What resorts need to know about digital money.
Last month we broke down blockchain’s potential impact on the travel industry, and now we’re diving deeper into the primary use of blockchain technology: cryptocurrency.
What is cryptocurrency?
The answer is in its name: Cryptocurrency is an encrypted digital currency. Encryption regulates the generation of units of currency and verifies the transfer of funds, a level of security that’s needed because all cryptocurrencies operate independently of a central bank. The most popular cryptocurrency is Bitcoin, but there are more than 1,000 types. (The code to create a cryptocurrency is an open-source platform, so anyone can make virtual money.) The main distinguishing feature among types of cryptocurrency is the way they use blockchain. Some, such as Bitcoin, rely on blockchain to exchange coins, while others, such as Ethereum, exchange virtual currency with the addition of smart contracts, which let users program where that currency goes. It’s similar to setting up an auto-deposit to a bank; the currency can be invested, spent or saved automatically.
Why use cryptocurrency?
Unlike cash or credit or debit cards, cryptocurrency is decentralized, meaning it doesn’t live in one place (like money does in a bank), and it is dispersed throughout a blockchain. It can also move around the world instantaneously, unlike credits and debits, which take time to update to a bank account. Cryptocurrency could be especially beneficial for those who don’t have bank accounts but do have smartphones. With cryptocurrency, anyone can create savings accounts and raise, exchange or borrow money.
Who uses cryptocurrency?
According to blockchain news company CoinDesk’s 2015 study Who Really Uses Bitcoin?, out of 3,515 respondents, almost 60 percent were under the age of 35. In addition, 90 percent identified as male and 66 percent as white. The fact that the initial user base for a virtual product was mostly white millennial men may not necessarily come as a shock, but the recent popularity of cryptocurrencies as a whole has diversified its user base. A January 2018 joint study by SurveyMonkey and Global Blockchain Business Council found that out of 5,700 adults polled, about half are minorities, the majority of which are still young (under 35)—58 percent. And with Bitcoin’s value growing (from $1 per coin in 2011 to more than $8,000 as of March 2018), it’s created a new type of wealthy user. Its peak value was $19,000 in December 2017.
How could cryptocurrency impact travelers?
Travelers may see cryptocurrency as a way to circumvent the costs of currency conversion, ATM withdrawal fees and transaction fees as well as avoid the fraud risks that come with international credit card use. While cryptocurrency is still not widely accepted at most retailers, Bitcoin, most notably, is beginning to be accepted by online travel agents such as CheapAir.com (to book flights) and Destinia.com (to book flights and hotels)—and even Virgin Galactic, the space-travel company.
What should resorts do?
Sit tight. Until a cryptocurrency—if any—becomes a ubiquitous medium for transactions, there’s no need to invest in the technology or accept cryptocurrencies as a form of payment. From a traveler standpoint, cryptocurrencies aren’t accepted everywhere (in China, their use is outlawed), don’t offer the built-in trip-delay or baggage-loss protection many premium credit cards do, and don’t allow users to earn points. This means that although cryptocurrency continues to gain legitimacy, it’s still risky technology to invest in.
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