Fintech The New Money Maker
Around the 6th century BCE, Alyattes, King of Lydia (modern day Turkey), produced the first officially standardised money – the coin. Then in the 7th century China made the first bank note under the Tang Dynasty. However the concept of modern money didn’t unify till the 11th century. For nearly a millennium money stayed the same, under the rule of state & distributed and regulated by the banking system. Now in the 21st century we are seeing the rise of a new type of tender – cryptocurrencies. In 2008 a mysterious force called Satoshi Nakamoto created the Blockchain, and Bitcoin. This infusion of technology with finance is creating what will be the next leap forward in money. Say goodbye to talking to cashiers, waiting for banks, the future of money is peer based. But as they say, money makes the world go around, so what impact will this make, in the red or back in the black?
With this new infrastructure being built by fintech, the main focus has been instant transferability. This is coming in the form of blockchain. Currently to transfer money, costs money, almost as bad as cash machines that take your money to give you your money.
You are probably hearing the word blockchain a lot at the moment in the world of fintech, but what does it mean? In layman’s terms you request a transfer, the money is put through a pay to pay (P2P) decentralised network and is changed into cryptocurrency making it valueless, it is then re-verified by the end user and then the transaction is completed. Blockgeeks have created a cool infographic with further data here.
The best bit about this kind of transfer is the speed. It is instant. It takes away the need for independently recording transactions, agreements, contracts etc. By distributing it across the chain with hundreds or nearly thousands of computers it makes the process easy. The other side note is the transparency, anyone with access to the network can see an up-to-date version of the ledger.
With the era of digitalisation, what is stopping money from becoming digitalised? Nothing. Though the process of transferring money might have been updated, we still deal with cold hard cash on a daily basis, but this is beginning to change. Welcome to Bitcoin. Probably one of the most confusing concepts of this new money.
So how does it work? You might want to take notes. It essentially works in conjunction with blockchain, by harnessing your computers power, you create a new block in the chain, keeping the network running & more secure. Through this, you can transfer your currency into bitcoin and into the system. If that still doesn’t make sense, Coindesk gives a detailed overview of everything Bitcoin.
As of July there were around 16.5m bitcoins in circulation with a value of over £3,000. That’s 660,000,000,000 pounds. Very close to a billion. A phenomenal amount of money for a currency that hasn’t been around 10 years, compared to the first coin at 2,600 years.
One day they we will look back on the idea of a physical robbery of coin or cash as barbaric. Probably how we look back at highway men. When it comes to digital money, this allows for a very different kind of robber, one you will never even see!
We have covered before the rise of cyber security and how the need for unique skill sets is changing the job market, this is because more companies are taking online or digital payments so the requirement to make sure their customers can trust their systems is vital.
The blockchain protocol is permitting a more secure avenue for transferring money but there are a few other technologies that are being developed to store, process and move money securely. AI is one that you probably don’t associate with fintech but the art of machine learning transcends far beyond just robots taking over the world. AI is examining the art of machine learning, so when it comes to attacks, algorithm updates, and user behaviour – by better understanding these concepts we will be able to keep the cracks within the system tight. However there is another side to AI in fintech that could make it worse with very clever hacking, but this threat will always be around no matter the development.
The blockchain concept has allowed the middle man to be cut out, Bitcoin has created a valueless near-1 billion pound currency, and AI is going to radicalise security within finance markets. All this is giving the old system a bit of a… run for their money. But this creation of an instant money transfer, and digital money system taps into the millennial needs for quick, fast and tech orientated service. So however confusing the concept, experts predict this will be the money of the future.