For my upcoming book "Financially Forward," I've read every cryptocurrency-related text I can get my hands on, watched dozens of videos and interviewed countless leading entrepreneurs -- all with an eye toward taking a balanced, informed approach to the possibilities ahead.
Here's a closer look at what this may mean for our wallets.
1. No More Middlemen
Today, when it comes to managing our money (or processing just about any transaction), middlemen abound. There are banks, credit card processors, payment platforms, stock exchanges -- the list goes on. Everywhere you look, entities are standing between both sides of every transaction we carry out. And in many cases, one or more of them is taking a cut or charging a fee.
Take a credit card transaction, for example. Your credit card issuer (e.g., Chase) and payment processing network (e.g., Visa) manages the transaction. The store where you make a purchase uses a point of sale system (e.g., Square) and pays a transaction fee. That's a lot of cooks in the kitchen for a straightforward exchange of funds to buy something simple like a coffee.
With blockchain, those middlemen could disappear. One of blockchain's main features is that it's decentralized -- meaning that you can transact directly with the producer of the item you want to buy, no bank or credit card needed. Transaction fees are no longer a part of the equation. Think about how much money that could put back in your wallet! And more importantly, how much this simplifies the transactions we make -- giving us more clarity into where our dollars go.
2. Smart Contracts
Today, executing a contract is a rigorous process that involves lawyers and headaches. Think about buying a house. You have brokers, real estate and bank lawyers, the deed company -- the closing process involves a ton of people, and mountains of paperwork (and of course, legal fees).
But blockchain can eliminate just about all of it. You don't need all of those records and documents; the blockchain stores all the information. Buying something like a house becomes seamless. Contracts can be automated and direct. By reducing the time it takes to buy and sell, property can suddenly become a more liquid and accessible asset for consumers, pushing transaction costs down, and allowing consumers to more easily tap into their home equity.
Blockchain, in other words, takes power out of the hands of institutions and puts it into the hands of the consumer.
3. A More Secure, More Streamlined Wallet
It's no surprise that so many people fall victim to credit card fraud. We all know that if someone walks into a store and tries to buy something with your credit card, the cashier barely glances at the name on the card, let alone the signature. The company might assume something is fishy and send you a fraud alert -- or perhaps you check your statement a week later and notice that something is wrong. All told, it takes days for a transaction to be tracked and verified as fraudulent, another day or two for your new card (to replace the one you had to cancel) to arrive.
But all of that could be streamlined with blockchain. Because transaction records are permanent and immutable, there isn't a question about who is involved in a transaction.
With blockchain, our phones could store not just our credit cards and passwords, but our medical records and our prescriptions, and even the "keys" to our car and home. Your identity will be fundamentally managed in one spot.
Once these disruptions start to change the way we as individuals interact with money, the next phase will be disruption across industries and society.
But while blockchain holds the potential to put more and more power into the hands of individuals, that doesn't mean it's going to be easy. These new technologies are endlessly complex -- but the possibility for innovation is endless, too.
Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance Company (NM), Milwaukee, WI and its subsidiaries.