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Business Report

A Closer Look at the Future of Money

A Bitcoin update, worthwhile further reading, and a list of upcoming events focused on payments, commerce, and banking.

BITCOIN 2.0 | OUTSIDE READING | CALENDAR

Bitcoin 2.0
Cryptocurrencies are still in their early days. Though a growing number of online and real-world businesses accept bitcoins, writer Russ Juskalian found while reporting “A Weekend in Bitcoin City” that they are not yet accepted widely enough to be a reliable substitute for cash.

Neither are bitcoins reliably functioning as a store of value, a second key function of any currency. Bitcoin has proved volatile recently, dropping from a value of over $1,200 in November 2013 to $310 in December 2014.

This story is part of our March/April 2015 Issue
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That fall-off, along with the fact that Bitcoin is still being used to move only about as much cash as it was a year ago, prompted senior editor ­Antonio Regalado to nominate the currency as one of the “top technology failures of 2014.” “The idea of Bitcoin remains intriguing,” he writes. “But in practice, it is more like a Ponzi scheme that attracts speculators, and it’s become the payment form of choice among professional cybercriminals.” In November, the U.S. Marshals Service auctioned off 50,000 bitcoins seized from drug dealers, worth about $19 million.

Still, advocates continue to see real value in a peer-to-peer digital currency that’s independent of middlemen and government affiliation—and, lately, in the core computer code that makes Bitcoin what it is: the blockchain.

Free and open, the blockchain is maintained by computers around the world and shares some of the design features that laid the foundation for the success of the World Wide Web and Linux, among other technologies. Increasingly, investors believe that the future of Bitcoin lies in the idea of extending or building on the blockchain to create something called sidechains. Sidechains would build on top of the blockchain code—which currently records every Bitcoin transaction as an open, public ledger—to create systems that secure other kinds of assets beyond payments, such as contracts or ownership of stock.

Gavin Andresen, the driving force behind Bitcoin, foresees a future in which the currency might come to cheaply power a diverse collection of services focused on trust and security.

To use Bitcoin today, you must install a special wallet, like Coinbase, on your computer or mobile phone. You can trade U.S. dollars or other currency for bitcoins at exchanges like Bitstamp. Both of these sites explain how their systems work, and the nonprofit Bitcoin Foundation has published an explanation of the technology behind the payment system.

For insight into how Bitcoin solves some of the special challenges of digital currencies, a good starting place is “Explain Bitcoin Like I’m Five,” an essay published on Medium by financial consultant Nik Custodio.

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OUTSIDE READING

The End of Money: Counterfeiters, Preachers, Techies, Dreamers—and the Coming Cashless Society
by David Wolman
Da Capo Press, 2012

Wired contributing editor David ­Wolman exposes the unsavory side of cash as he seeks to measure its place in the modern world, talking to counterfeiters, coin collectors, and everyone in between. Even so, the book’s takeaway that cash may be on its way out has proved controversial, explained the author in a 2012 interview with MIT Technology Review’s senior editor Antonio Regalado (“The Slow Death of Cash,” March 2012).

Breaking Banks: The Innovators, Rogues, and Strategists Rebooting Banking
by Brett King
Wiley, 2014

In his latest book, best-selling author Brett King compiles interviews with executives at Google, Citibank, Zopa, Simple, and other firms that are disrupting banking with peer-to-peer lending, cryptocurrencies, and social media. The financial industry, he argues, will change more in the next decade than it has in the past 100 years.

Bitcoin and the Future of Money
by Jose Pagliery
Triumph Books, 2014

CNNMoney reporter Jose Pagliery details how Bitcoin came into the public eye and why it is prone to unique risks, as seen in February 2014 when nearly $400 million vanished with the sudden shutdown of the online exchange Mt. Gox. The author talks to advocates like Ron Paul about how the digital currency could shape the world’s economy and learns about the illicit side of Bitcoin through interviews with FBI officials and a Bitcoin entrepreneur behind bars.

The Age of Cryptocurrency
by Paul Vigna and Michael J. Casey
St. Martin’s Press, 2015

A pair of Wall Street Journal writers team up to produce a sympathetic overview of cryptocurrencies. The book ends with the prediction that encryption-based, decentralized digital currencies “do have a future,” even though it’s a major task to convince people of their benefits. Those benefits include potentially making the financial system far more efficient and offering an affordable alternative to the many people without access to banks today.

Money, Real Quick: Kenya’s Disruptive Mobile Money Innovation
by Nicholas P. Sullivan and Tonny K. Omwansa
Balloon View, 2012

Tools to send money via mobile phone are gaining popularity in the United States, but this book reveals that 70 percent of Kenyans were already sending money that way when it was published more than two years ago. The book’s authors explain how M-Pesa, the country’s most widely used mobile money service, rapidly rose to popularity when not even 20 percent of Kenyans used traditional banks a year before its launch.

Mobile Banking: Financial Services Meet the Electronic Wallet
Ernst & Young, Knowledge@Wharton (the online business journal of the University of Pennsylvania’s Wharton School), 2013

This e-book provides an overview of the firms battling it out to provide mobile payment and banking services. In a series of accompanying videos, scholars from the University of Pennsylvania’s Wharton School discuss business opportunities, data security, and mobile wallet technologies with Ernst & Young analysts.

Mobile Influence: The New Power of the Consumer
by Chuck Martin
Palgrave Macmillan Trade, 2013

It’s no secret that people use their mobile phones to buy goods online, but this book explains how brick-and-mortar stores can adopt new mobile payment technologies to better reach their smartphone-toting customers. The author describes different payment systems within the context of a bigger strategy for influencing consumers’ shopping habits through their mobile phones.

Designing Mobile Payment Experiences: Principles and Best Practices for Mobile Commerce
by Skip Allums
O’Reilly Media, 2014

The inner workings of mobile payment frameworks are the subject of this guide for app developers, designers, and project managers. The book gives a history of payment technologies and compares apps like Google Wallet, LevelUp, Square, and PayPal. It also explains how to integrate security features like PINs and passwords into payment apps.

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CALENDAR

Financial Cryptography and Data Security 2015 19th International Conference
January 26–30, 2015
San Juan, Puerto Rico
fc15.ifca.ai

First International Workshop on P2P Financial Systems
January 29–30, 2015
Frankfurt, Germany
www.ecurex.com/p2pfisy

8th Annual Smart Card Alliance Payments Summit
February 3–5, 2015
Salt Lake City
www.scapayments.com

Apex All Payments Expo
February 23–25, 2015
Las Vegas
www.iirusa.com/allpaymentsexpo/home.xml

BAI Payments Connect 2015
March 2–4, 2015
Phoenix
www.bai.org/paymentsconnect

GSMA Mobile World Congress
March 2–5, 2015
Barcelona, Spain
www.mobileworldcongress.com

Transact 15
March 31–April 2, 2015
San Francisco
electran.org/events/transact15/

Payments 2015
April 19–22, 2015
New Orleans
payments.nacha.org/2015CFP

Open Mobile Media’s Mobile Commerce and Banking 2015
April 20–21, 2015
London
http://www.openmobilemedia.com/mobile-payments-europe/

Virtual Currency Today Summit
April 29, 2015
Boston
summit.virtualcurrencytoday.com

Cards and Payments Middle East
May 12–13, 2015
Dubai
www.terrapinn.com/exhibition/cards-and-payments-middle-east/index.stm

Connect Mobile Innovation Summit
August 18–20, 2015
Chicago
mobileinnovationsummit.com

Money20/20
October 25–29, 2015
Las Vegas
money2020.com

CARTES Secure Connexions
November 17–29, 2015
Paris
www.cartes.com

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