Country Cash, Digital, not Johnny

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Digital Wallets and Apps Will Support Digital Cash

PART 1, for people, for us…

Hey, can I borrow $5 from you? I’ll pay you back. Can I do this with every reader of this article? Would you like to do it using Venmo or PayPal or Square or Apple Cash or any other system we have today as of Dec 16, 2021 in the US? You would just need to somehow know my account number or handle and ask your app to send me money. But what does it mean to send money? Or, you can somehow tell me where to get the money.

Is there a digital equivalent to cash?

When sending money to one another on an app, we’ve never had money physically sent to one another. The word send is the wrong word. But it has been carried over through the years, through the ages. It was sent when it was physical; it was sent when it was a banknote. Modern banks do not send anything but instructions and acknowledgements and confirmations to one another. What happens behind the scenes is already all digital. Computers and databases control it all. Secure, encrypted, stored safely, with limited and highly controlled access, each bank’s records are the source of truth for how much money you have.

If the bank says you have $100, that’s how much you have. Did you just withdraw $10 from your account at an ATM? Eventually, pretty soon, your account will show that you have $90 left and you won’t be able to withdraw more than $100 unless you have a special overdraft arrangement with your bank. In that case you end up owing your bank, with interest and fees. That’s another story. The point is that it is all digital. The records are with the banks. They report to the nation’s central bank periodically, maybe daily or hourly to make sure that the total sum of money remains known and controlled. And although I used a dollar symbol, representing USD, the US Dollar currency, I could have used any country’s currency. Banks work this way everywhere there are banks connected to the global financial system.

So, we have bank accounts. But we also have pockets. In our pockets and money jars and piggy banks, we keep physical cash, banknotes and coins that we can take out and give to one another. Giving cash is easy. Giving cash is a silent discrete operation. What does that mean?

Giving cash is discrete and discreet

Ok, that’s a bit of fancy talk there since I’m using discreet and discreet; 1. a cash transaction is discreet because you do not need to give out your name, number, anything; it just works, as long as there is trust in the system. 2. a cash transaction is discrete because it is bounded and finished once the physical money changes hands. Hands matter, pockets matter, being in the same place matters, but you can also leave cash on a bedside table as a tip for a hotel housekeeper or on the kitchen table for your child to pick up to go out with friends.

Cash is discreet because banks do not track what happens to banknotes after they are dispensed from an ATM. I can take money from my bank account, put it in my pocket, give to anyone I want, mail it in an envelope, lose it, donate it, there are a lot of “use-cases” that are just part of normal daily life, all over the world. Note serial numbers are not traced out of an ATM.

When I get paid after doing work for you, you can pay me cash that I can take to the bank and deposit. I can keep the cash or spend it or give it to someone else. Not complicated. It is part of a nation’s infrastructure. That’s how it works.

For shopping, spending cash is easy and controlled by the shopper. For the physical retailer, there’s some hassle to protect the collected cash, make change, get the cash to the bank, and of course, to count it properly. These hidden costs of cash are what get retailers to prefer digital payments. Cloud-based cash-registers track and process digital payments from our NFC taps of our contactless credit cards or phones with Google Pay, Apple Pay, and more.

For e-commerce retailers, there has been no digital equivalent to payment with cash. This is an area of active exploration and experimentation. Some retailers are no longer accepting physical cash due to the risks and costs associated with it. Some governments, local and regional, are requiring all businesses to honor physical cash.

In the world of bank accounts, bank transfers, e-wallets, payment apps, stored-value cards, and digital transactions using credit-cards/debit-cards, there are a lot of rules. These rules govern what is allowed and not. These rules manage and reduce and account for risks in the system. You might not pay your credit-card bill. You might cost the credit-card company a bunch of time and money with your complaints and demands for insurance or other perks they offered to get you to accept the credit they extended to you.

These networks, their operators, and their clients, say a lot about the state of financial stability and financial control globally. They form a complex system of actors feeding on each other, benefiting and adding value and taking value out. At their root: the national and international financial infrastructure of trust and laws.

You and I, our families, our children, we’re all part of this massive interconnected economy that is based on trust. Cryptocurrencies are a technological innovation, an evolution of our world resulting from applied computer science and mathematics giving rise to new tools to trust one another, as long as we trust one another a little bit and as long as, in the end, we’re willing to sell our time, effort, and stuff to someone in return for something we believe someone else will accept to give us their time, effort, or stuff.