryptocurrency tech (e.g., Bitcoin, Litecoin, Namecoin) itself, nobody could fully feel comfortable of using such tech as a replacement for traditional forms of currencies.  I hate the feeling of being a broken record, but let’s be clear cryptocurrencies are facing real hurdles such as hackable, not widely acceptable, not being supported by the governments, relying too much on an electronic wallet as the trail of origin, facing corruptable electronic memory (i.e., RAM/hard-drive), no mean of compensation once crypto-coins got loose from the crypto-wallet, too much saturation as too many cryptocurrencies are in the existence, and so forth.

One more thing!  If someone stole the medium that you store your crypto-coins on such as your smartphone, you will never get these crypto-coins back!  Traditional forms of money such as the digital numbers that represent the dollar amount you got in your smartphone app would still be yours if your smartphone got stolen!  After all, the app on your smartphone is probably connected to your bank account and the app could once again be re-download and reconnected to your bank account. Perhaps, you’re using an app such as Starbucks app which requires you to preload the number of dollars before you could use it to pay for coffee — even a stolen mobile phone won’t be a problem since you could always re-download Starbucks app and reconnect to Starbucks’ server which got the proper dollar amount in your Starbucks account as before!  Crypto-wallet?  I don’t think so!

Why I Think Bitcoin Is Not Ready For Prime Time

So Bitcoin becomes the rage again for unknown reasons.  Today Bitcoin price is going through the roof.  As of this writing a single Bitcoin is equating to $2251 (US Dollar).  I can see the allures of Bitcoin, but I can also see so many drawbacks.  Let’s talk about the drawbacks shall we?

First, one of the biggest drawbacks of Bitcoin for me is not be able to sell Bitcoin anonymously through an exchange.  Instead, the exchange requires you to send your info includes your social security number before you get verified and be able to do any trading of Bitcoin.  This means if an exchange gets hack, all of  your info is going to be shared or be sold to any unknown parties.  Of course you can argue that lot of your information is already in places that are being stored online and can still be hacked easily.  I argue that at least the government agencies and banking institutions are perhaps more willing to protect your information than some Bitcoin exchanges.  Thus, hacking into these institutions may not be easily done, and once it is being done the government would definitely go after such hackers in a big way.  So, at least you know you got huge resources to look after your information in a more serious manner.

Second, another biggest drawback is that many Bitcoin exchanges cannot be trusted, because not only they’d gotten hacked way too many times before but some of them also run away with your bitcoins.  This means if an exchange decides to stop doing business and just run away with your bitcoins, you’re basically losing all of your bitcoins on a specific Bitcoin exchange.  This is why I don’t think it’s wise to store any of your bitcoins on a Bitcoin exchange besides just enough bitcoins for selling purpose.  Once buying a bitcoin on an exchange it’s wise to transfer the bitcoin out of the exchange immediately and into your more secure Bitcoin wallet that stores on your local machine/computer.

Third, another biggest drawback is that you can lose all of your bitcoins easily if a computer that you’re using to store all of your bitcoins got corrupted hard drives.  This means if you cannot rescue a specific corrupted hard drive that stores all of your bitcoins, you basically lose all of your bitcoins forever.  Thus, I think some people may adopt storing their bitcoins on multiple machines in multiple wallets, so they don’t have to worry about having all of their eggs in one basket.  Some people also do backups for their Bitcoin wallets’ data to ensure that Bitcoin wallets’ data won’t get corrupted easily.  It is also wise to encrypt the partition or partitions that you store your Bitcoin wallets’ data, and only this way you can protect your bitcoins from being stolen easily.  Basically, encrypting a partition on top of already encrypted Bitcoin wallet’s data is like having one more security layer.

Fourth, another biggest drawback is that Bitcoin is still not being accepted widely.  Sure, there are many places that may accept Bitcoin, but there are also so many many places that do not accept Bitcoin.

Fifth, another biggest drawback is that Bitcoin can be confusing for people who have no experiences with computer.  Some people in older generations will not be able to understand how to use Bitcoin, and so it’s going to be exotic and hard to use for them.  To use Bitcoin, one must know how to securely protect your bitcoins in a Bitcoin wallet and on a secure machine, but these measures are probably just gibberish for people who do not have the ability to use computers correctly.  Especially, if they do not know how to use computer in a secure manner, they are going to get hack easily and lose all of their bitcoins.

Sixth, another biggest drawback is that many governments are not recognizing Bitcoin as currency, and so Bitcoin is in a grey area in which so many different laws are being applied to Bitcoin.  This means you have to use Bitcoin differently in each country, and so laws that regulate Bitcoin in one country doesn’t behave similarly to laws in another country.  Of course you can argue that cash are not the same in all countries, but cash are legal tender — thus there are specified laws that may apply on the usage of cash even though such cash are not printed in the specific country or countries.  Some governments are outright hostile toward Bitcoin, thus they’re banning Bitcoin outright.

Seventh, another biggest drawback is that some governments are making you as a target of investigation for using Bitcoin, because they think Bitcoin is a way to facilitate dirty money.

These are the drawbacks and other drawbacks that I may not have stated that prevent me from seeing Bitcoin as a sure way that can replace the traditional money.  Furthermore, I like to have the option of Bitcoin and digital currencies and traditional currencies in digital forms, but I also like even more to see that traditional currencies in the form of cash that do not go away.  Why?  Anything that is tangible is definitely harder to be erased and made disappear.  This means your wealth can be protected better even it means securing them under your mattresses.  If your wealth can just go poof in an instant, it means your wealth is not being secured in a correct form or forms.  Because Bitcoin has so many weaknesses, I think it’s not wise to convert a huge portion of your wealth into bitcoins at all.