The Rise Of Cryptocurrencies

On the face of it, Burger King and the Estonian Government have very little in common. Yet in August, these polar opposites both announced plans to develop their own cryptocurrencies. And while the motives behind these schemes are very different, they both highlight the growing interest in evolving away from traditional bank-based finance in favor of digital currencies.

Blazing a trail

Estonia’s population is roughly the same as that of Dallas, yet this small Baltic nation has already given us Skype, Kazaa and TransferWise. Every child is taught computer programming at school, and Estonia has more startups per head of population than any other nation. Internet access was declared a human right back in 2000, and the government has already moved most public services online.
Their latest innovation centers on an established government scheme, where foreigners wishing to start a business in Estonia receive a digital identity akin to naturalized citizens. The ID scheme’s director recently proposed offering e-residents (as overseas entrepreneurs are known) digital tokens that can be redeemed when accessing services or conducting business-to-business transactions. While this is merely a proposal, it’s easy to imagine how a country governed almost entirely online could support a cryptocurrency in tandem with the Euro.

Telling whoppers

While Estonia was starting a national debate about cryptocurrency payments, its larger neighbor Russia was unveiling a very different kind of digital currency. Burger King in Russia now offers virtual coins called Whoppercoins as part of a loyalty scheme. But unlike traditional card-based programs, Whoppercoins are blockchain tokens hosted on a P2P exchange. Coins are traded and transferred like other cryptocurrencies, stored in a digital wallet and redeemed for real-world items like Whopper Burgers.
It was probably optimistic of Burger King’s Russian communications head to describe Whoppercoins as “an investment tool” during August’s launch. Nevertheless, this is a groundbreaking example of a mainstream company turning to the blockchain. Burger King has five thousand restaurants across 73 countries; since Whoppercoins might be used equally effectively in Moscow or Miami, they could easily become a global unit of value.

Banking on success

So are we about to see cryptocurrencies entering the mainstream? The above examples certainly offer more grounds for optimism than Bitcoin. The world’s best-known cryptocurrency remains volatile against traditional benchmarks, regularly hitting new values against the dollar and Euro before shedding much of its value overnight. There is is no stigma attached to a Whoppercoin beyond its rather juvenile name, Bitcoin is unable to shake its unsavory association with illicit Deep Web activities.
Cryptocurrencies offer significant advantages over traditional wire transfers, credit cards and ATMs. There are no exchange rates when you travel abroad, and no transaction fees for completing a domestic purchase. Digital currency is ideal for website transactions, avoiding the clumsy verification and 2FA procedures requested by card providers. And simplifying payment processes may help to address the issue that only one in ten US dollars is spent online, even after twenty years of ecommerce development.

On the outside looking in

Unfortunately, cryptocurrencies remain on the fringe of society rather than the mainstream. In total, the world’s digital currency is estimated to be worth less than Uber, and PR problems persist around untraceable transactions. It seems nonsensical that the European Union withdrew the €500 note last year to prevent criminal activity and money laundering, yet Bitcoin is entirely unregulated and anonymous.
f a foreign government like Estonia’s does decide to introduce blockchain transactions, the positive associations could see cryptocurrency taking off in certain industries. Ethereum is a popular payment method for computing work, already operating well within defined parameters. However, we’re unlikely to be using the blockchain for everyday purchases in the near future – unless they involve flame-grilled beef and a sesame seed bun…