**This is a more serious post than what is usual for this blog. In fact, this was originally a research paper for my English class, but since I thought this topic pertinent and important, here it is on my blog.**
The digital revolution transformed the human experience. It forever altered human relationships, from changing the media through which daily interpersonal interactions occur to completely overhauling the human relationship with information and even widening the generation gap. What went into a letter written in pen on paper now goes into an email, what required physical meetings for face-to-face conversations now requires text applications such as iMessage and SMS, and what required a scan through three volumes of the Encyclopedia Britannica now requires a scan through the top five lines of a Google webpage. But yet the financial industry has remained obstinately backward. Transactions still take a preposterous amount of time, and a glance through the pockets of almost everybody will prove that cash has remained king, despite the multitudes of superior options. Hence, governments, businesses, and individuals alike should aid in expediting the transition from a cash-based currency to a digital, paperless one.
First, the transition from a cash currency to a digital one will improve the efficiency of monetary transactions and hence that of the entire economy. Currently, international bank transfers may take up to a week and usually require loads of documentation (Athey). However, the same transfers conducted through digital money companies take an average processing time of just a day (Gimein). Ditching our current currencies in the favor of digital ones provides an even better option. Bitcoin, a digital cryptocurrency, sends transactions over long distances cheaply, safely, and instantaneously. Furthermore, these digital money companies have fast-tracked everyday small-scale transactions: clients can now pay through the sheer swipe of a card or code, instead of having to stand in line, count bills and coins, and wait while the vendor counts change. Reducing or eliminating the need for physical money will move transaction fees and processing time down with it.
Besides, the widespread use of digital money will aid in efforts to reduce crime. Property crimes currently occur around 1.2 million times annually just in the United States, making them the second most common felony in the country (Schatz Anderson & Associates). Replacing physical money with digital currencies presents a solution to the proliferation of these crimes. First and foremost, criminals cannot rob or steal digital money, such as virtual currencies or cryptocurrencies, through physical means. Moreover, digital currencies such as the cryptocurrency Bitcoin utilize multiple layers of encryption for security. Therefore, hacking to steal or utilize others’ digital money entails numerous difficulties, or, in some cases, impossibilities, for even the most experienced hackers (Lynch and Lundquist 75). This added monetary security will undoubtedly alleviate the burden that physical money now places on the law enforcement system.
Digital money also lays the path to increased flexibility in options to ensure bank account security. For example, in a type of smart contract called an escrow account, the buyer puts the money in question into escrow, and the seller only receives this money when the buyer receives the property. Though this arrangement can significantly reduce the risk of fraud, currently only large transactions on the scale of property or estate deals use escrow as a method of transaction because of the difficulty and complexity involved in implementing the escrow system. However, digital money has created a thriving online environment for these transactions. These online environments include websites like Escrow.com, where individuals and firms alike can reap the benefits of escrow on transactions both large and small. Multisig presents yet another example, where multiple persons need to authenticate before disbursing money from an account, preventing theft and ensuring monetary security when conducting transactions internationally, externally between individuals, firms, or other organizations, and internally between different parts of a firm (Athey). Also, numerous digital money firms utilize a complicated cryptographic technology called digital signature. Through this system, each money receiver employs public and private keys to decode each sender’s unique signature. Senders can therefore rest assured that the intended receiver and only the intended receiver will receive the money in question, while receivers can rest assured that the supposed sender actually sent the money (Lynch and Lundquist 111).
The environmental boon to using digital currencies instead of cash provides an added incentive, especially in an age where global warming is essentially melting the one and only planet on which all humans live. Cash bills ultimately hurt the environment, as they only have a life of around 16 months before wearing down to the point of uselessness. Additionally, the process of manufacturing bills from cotton and linen fiber commands a substantial amount of energy – “cultivating, harvesting, and ginning 1 kilogram of cotton” (Rastogi) consumes almost as much energy as producing the same amount of PVC, an extremely environmentally unfriendly plastic. Coins not only use up even more energy in production – specifically, a hundred and nine megajoules per kilogram of copper, compared with sixty megajoules for a kilogram of PVC – but they also annually consume an average of forty-one thousand tons of metal just in America. Moreover, transporting physical money has more environmental implications: moving money around the globe causes more than half of currency’s overall pollution (Rastogi). On the other hand, digital currencies like Bitcoin can transact money, store value, and act as a unit of account with almost no pollution or impact to the environment.
Additionally, cash carries a shocking amount of bacteria. In May of 2016, ABC News conducted a study on the amount of bacteria present on one-dollar bills. The organization asked sixty-eight random people in Dayton, Ohio, to trade an old one-dollar bill for a new one, and then it told doctors to analyze the sixty-eight old bills collected. The news agency found that five out of the sixty-eight bills contained bacteria that could infect perfectly healthy individuals. Also, fifty-nine bills out of the sixty-eight studied contained bacteria that posed a danger of pathogenic infection to people with compromised immune systems, such as those afflicted with HIV, the abbreviation for Human Immunodeficiency Virus, or cancer (Mitol). When CBS News conducted a similar study in New York City, the news agency found that more than three thousand types of bacteria lived on the city’s one-dollar bills in 2013. Additionally, they found that cash, especially bills manufactured from cotton and linen fiber, such as U.S. dollars, create a stable environment conducive to spreading antibiotic-resistant bacteria, mutated supergerms on which antibiotic medication has limited to zero effect. Combined with the statistic that antibiotic-resistant bacteria killed 23,000 in 2013 alone, this fact definitely gives enough reason to make the shift from a cash-based currency to a digital one (Tanglao). Furthermore, money not uncommonly contains even trace amounts of feces. Therefore, when food workers handle physical money and food at the same time, both feces and pathogens, such as E. coli, salmonella, influenza, Rhinovirus, the hepatitis A virus, and Staphylococcus aureus, can get onto foodstuff, causing cross-contamination and illnesses from preventable infections (Angelakis et al. 249).
All of the above discussed culminates in the empowering, streamlining, and equalizing effects of digital currencies on the global economy. First and foremost, instant monetary transfers through digital means will create a financial norm where firms do not have to tolerate late payment. Thus, small companies with limited cash flows will not have to suffer anymore from liquidity concerns stemming from large clients reimbursing their smaller suppliers months after the initial purchase (Lynch and Lundquist 100-101). Digital currencies will also expedite the globalization of commerce. Because international bank transfers entail a greater risk of fraud than domestic ones, many firms currently refuse to sell internationally, limiting their customer base and sales volume. Digital currencies like Bitcoin solve this problem through their encrypted security and irreversibility once parties complete their transfers. Escrow accounts and multisig provide alternate solutions to ensure transaction security. Hence, digital currencies will essentially eliminate the trust barrier to international trade (Athey). In addition, the dissemination and widespread usage of digital currencies will curtail the currently vicious effects of high “frictional costs,” such as foreign exchange rates and international bank transfer processing fees, upon global commerce. As long as enough individuals and businesses worldwide recognize and accept a certain digital currency, they can establish it as an innovative, efficient, and globally-accepted medium of exchange. In effect, this transformation will replace local currencies in international commerce and thus eradicate the prohibitive effects of frictional costs upon international trade (Lynch and Lundquist 122).
Poverty and living in an area with a less stable economy only amplify this empowering effect. If societies go cashless, the security issues surrounding poorer areas will also fade, as discussed before. Likewise, e-commerce combined with the security of digital currencies has the power of lifting entire communities out of poverty. As soon as one member of an impoverished community obtains Internet connection and a connecting device to set up an online shop, the entire community can produce products to sell for a profit via e-commerce (Athey). The residents can then reach the entire world online, swelling their customer base. Thus, distance will no longer bar isolated, impoverished communities from trading with developed, affluent areas; instead, a vendor in rural Ghana may attain almost the same opportunity as a supplier from New York City. In a time when isolation resulting from a landlocked geography keeps the countries with the lowest GDPs, the abbreviation for Gross Domestic Products, and standards of living in poverty, the equalizing effect will show visibly (CIA). Besides, in countries with highly unstable economies, using digital currencies as an alternative to the standard national currency can save the vulnerable masses from the terrible effects of currency instability and hyperinflation, afflictions oftentimes due to government corruption and incompetency rather than the average citizen’s wrongdoing (Abramowicz 119).
The time has come to expand the reach of the digital revolution to the financial industry. The world must switch to a clean, safe, environmentally friendly, and efficient method of transaction in order to connect the world and give everybody a fair chance to succeed financially, regardless of nationality, gender, social status, or current wealth. Governments, businesses, and individuals alike should aid in expediting the transition from a cash-based currency to a digital, paperless one.
Angelakis, Emmanouil, et al. “Paper Money and Coins as Potential Vectors of Transmissible Disease.” ResearchGate. Future Medicine, 16 Mar. 2016. Web. 21 Feb. 2017. <http://tinyurl.com/jd8alqe>
Athey, Susan. “5 Ways Digital Currencies Will Change the World.” World Economic Forum.
World Economic Forum, 22 Jan. 2015. Web. 22 Feb. 2017. <http://tinyurl.com/jfydy4q>
Central Intelligence Agency. “The World Factbook: WORLD.” Central Intelligence Agency. 12 Jan. 2017. Web. 22 Feb. 2017. <http://tinyurl.com/z5vgorm>
Gimein, Mark. “Why Digital Money Hasn’t Killed Cash.” The New Yorker. The New Yorker, 27 Apr. 2016. Web. 21 Feb. 2017. <http://www.newyorker.com/business/currency/why-digital-money-hasnt-killed-cash>
Lynch, Daniel C. and Leslie Lundquist. Digital Money: The New Era of Internet Commerce. New York: J. Wiley, 1996. Print.
Mitol, Jennifer. “Cash Carries Lots of Bacteria.” ABC News. ABC News Network, 23 May 2016. Web. 21 Feb. 2017. <http://abcnews.go.com/Health/story?id=117433>
Rastogi, Nina. “Is Cash Better for the Environment than a Credit Card?” Slate Magazine. Slate, 14 Apr. 2009. Web. 22 Feb. 2017. <http://www.slate.com/articles/health_and_science/the_green_lantern/2009/04/how_green_are_greenbacks.html>
Schatz Anderson & Associates. “20 Most Common Felony Crimes in the U.S.” Schatz Anderson & Associates, 4 Jan. 2012. Web. 22 Feb. 2017. <http://www.schatzanderson.com/information-and-resources/20-common-felony-crimes-u-s/>
Tanglao, Leezel. “Dirty Money: Your Cash Is Home to Thousands of Bacteria.” CBS News. CBS Interactive, 24 Apr. 2014. Web. 21 Feb. 2017. <http://www.cbsnews.com/news/dirty-money-your-cash-is-home-to-thousands-of-bacteria/>