(Permissionless) Blockchain Could be Key to the Cashless Kingdom

  • Grace Noto
  • December 15, 2016
  • 1

Permissionless, permissioned. Cashless, cash-filled—two of the larger discussions currently underway in the fintech world. However, a recent paper by Coin Center’s Peter Van Valkenburgh suggests that the most beneficial way forward may be to merge the two.

The paper, which can be viewed here, postulates that blockchain is ideally suited to provide electronic transactions with all of the cash benefits consumers currently enjoy with, well, physical cash—so long as the underlying blockchain is a permissionless blockchain.

From the paper:

Electronic cash promises efficient microtransactions, and enhanced financial inclusion; robust digital identity may solve many of our online security woes and streamline commerce and interaction online; and blockchain-driven Internet of Things systems may spur greater security, competition, and an end to walled gardens of non-interoperability for connected devices.

A permissionless blockchain is one open to all comers, and due to the way blockchains are typically structured, this means that all comers control how the chain functions.

While this works well in some environments, that kind of structure can be justifiably worrisome for financial institutions and services, which is what led to the rise of permissioned blockchains—where the only users are approved users. Again, this is fine for certain use cases—it just so happens that creating the benefits of a physical cash economy with a virtual currency does not happen to be one of them.

Micro-transactions are of course the champion realm of physical cash across a majority of the world, but we have already seen this model work with a method of virtual currency on the first blockchain network that was ever created—this being the bitcoin blockchain, which was (and still is) permissionless.

While a permissionless blockchain-based electronic cash would be the closest electronic mimic to physical cash flow–which is both opposed and championed for its unrestricted nature–there is still debate over whether stopping that physical cash flow will actually prevent the problems that cashless champions say that it will. Certainly, several modern choices to reduce the amounts of physical currency circulated have had some negative economic consequences.

In other blockchain news, Denmark is considering producing its own fiat electronic currency (this in a country where only 20% of transactions are conducted in cash); bitcoin is at its highest  price in years; and Coinbase is disputing the legality of the IRS’s subpoena for customer data on its virtual currency exchange.

1 - Reader Likes This Post

One thought on “(Permissionless) Blockchain Could be Key to the Cashless Kingdom

Leave a Reply