What is programmable money and how it is changing the value transfer experience?
Blockchain is emerging rapidly as an ideal technology for various industries, especially financial services. It offers enhanced security to payment transactions, as well as data integrity, record-keeping and efficiency features. Blockchain technology is also enabling the growth of programmable money, a valuable use case for cryptocurrencies. Programmable money refers to real money represented in digital form, also known as tokens. This digital currency is estimated to be the next breakthrough in the evolution of money and could be as disruptive as any financial technology development so far.
As the adoption of Bitcoin already shows an appetite for blockchain-powered digital currencies and payment, programmable money is likely to change people’s value transfer experience entirely. It can be designed to run without sacrificing regulatory controls, monetary policy or personal privacy.
Programmable money can be the foundation of a multi-trillion-dollar new technology stack. It is the most promising digital currency as it is constructive with no significant technology blockers. This digital currency can be tracked with corresponding electronic ledgers, particularly blockchains, enabling a transactional record that is publicly and securely shared.
Central Banks’ Growing Interest in Programmable Money
The interest in digital currencies from central banks is continuously increasing. According to the 2019 Bank for International Settlements survey on central banks and CBDCs, central banks are reportedly thinking about how new central bank digital currencies (CBDCs) could replace traditional money. Indeed, 85% of central banks reported that they are unlikely to issue a CBDC within the next three years. Contrary to this, about a quarter of the central banks already has the authority to issue a CBDC or will soon have it.
Kaj Burchardi, Managing Director & Partner of Platinion part of the Boston Consulting Group said in a magazine that nearly 80% of the world’s central banks are looking into a digital currency, including some who are exploring CBDC 2.0 – digital currencies connected to smart contracts. However, there is not even a single central bank that appears to be pushing programmable money yet. Mainly academia, including the Frankfurt School Blockchain Center in Germany and MIT Media Lab’s Digital Currency Initiative in the U.S., as well as industry groups like the Association of German Banks are pushing the impetus towards digital currencies.
Reinventing Business with Programmable Money
Bitcoin is the most popular digital currency in the business arena. It operates with blockchain technology, enabling enhanced trust among users. With bitcoin, a user can prevent the fraud that comes from chargebacks. Digital currencies can significantly lower transaction costs and give the ability to make payments at any time. These currencies, tokens and other digital assets are pushing businesses toward programmable money, which integrates automated internal governance of common resources and fosters collaboration among communities. However, creating a universal model for internal governance is a challenge, especially within microeconomic settings wherein it is difficult to recognize and practically regulate the misuse of the common resource. Thus, with the evolution of blockchain and cryptocurrencies, businesses can see the dawn of a programmable money model that can deliver a more automated system of internal governance over common resources.