Posted by Allison on 6 April 2009, 15:13
When currency first came into being, the idea that people would one day be able to pay for things without anything actually exchanging hands would have been laughed at. How could you possibly get money to travel from one town – even one country – to another, in just seconds and without anyone actually seeing any coins or notes in the process?
Thanks to the advent of technology, computers and the internet, this has now become a reality that millions of people tap into every single day – and we don't even give it a second thought.
Welcome to the world of digital currency, the only truly universal currency that can cross continents in mere seconds and make it easier for goods to be bought and paid for than it ever has been before.
So what exactly is digital currency?
Well if you have a PayPal account you'll certainly know what digital currency is. If you want to sell someone a service, for example, you can agree on terms via email, send them a PayPal invoice for a specified amount of money, and within minutes of sending that invoice the money can arrive into your PayPal account, ready for you to withdraw to your bank account.
If the money arrives in a different currency to the one you use in your country, it's a simple matter of converting it within your account and then withdrawing it.
But this is an online system of digital currency, and it is just one of the many ways it can impact our lives. If you travel by Underground in London nowadays, you don't have to carry any cash with you if you don't want to; an Oyster card can get you to wherever you want to go without stopping to buy a ticket at every station you visit. Similar ideas are in place at other locations across the world.
But the internet is where the real home of digital cash lies. It has allowed the business world to become both smaller and larger at the same time. It's become smaller because the act of sending money abroad is now extremely easy; and larger because sites like PayPal have made it easy for regular people to start selling goods or services from their own home via sites like eBay, dispatching them to people all over the world.
At present digital currencies consist of currencies which exist in the real world. This means we can buy something from an American website and send our payment in US dollars via a secure site such as PayPal. UK users will simply buy items in pounds sterling. The current exchange rate which applies at that moment is the one which is deemed to relate to that purchase.
But there is the possibility that there may eventually be a new currency on the world stage – one that only exists in cyberspace. There won't be any banknotes and no one will ever see a single coin. But it could have a profound effect on how we go shopping online.
Cybercash, as it has been called in the past, has been attempted in the past but it has never caught on. The very attraction of a virtual currency is also its potential downfall – anyone who wants to shift a large amount of money illegally tends to look at shifting it online as a good way of getting rid of it. E-gold has certainly been targeted in this way in the past.
It is certainly true that we are relying less on cash than we did in years gone by. First the cheque book arrived – which even now is being phased out as a method of payment in many shops, in favour of taking card payments instead. More and more transactions are taking place on plastic – whether credit or debit – and while we still like to carry some old fashioned currency in our pockets, the time is ripe for wondering whether we will all eventually carry plastic instead. It may be a good few years off yet, but digital currency – and in fact anything which doesn't involve notes and coins – may still rule the roost in years to come.
Even now there are a number of cards being tried out in the UK at the moment which aim to get rid of cash altogether. Barclaycard's Pulse card has been launched in London and lets you buy goods at a number of outlets by waving your Pulse card over a special scanner when you come to pay. While there are several different varieties of card doing the rounds and hoping to become indispensable, this one is the best of the lot because it will undoubtedly speed up queues. No signing, no waiting, no punching in pin numbers - just one wave of your card and you're off.
But while we are inexorably moving towards a cashless society, will we ever take the final step towards it?
While we may have a long wait to see an online currency that is both secure and worth buying into, there is no doubt that we are becoming increasingly reliant on credit, debit and other cards to pay for items without handing over any actual currency.
It seems bizarre that in a world which relies so much on the internet on a day to day basis, we haven't yet adopted a single unified online currency. Security is deemed to be the biggest reason for this, but not so long ago we were all dubious about using our credit cards online. Provided adequate security measures are in place it should be perfectly safe, and more of us are now buying things online.
Perhaps things will develop this way with digital currencies too? At present many people aren't even aware of the idea, but as information spreads and becomes more well known, perhaps a digital currency to unite the world won't actually be that far off after all.