Those familiar with the Bitcoin setup liken it to a public “ledger,” in which anyone can view transactions made. That public structure keeps everything aboveboard, but what’s removed are the hassles (and fees) of a typical credit or debit infrastructure. Encrypted systems also keep participants anonymous. So, as with cash, it’s an anonymous transaction.
Bitcoin does have its drawbacks. One of its largest exchanges had a run-in with U.S. federal agents this year regarding filing requirements and whether or not it was a money transmission business. The result was the shutdown of key bank accounts used to settle transactions, stifling the company’s ability to do business here.
Even when left alone, Bitcoin’s value can fluctuate with greater volatility than established currencies. But the concept is out of the gate.
Author Wolman started his book after finding it costs the U.S. Treasury 2.4 cents to mint a single penny and nine or 10 cents to make a nickel. Of course, those costs fluctuate depending on the spot price of raw materials. “It was absolutely ridiculous math,” he recalled. “So it started as a public discussion of minting small coins at a loss.”
What his research led him to conclude was that three trends are pressuring the physical paper-and-coin system of currency that many countries still use today. The first is the growing burden of cash management. Beyond the physical manufacturing of money, Wolman said, the cost of counting, transport and security behind putting cash into registers at convenience stores and outlet malls across the country can be as much as $40 billion to $80 billion—three to four times the budget of the U.S. Department of Education. A source in the U.S. Secret Service told him that 90% of employee time is used not protecting public officials but chasing down individuals who bleach a $5 bill and use a color printer to turn it into a $20.
“I’ve been told cash is blood in the veins of crime,” he said. That’s because organized crime and even those involved in terrorist activities operate in cash.
These realities alone are reasons to question the continuing use of physical cash, especially bills on “the fringe” such as $50 and $100, and pennies and nickels.
Second, Wolman spoke of the nation’s growing use of alternative forms of cash, such as airline miles: “It’s thriving; people care about it, they even buy and sell with it.”
Another favorite examples of Wolman’s is “Disney Dollars,” another form of what is essentially digital currency but thought of more in the lines of loyalty rewards. While the Disney “money” seems frivolous because it’s associated with characters such as Mickey and Minnie Mouse, for a family of six who save for two years to go to Orlando, “finding out that Disney Dollars will give you 10% to 15% off everything means something,” he said.
The most important result of the emergence of Bitcoin was that it “broke the spell of the dollar’s universality” and what Wolman called “people’s blind acceptance of the dollar as the be-all, end-all.”
The third pressure on physical currency, according to Wolman, is technology. While mobile payment is getting a lot of buzz lately, it may be deserved. A mobile phone can take any currency and almost instantly convert it to whatever’s necessary to pay for that six-pack of beer at the store.
Technology will allow regular people to bypass current financial infrastructures, cutting float times and eliminating interchange fees. He cited Des Moines, Iowa-based Dwalla, which handles payment transactions under $10 for free and payments above for a flat 25 cents.