With rapidly advancing technology, our money still remains quite analog — but it doesn’t have to be that way…
Traditional banking models are changing
The modern bank’s roots can be traced back to the Florentine Renaissance, originating with the Medici family in the 15th century. Banks serve the purpose of acting as an intermediary between borrowers and lenders, facilitating trust in a high-risk equation. As they exist primarily to provide security in storing wealth and to have money readily available, they also require customers/clients to trust in their services — a notion reinforced by the typical image of a thick, steel bank vault, and heavily armed security guards.
However, when you deposit money into a bank, their heavily guarded vaults are not likely to contain a bag with your name on it. Rather, this money is lent to the bank as a liability, and they can leverage it for investments — possibly continuing to be exchanged to another foreign, whereupon it enters into the global Society for Worldwide Interbank Financial Telecommunication (also known as SWIFT). Long story short, this global electronic exchange system allows international banks to keep tabs on the balances that banks and underlying accounts have with each other.
According to latest estimates, only 8% of the global supply of money is accounted for in cash. Though a vast amount of our money exists in computer databases and moves around electronically, this money remains quite analog.
You may often hear the phrase “cashless society”. This refers to the vision for the future that grubby banknotes and dirty coins will be phased out, and replaced with technology that facilitates payments. Be it contactless credit cards, smartphone payment apps, or Bluetooth/NFC enabled smart-rings; these technologies gradually decrease reliance on cash.
“In the last two decades, the total amount of U.S. currency in circulation has more than tripled, to about $1.4 trillion. About seventy billion dollars, or five percent, of that cash, sits in bank vaults, neatly accounted for. The rest is not so easy to track, despite the data revolution in economics.”— Source: The New Yorker
With the dawn of smartphone technology, private citizens and commercial entities have a convenient opportunity to have enormous control over one’s money. In Denmark, “[Finance Minister Brian Mikkelsen]’s vision will see smartphones accounting for 50 percent of all payments by 2020, and a cashless Denmark in 10 to 20 years.” Already now, we can see that only cash only accounts for approx. 23% of transactions in Denmark (2016). Studies reflect similar trends in Sweden, where their Riksbank is considering a transition to an electronic Krona (eKrona).
The rise of programmability
Today, we are seeing revolutionary ecosystems and economic models based on crypto-currencies and digital assets beginning to be developed. Some of them are designed for machine to machine communications, some are intended to function as a store of value, and others for day-to-day transactions. One needs to look no further than CoinMarketCap to see the growing popularity of these diverse digital solutions.
With this new generation of digital monies, tokenization allows for programmable characteristics to be built into assets. Essentially, software allows for terms and conditions to be ingrained into money and actions — this software is commonly referred to as a smart contract.
It makes the transaction virtually impossible to hack, since the data transmitted between the transacting parties is meaningless to everyone else. It also happens instantly and enables the parties to reduce — and usually eliminate — their dependence on third parties, such as clearinghouses, which would traditionally charge a fee for verifying the authenticity of the transaction and those performing it. — Source: Fintech.Finance
Once you have what is essentially an API for programmable money, you can code transactions into a wide assortment of behaviors. If This Then That (IFTTT) is an interesting web-based service that focuses on creating chained conditional statements, called Applets. These are basically smart contracts that are programmed to carry out actions upon the fulfillment of certain conditions.
“With Blockchains and cryptocurrency, we can give machinery digital identities and digital wallets, and allow them to carry out their own transactions, based on programming. What if I could program my Roomba to pay a drone to pick it up, and fly it to the neighbours house, and then invoice the kitchen for 25 minutes of cleaning? I could program it to do that every Wednesday. That’s called Internet of Things.” — Jack Nikogosian, CEO at ARYZE
By combining the properties of fiat currency with cryptographic elements and blockchain, we at ARYZE strive to make “dumb money” smart. We are living in a world where technology is rapidly improving — why shouldn’t our money do the same?
ARYZE is creating a range of stablecoins — Digital Cash— cryptocurrencies pegged to fixed assets, like the US Dollar, DKK or EUR. By making a programmable and virtual representation of fiat currencies, and activating and moving ownership of them on blockchains, we believe that this is the first step towards an improved vision for money.