If you have ever considered where money originated or why we use it, then join the club.
Long before the day of the dollar, civilizations operated under a system of barter where goods were directly exchanged for other goods. While there are a few benefits with this system, people quickly realized the obvious flaws. For example, if a farmer had a cow to trade, they would need to find someone with goods of equal value. Further, there is often an expiration date associated with certain goods, such as a farmer’s milk or a baker’s bread. Therefore, even if a baker had enough bread to buy a cow, the farmer would have no use for that much bread.
These days, most of the world uses government issued currency that acts as a standardized means of exchange. While currencies address many of the issues of the barter systems, they are still often limited by some factors. For instance, if a person wants to spend money online or while vacationing in a foreign country, that spending creates transactional friction. In other words, customers pay fees to a middle man, whether it’s to exchange currencies or process transactions.
As a result, many have turned to cryptocurrencies as a solution to transactional friction, though cryptocurrencies have not been able to handle scalability for the time being. As a result, using cryptocurrencies for their intended purpose is virtually impossible. For cryptocurrencies such as Bitcoin or Ethereum, consumers spend several dollars in fees to make a transaction, rather than the fraction of a penny that they initially boasted.
Consumers around the globe are losing billions of dollars each year to various fees. So what can we do to avoid transactional friction? One piece of advice is to avoid using money where possible. Try to exchange your marketable skills for something more valuable than money. Programmers are continuing to work on some of the scalability issues behind blockchain technologies. In the meantime, everyone else can have a bit of patience and remain on the lookout for the progress taking place.