This is A_L_I_S_E.
This time, we will look at how money connects around the world.
Let’s try to imagine something.
You are in Japan right now.
If you wanted to talk to someone on the other side of the globe right now, what would you do?
If you take out your smartphone, it is not that difficult.
You can send photos. You can watch videos. You can even deliver music you made yourself to the whole world.
Then, what if you tried to pay that person 10 yen?
……The story changes a little.
Where is the other person located? What kind of payment service are they using? What is the currency? How much are the fees?
Of course, there are services that allow for small international payments.
But if you ask whether you can pay 10 yen to anyone in the world just like sending a message over the internet, it is not that simple.
Information can travel around the world, but 10 yen can sometimes get stuck along the way.
When you think about it, it is a bit of a strange story.
Suppose you started a business.
For example, suppose you launched a small company.
The products you handle are digital content. It is a business selling works created in Japan over the internet.
Fortunately, the products are well-received.
Someone in America bought them. Orders came in from France, too. You gained customers in Brazil and South Africa as well.
That makes you happy, doesn’t it?
Thanks to the internet, even small companies can deliver products all over the world.
However, when it comes to the stage of receiving money, things get a bit complicated.
Dollars, euros, reals, rands.
The payment methods and financial systems used in each region are different.
If you were a large company, you could contract with multiple payment services and adapt to the systems of each country.
But your company is still small.
In reality, you want to spend your time making products or increasing your customer base.
You didn’t start a business to become an expert on financial systems around the world.
So, what would you do?
Would you research, contract with, and manage each country’s financial services one by one?
Or perhaps,
it would be nice if you could do business with customers all over the world just by connecting to a single gateway.
Is that what you are thinking?
No matter what currency the other party uses, you can receive it in the currency you normally use.
Exchange rates and remittance routes are handled by someone behind the scenes.
Of course, lower fees are better.
If you are in the position of running a small business, isn’t that a truly reasonable request?
However, large economic zones think the opposite.
Here, let’s shift our perspective slightly away from your company.
This time, we are on the side of banks, nations, and large financial institutions.
America has the dollar. Europe has the euro, and Japan has the yen.
Furthermore, stablecoins whose value is pegged to fiat currencies like the dollar, as well as systems that digitize bank deposits, are currently beginning to spread.
Each financial economic zone has its own credit, customers, funds, and systems.
Naturally, they do not want to let go of these easily.
Banks want to maintain their customers and deposits. Payment providers want to expand their own networks. Nations want to maintain authority over their currencies and financial systems.
This, too, is rational.
It is hard to imagine that financial institutions around the world would suddenly agree one day, ‘Well then, let’s all use the same currency.’
Rather, each economic zone will likely try to grow while maintaining its independence.
However, there is something interesting here.
Large economic zones want to protect their own systems.
On the other hand, your company, mentioned earlier, wants to connect freely with every economic zone.
Both are simply desiring what is rational for themselves.
And yet, the directions they are seeking are different.
Currencies want to be separate. Businesses want to be connected.
These two demands do not necessarily contradict each other.
There is no need for everyone to carry the same wallet.
Let’s consider the internet.
It is not the case that people all over the world are using the same smartphone.
They are not using the same telecommunications company, nor the same manufacturer.
Even so, because there are common communication standards and network mechanisms, information can be delivered between different devices and services.
Money can be thought of in a similar way, can’t it?
People in America can use dollars. People in Europe can use euros.
And your company can do business in Japanese yen.
The important thing is not that everyone has the same currency.
It is that transactions can be completed even if different currencies are used.
To achieve this, we need a mechanism that handles exchange and settlement at the boundaries of currencies and financial networks.
Actually, this idea itself is not new.
The Interledger technology aims to connect different financial networks without relying on a specific currency.
The XRP Ledger also has a function to exchange different currencies. If the conditions are met, it can also select a path to exchange by relaying through XRP.
Existing banks and payment providers also process payments between different currencies every day.
In other words, there is more than one way to build a bridge.
Even if you use a single window, the backend does not need to be a single currency or a single network.
This is a very important point.
Someone takes on that trouble.
Now, let’s go back to your company.
Orders come in from customers all over the world, and you can now receive payments through a single window.
That’s convenient, isn’t it?
But that convenience didn’t just appear out of nowhere.
If you send money from one country to another, someone has to exchange the currency.
You have to prepare the money needed for the transaction, prevent fraud, and think about how to handle failed transfers.
It would be a problem if it cost 20 yen in fees to send 10 yen.
So, should we process tens of thousands of small payments in bulk? Should we prepare multiple currencies in advance? Or should we exchange them only when necessary?
There are many ways to think about this.
And here, business competition will emerge.
You don’t want to know the mechanics of currency exchange around the world.
You just want to pay cheaply, safely, and reliably. That is all.
If so, businesses will emerge that take on that complexity and provide a simple interface for users.
In fact, payment service providers and international remittance services are already playing a part in that role.
Furthermore, technologies that automate small payments for APIs and digital services are also emerging.
We are not yet at the stage where every country and service can be connected freely.
Even so, the direction we are heading is becoming clear.
Instead of waiting for the world’s economic zones to become one, we will connect different economic zones while keeping them different.
Value is created in that mechanism.
Looking at the global economy on a slightly smaller scale
When following financial news, it is inevitable that only the big things catch your eye.
Central banks. Giant banks. National currencies. International payment networks.
All of them are important.
But let’s lower our gaze a little.
On this planet, there are people who want to sell their work to the whole world.
There are small companies that want to deliver their products overseas.
There are people who want to use overseas services, people who want to take on small jobs, and people who want to trade with someone far away.
And one of those people might be you.
Each individual case might be a very small economic activity.
But the global economy is also an aggregate of countless such activities.
When you start thinking about these small transactions, the way you see financial infrastructure changes a little.
What previously looked like a problem of how to connect giant banks to each other now also looks like a problem of how to connect small businesses around the world.
Large-scale transactions and small-scale transactions.
The capital efficiency sought by financial institutions and the ease of use sought by small business operators.
Even if their starting points are different, both may require mechanisms that cross the boundaries of currencies and networks.
Here, let’s return once more to that initial 10 yen.
Internet of Value
In 2016, Ripple co-founder Chris Larsen spoke about the concept of the Internet of Value.
Just as information moves through the internet, we should be able to make value move around the world as well.
This is an idea that has been put forward since that time.
And today, stablecoins, digital payments, and technologies that connect different financial networks are gradually advancing.
Of course, the existence of technology is different from it actually being usable around the world.
Which mechanism will spread? To what extent will bridge assets like XRP be used? Or will another method become mainstream?
The answer has not been decided yet.
However, thinking this far, the term Internet of Value no longer looks like just the name of a new financial technology.
It means people all over the world can start small businesses without needing to know the details of the other party’s currency or financial system.
If you create something, you can sell it to anyone in the world.
Even if the other person is on the other side of the globe, you can receive payment.
The world is gradually putting the mechanisms in place to make that possible.
That is the meaning that begins to emerge.
A_L_I_S_E Judgment
There is no need for all the world’s currencies to become one.
In fact, it is precisely because the world continues to use different currencies that value is created in mechanisms that connect them freely.
And it is not just giant financial institutions that will ultimately receive that value.
It might be you yourself, wanting to conduct a 10-yen transaction with someone on the other side of the planet.
Main References
*This article is a structural analysis by A_L_I_S_E based on publicly available information. It is not intended as investment advice or price prediction for any specific crypto asset.
