The Currency Revolution

The Currency Revolution

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It used to be that banks and bankers and governments and politicians were trustworthy and dependable enough to manage our money. Those days have come and seemingly gone.

Wall Street crashed, Europe is still in a massive depression, Spain is in the midst of a housing bust like nothing seen before and Greece, well, what more needs to be said about Greece?

In recent times we have become accustomed to the idea of a currency existing in a single country (or group of countries like the Euro) and controlled by a single organisation which imposes specific transaction fees and rules. The Internet has changed our understanding of currency.

Bitcoin and various other digital currencies have burst onto the global scene recently and scared the daylights out of traditional financial institutions. While they try to get to grips with the implications of Bitcoin, the world has adapted to the currency like a Wall Street banker to an innocent family’s bond.

A digital currency

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So what is Bitcoin? It’s a digital currency that can be used to make payments on the Internet without transaction fees or a financial institution.

The amazing thing about Bitcoin is that it’s created much like gold or any other natural resource. Bitcoins can be mined much like gold but with computers and incredibly complex mathematical algorithms rather than large machines and hard labour.

Other digital currencies are emerging; Litecoin has branded itself as the silver to Bitcoin’s gold and is slowly climbing in value. Since the start of the year, the value of Litecoin has risen from $0,07 to $2,50.

 

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Legal or not, here it comes

There is a debate raging in legal systems around the world as to whether or not digital currencies should be accepted as a legal form of money. Israel recently passed law that allows payment to be made to attorneys using Bitcoins while courts in Thailand have issued a preliminary ruling that it is illegal to use Bitcoins.

In truth, whether these digital currencies are outlawed or not they are being used around the world.

People are even trying to think of ways to convert their real-world currency into digital currency. Hackers at a recent conference got together and used an open source Raspberry-Pi computer to create a briefcase that accepts loose change and converts the value into Bitcoins.

A Kenyan company, Kipochi recently launched Bitcoin integration with the incredibly successful Kenyan mobile payment platform, M-Pesa. The Kipochi platform will allow users to send and receive Bitcoins and convert them to and from M-Pesa.

This level of real-world and mobile integration is a game-changer for digital currencies in the emerging markets. We all suffer the exorbitant charges that financial institutes force onto us as users to transfer our own money to and from other users.

Are You Ready to Wear Your Technology?

What can you buy with Bitcoin and other digital currencies?

This is where things get interesting for local business people and consumers. If you take the leap and integrate a Bitcoin payment method into your store (online or real-world) you will be catering to an entirely new market of clientele as well as putting your customers first.

You’ll save on bank charges and transaction fees and be able to make use of the currency like any other.

There are organisations taking donations in Bitcoin, educational institutions accepting payment for online courses using digital currency, as well as proposed lower fees for merchants using Bitcoin as an exclusive payment mechanism. The big players in the payment space should be concerned about the onslaught of digital currencies and from the looks of it, they are.

If you’re a Bitcoin miner or just have some lying around, there are things that you can buy in South Africa using Bitcoin. Things like t-shirts at rooi.co.za, geysers at wesellgeysers.co.za, computers and technical equipment at landmarkpc.co.za and anything from biltong to a trip abroad at plastic-man.co.za. The possibilities are endless and more merchants are embracing digital currencies every day.

A social and reputational currency

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If you use social media you will understand the feeling that you get when someone likes your photo, comments on a tweet or responds to a post on Facebook. Now that feeling can and will be turned into a real-world currency that you can use to do things with.

Services like Klout track and index your social ‘clout’, give you a score of, say, 65 and then peg your score against those around you and those who excel in the social space. You then sit in a social standing either at the top, the middle or the bottom. It’s only a matter of time before real world organisations start rewarding users with higher social scores.

For example, if a nightclub were to allow people with a social score of 65 or above into the club for free, you’d probably work harder to gain a higher score. This could apply to coffee houses, bottle stores, music, movies and anything else. The more social clout you have and are willing to exchange for a discount, the better you’ll be.

A branded currency

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Digital currency has opened the floodgates for anything to be used to buy product or trade items. A case study for this type of currency being used is what Nike did as part of a global Make It Count campaign. JWT, Nike’s ad agency in Mexico created an auction where sweat was used as currency, not money.

The more you run, the more buying power you have at the auction. Users were pushed to get out onto the streets and use the Nike + product to track their progress.

The auctions last 15 days – for only one Nike product. This begins to illustrate the need to get out and build your buying power. It’s also a great way to reward your loyal fans and users.

Applications for this kind of currency will be vast moving forward. Sports clubs will give you discounts for the number of games you play, weigh-less will give you benefits for every kilogram you lose and I can even imagine getting points from a flower shop for treating your significant other many times.

Nicholas Haralambous
Founder of the luxury sock company,, Nicharry.com , CEO and co-founder of Motribe before the company was successfully acquired by Mxit in August 2012.