We have always been told that money does not grow on trees, which is true, but the economic revolution in the payments industry that has taken place in recent years has taught us that yes coins can “grow” online and that the wallet we knew is no longer the same wallet. The global amount of investments in the fintech industry (technologies in the financial field) was estimated in 2019 at about $ 135 billion and is constantly rising. One of the main reasons for this is that institutional and business financial entities, regulators and veteran service providers like banks have realized in recent years that they need to adapt to the digital age and the new consumption habits and expectations of their customers.
The economic technological revolution is extensive and includes changes such as automation in financial institutions, beyond green receipts, digital tax services and of course digital wallets – in order to march into the world without banknotes or physical currencies. One notable example of a revolution in the industry is the growing popularity and profitability in recent years of digital currencies, the most famous of which is Bitcoin, but it is really not alone.
The digital currency is called cryptocurrency or crypto currency, and it is only a digital asset that is used as a means of payment and trading and is based on encryption (cryptography) to secure the transactions and verify the transfer of assets between users. Up to this point it sounds simple, but unlike an institutional currency like the shekel or dollar, digital currencies are controlled in a decentralized rather than centralized manner, and their value is not determined by a central bank in the country, but by a user network that trades through P2P. BitTorrent and similar software.
But here an important question arises: if there is no central institutional body that runs the system, how do we know that we are not being robbed and what actually prevents us from producing unlimited virtual money and sending it to ourselves? The answer is the blockchain system, which has also become popular in recent years due to the fact that it allows homogeneous groups, such as companies in the field of pharmaceuticals and medical equipment, to establish an internal trade network in P2P. The system serves as a public database for financial transactions, and the definition and transfer of the currency is done through smart contracts between the users of the network under strong encryption. It even created a new industry called “crypto mining”, which we will expand on later.
Fear of fraud
In recent years, more and more countries, such as the United States, Singapore, Switzerland and Israel, have begun working to create cryptocurrencies and regulate the use of cryptocurrencies, especially in Bitcoin. According to Bloomberg data, this is leading many investors to look for the next glittering currency, the new bitcoin, which also entails a great risk of many online scams. Ltd., “one, which is already beginning to be dealt with worldwide, on the subject of money laundering, and the other is pyramid scams (Ponzi scam). The intention is for a fictitious investment reporting system to emerge, supposedly successful in the currency, when there is really no asset behind the transactions or it has not covered a comma of total expenses.
“Just as you can ostensibly sell a security that does not really exist, so do cryptocurrencies, and I do not mean classic established currencies like Bitcoin, but new virtual currencies, and new currencies are constantly entering the market. In recent years there has been a decline in classic Ponzi scams. In cryptocurrencies, and there are quite a few stories about coins being issued to the public, and started trading in them, and one fine day the person who supposedly represented the currency disappeared.It is important to examine how tradable the currency is, and where to check. “Getting into Bitcoin today is an expensive business, and everyone wants to be a part of it, there are many who are trying to ride on the back of its success, and as these currencies become more popular, the risk will increase.”
The second risk that a country is talking about, money laundering, stems from the fact that in the beginning many of the decentralized currency traders were criminal organizations, but the authorities in Israel and around the world have begun to address the phenomenon more strongly in the past year. “Using cryptocurrencies, the activity does not lead to reporting to the authorities, and you can do economic activity without the regulators coming to ask questions,” he explains, “but the regulators woke up and took action so that the whole system would go through a reporting mechanism.” It is regulated, there is an address, and everyone who makes currency transactions must report them, and they are under the supervision of the Anti-Money Laundering Authority. “
As mentioned, digital coins are created on the Internet and this situation has created a new industry called “cryptocurrency mining”, similar to miners working in mines to extract the desired element from the ground, coin mining is done using PCs, users who use their processing power to run a complex mathematical formulas. And in return the miner is compensated in digital currencies. This is because the blockchain network is based on encryption and authentication, and they are made by the same PCs that maintain and protect the network – the more reactors that work on the network, the stronger, faster and more secure it is.
To understand how much this industry is growing, one can see the announcement from the American technology and chip giant Anvidia, which recently announced a new product line called NVIDIA CMP – graphics cards, GPUs, all aimed at providing the best performance for digital coin mining. The cards offer improved airflow (thanks in part to the waiver of the screen connection port), offer lower energy consumption and are designed to meet the relevant needs for digital coin mining. According to the statista website, the digital coin mining industry has only grown over the years, reaching an average revenue level of about $ 50 million per day during 2021. Most virtual reactors are based in countries where the cost of electricity consumption is not expensive.
One of the exciting things that has happened in the financial field in recent years, and is now also developing in Israel, is “non-contact” payments, which allow purchases in businesses by approximating means of payment such as credit cards, mobile devices and wearable products such as smartwatches.
MasterCard recently announced the launch of “Tap on Phone” technology, which allows payment without the need for an EMV terminal, and thanks to a dedicated application, every Android device becomes a clearing device. MasterCard Israel CEO Omar Unger notes that 2021 is a turning point in the payments industry in Israel. In fact, in the third quarter of 2020, contactless payments accounted for more than 80% of personal purchases in Europe. Today in Israel, about a third of all physical transactions and about two thirds Transactions at terminals that already support the EMV standard are made non-contact. In other words, Israel will close the gap in a relatively short time. ” “The use of cash will decrease, and we expect Israel to be one of the leading countries in the world in terms of adopting non-contact payment technology in a short time, both in cards and through digital wallets and wearable devices.
“There are many studies on the benefits of this, besides the costs of securing and transporting cash, an economy that deals with physical money is more convenient for tax evasion, money laundering and worse – for terrorist financing, which is a goal many governments connect to,” Unger adds. According to him, Israel is an anomaly because on the one hand there is a large penetration of non-cash payments, but on the other hand, the market lagged behind Europe and large US cities in implementing EMV and Contact Les systems. He explains, “Not only in e-commerce, Israelis also pay for insurance and services through credit cards. An efficient system has been built here, which has resulted in a relatively large penetration of electronic payments, between 40% and 60% of private consumption. “
He adds that although this is done late, there is a significant improvement in the adoption of the non-contact payment fashion in Israel: “We have noticed that 67% of transactions, where possible, are non-contact. That is, we close the gap in a relatively short time. In Europe, a quarter of transactions are in digital wallets “In Israel, this part of the revolution is only in the beginning – almost a percentage of transactions. Our first stage was the deployment of terminals and infrastructure, the second stage is non-contact tickets and payment methods and the third stage is closing the gap in payments and digital wallets, and I believe we will see a stabilization.”