The Demise of Paper Currency

December 16th, 2011

These days it appears as though everything is going digital. Will currency follow suit? It may seem far-fetched to think that currency could go fully digital. Nevertheless, people already depend greatly on credit cards and online auto-payments to pay their bills. Gas stations, parking meters, as well as vending machines take plastic now and many people don’t carry cash any longer. So we might not be that far away from ditching paper money after all.

The Bitcoin revolution?

Did you realize there is an increasingly popular digital currency currently in “circulation?” Bitcoin, first seen in 2009, is an “unhackable” peer-to-peer digital currency that’s recognized worldwide and can used to buy goods and services.

Bitcoin isn’t technically a legal tender and therefore many, if not most, retailers outside the Bitcoin user database won’t accept it.  It is quite possible another alternative digital currency may pop up and over take Bitcoin, becoming more mainstream than the groundbreaking Bitcoin.

The digital currency model

There are lots of advantages to ditching paper money. You cannot lose digital currency because it falls out of your pocket. You don’t have to be sure that you constantly have enough of this digital money in your wallet to cover a purchase. Furthermore, countries can eliminate the need to constantly replace damaged paper currency that must be taken out of circulation.

Digital currency may also be safer. For instance, if your cash-filled wallet is stolen, there is little chance you will get that money back. However, if a person steals a credit card, you can quickly cancel it to protect yourself from further theft and possibly get some of that money back. Similarly if someone were to steal your digital dollars, the digital trail makes it more likely that you may retrieve your funds.

Holdouts

It’s unlikely the change to an all-digital currency world will be met without a few strong objectors. There are still consumer luddites today that have never opened a line of credit with a credit card company, never used the banking system, and prefer to handle all purchases with cash. The future is always in flux and it will be interesting to see how both sides of the debate form their stance on the issue.


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