The future of money, part 4: Smart notes will be the cash of the future

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The future of money, part 4: Smart notes will be the cash of the future

We present you the fourth publication of the series the Future of Money in the online publication Quartz, in which five experts describe their vision of financial systems. In this article, Ignacio Mas, Executive Director and co-founder of Digital Frontiers Institute, creating online courses on digital financial inclusion, presents its version of cash turnover in the near future.

Should we oppose digital money physical cash? And if bill could function as a kind of digital debit card that you could through your smartphone to load its value? Unlike regular cards, it could take and in the same shop around the corner where no pos terminal.

In our minds the money are different aggregate States: solid as a bundle of money, giving confidence in the future, in a liquid, when we think about cash flows, and, finally, gaseous — when finances evaporate in an unknown direction. Such metaphors state money is deeply ingrained in our language so that their form is changing, and in reality, we are not especially surprising.

Money can be both notes and coins, and recordings in the digital registers. Both physical and digital properties have their advantages. Have cash there are two fantastic properties: anyone can take it, after a simple tactile and visual control, and it does not have “memory”. Digital money is unique: you can instantly send them to any place, and they have a “memory”. What is better depends on the circumstances (such as the distance between the parties to the transaction and their relationship to anonymity).

The problem is that these two types of money difficult to “make friends”. In contrast to the “metaphorical” money that can go into a different aggregate state, the banknote stubbornly keeps its shape. We can convert digital money into cash and back, went to the ATM, but it takes time, effort, and ATM availability.

We criticize cash. But why? Why should they go down in history? To imagine a day when the world will reach a “cashless Nirvana”, it’s pretty easy, but the new must replace the old only if it is better in every way. Digital money is not yet we can make that promise.

Instead of replacing the same phenomenon others would cost to get them to work together.

Imagine that all banknotes have a chip (such a development is inevitable, as banks will soon want more accurately determine the authenticity of banknotes). Through the banknote chip can communicate with mobile devices. And this is not idle fantasy: today, many things in the supermarket have already been marked with RFID— tags. Finally, imagine that the appearance of the banknote changes when the chip is not working: its colour becomes paler, more gray. Soon these technologies will be available for printing.

Using these notes, you will be able to transfer their cost directly into your Bank account. Will not have to go to the Bank branch or standing at the ATM — just bring the bill to the smartphone. Your account balance will increase by $20, the state of the chip of the banknote will change to “no money” and bill noticeably becomes gray.

But this does not mean that you should throw out an “empty” note: you can use it later by using the same translation with digital Bank account. The balance of the chip will change with the color of the banknote. Now she will be able to function, and one can easily determine that it is valid, thanks to its bright color.

With such a system of “smart bills” your phone will become a personal ATM. It will allow us to conclude a peace agreement between digital money and cash. Some people will probably retain their habits concerning money, and others will want to switch completely to digital format. In any case disappear specialized logistics, risks and costs associated with the transportation of cash.

Grey (i.e. “empty”), the banknotes can be distributed through conventional retail channels: buy something in the supermarket and for a nominal fee will get a grey bill, which you will be able to Deposit money from your Bank account. Thus, for the sake of people who prefer cash do not have to maintain costly and unsafe system of ATMs.

Getting rid of cash would be a step backwards, but her new, more “intelligent” implementation can bring us closer to the Nirvana to which we all aspire.

See also: the Future of money, part 1: the co-Founder of the Ethereum debunks mass delusion

The future of money, part 2: Our data is the currency of the future

The future of money, part 3: Cryptocurrency is a new value, not new money

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