This week Apple announced two new pieces of hardware, the iPhone 6 and a “smartwatch.” But as flashy as they are, neither item is as groundbreaking as a piece of software that will accompany them: a digital wallet, allowing users to eschew cash and credit cards for a quick swipe of their device at the register.
Apple’s digital wallet, if widely adopted, could usher in a new era of ease and convenience. But the really exciting part is the fast-emerging future that it points toward, in which virtual assets of all sorts — traditional currencies, but also Bitcoin, airline miles, cellphone minutes — are interchangeable, opening up enormous purchasing power for consumers and creating tough challenges for governments around the world. (...)
We don’t typically think of these as currency, because virtual money has traditionally been locked down, in the sense that its use was strictly limited: If you earned points from Amazon, only you could use them, and you could exchange them for dollars only within the Amazon marketplace. Meanwhile, up to now, the only currencies you could use everywhere in an economy were state-issued currencies, like the dollar.
But that distinction is eroding: After all, the value of a currency lies in what you can buy with it, not in the fact that a government says it’s worth something. So if I want to buy a widget, and the only thing I can use to buy it is Widgetcash, then I am willing to trade dollars or euros or anything else for Widgetcash. When I buy something with Widgetcash, it doesn’t go through any bank.
That’s why a digital wallet, loaded with your dollars, credit and loyalty points, is such a revolutionary technology — it makes those transfers and transactions seamless and safe. (...)
The revolution is what comes next: an exchange that connects and trades these different stores of value to find the most cost-efficient one to use, both within your wallet and between wallet users, worldwide. Let’s say you want to buy an audiobook from Best Buy. It costs $16, or 1,000 My Best Buy points, or M.B.B.P.s. Your wallet contains several hundred dollars and 200 Best Buy points. The wallet software automatically determines that, at the current exchange rate between M.B.B.P.s and dollars, it is better to buy using the points.
But then let’s say you only have 50 M.B.B.P.s. The wallet system searches its clients and finds someone — call her Hannah — with enough M.B.B.P.s for the transaction. It buys the audiobook with her points and sends it to you, and sends Hannah dollars from your account.
Following Bitcoin’s protocol, the wallet software broadcasts these transactions to the network, and every wallet in the world updates the M.B.B.P.-to-dollar exchange rate.
The idea is that you can buy anything, with anything. The wallet will find the best deal and execute it. In so doing, it will ignore the historical and cultural differences between dollars, points, coins and virtual property. It’s all bits anyway.
Apple’s digital wallet, if widely adopted, could usher in a new era of ease and convenience. But the really exciting part is the fast-emerging future that it points toward, in which virtual assets of all sorts — traditional currencies, but also Bitcoin, airline miles, cellphone minutes — are interchangeable, opening up enormous purchasing power for consumers and creating tough challenges for governments around the world. (...)We don’t typically think of these as currency, because virtual money has traditionally been locked down, in the sense that its use was strictly limited: If you earned points from Amazon, only you could use them, and you could exchange them for dollars only within the Amazon marketplace. Meanwhile, up to now, the only currencies you could use everywhere in an economy were state-issued currencies, like the dollar.
But that distinction is eroding: After all, the value of a currency lies in what you can buy with it, not in the fact that a government says it’s worth something. So if I want to buy a widget, and the only thing I can use to buy it is Widgetcash, then I am willing to trade dollars or euros or anything else for Widgetcash. When I buy something with Widgetcash, it doesn’t go through any bank.
That’s why a digital wallet, loaded with your dollars, credit and loyalty points, is such a revolutionary technology — it makes those transfers and transactions seamless and safe. (...)
The revolution is what comes next: an exchange that connects and trades these different stores of value to find the most cost-efficient one to use, both within your wallet and between wallet users, worldwide. Let’s say you want to buy an audiobook from Best Buy. It costs $16, or 1,000 My Best Buy points, or M.B.B.P.s. Your wallet contains several hundred dollars and 200 Best Buy points. The wallet software automatically determines that, at the current exchange rate between M.B.B.P.s and dollars, it is better to buy using the points.
But then let’s say you only have 50 M.B.B.P.s. The wallet system searches its clients and finds someone — call her Hannah — with enough M.B.B.P.s for the transaction. It buys the audiobook with her points and sends it to you, and sends Hannah dollars from your account.
Following Bitcoin’s protocol, the wallet software broadcasts these transactions to the network, and every wallet in the world updates the M.B.B.P.-to-dollar exchange rate.
The idea is that you can buy anything, with anything. The wallet will find the best deal and execute it. In so doing, it will ignore the historical and cultural differences between dollars, points, coins and virtual property. It’s all bits anyway.
byEdward Castronova and Joshua A.T. Fairfield, NY Times | Read more:
Image: Getty
