Potential Effects of Blockchain and Crypto: LOSING THE USE OF FIAT CURRENCY

A fairly recent crypto news article caught my attention – it was about the car company, Jaguar Land Rover, and the ability of drivers of its vehicles to earn Iota, a digital currency. At first, it was simply interesting because it involved crypto and was another data point of a digital currency becoming more mainstream. But then, after analyzing it a bit more, the more serious implication hit me: what if this was a small, but significant contribution to the downfall of fiat currencies?

That’s a pretty a serious comment I just made, but the theory is worth examining. It starts innocuously enough with Jaguar Land Rover wanting to collect driver data to enhance the customer’s experience. By simply ticking a box, the car owner allows information while driving (traffic congestion, potholes, accidents, etc.) to be passed on to a central database at JLR, when then aggregates it and offers it back to the drivers, so that they can go about their day more efficiently. Not only do the drivers get a better user experience, they get rewarded with a cryptocurrency, Iota. But it doesn’t stop there, because JLR’s plan is to also let the drivers spend the collected Iota on driver-related expenses, such as tolls, tickets, cups of coffee, etc. This is where this concept goes from interesting to potentially alarming.

Eventually, this loop becomes a closed ecosystem: drive normally, earn Iota, spend it on driving stuff, rinse, repeat. Where’s the cash involved? There is none! Through a mundane daily activity, consumers wind up earning and then purchasing goods / services with digital currency. The JLR loop just described would be extremely small from the perspective of a country’s GDP, but what if thousands, if not tens of thousands, of these programs come into being over time? At some point, the aggregated value of these types of transactions could be staggering! After all, there will probably be plenty of other reward or incentive programs put into place, meaning that money as we know it will be used a little bit less each day. And the result? Less and less fiat currency being used within an economy, possibly leading to a loss in value as velocity and total transaction volume decreases.

Even a marginal shift of this nature should make the Federal Reserve, the Bank of England and a whole host of central banks very nervous…