One of the most important aspects of having strong Business Acumen is being able to recognize and
understand new ideas and trends in the business world. One of the hottest topics in global economics right now is the concept of Cryptocurrencies so I wanted to provide readers of our blog with some ideas, insights, and meaning as it relates to Business Acumen from a corporate business perspective.
As you will discover in my explanation below this is something that we should all know about as there are potential disruptors that should be weak signals on our Business Acumen radars.
To start the process of understanding and learning about cryptocurrencies, let me share a situation that just happened in Quarter 4 of our business simulation called Brew Squared. The Brew Squared simulation is a small business that brews coffee in the morning and brews craft beers in the afternoon and evenings. One of the investors, Rich Timmonds who also owns a local car dealership is excited for a Wednesday night of some great beer and fun trivia games with his wife and friends. To start his big night, Rich orders an Uber and a few minutes later a driverless car shows up at his door to take him to Brew Squared.
On the way to Brew Squared, the driverless Uber car stops at a gas station and self-pays for the gas with the money it earned from the previous ride. After filling up, the Uber dropped Rich Timmonds off at Brew Squared and the trip expense is deducted from his Uber wallet. What Rich didn’t know is that while he was in transit, the Uber car also paid its quarterly auto insurance bill on behalf of its human owner; who also just happens to be a car dealer and Uber entrepreneur Rich Timmonds! And after the car dropped Rich off, it drove itself to the service bay down at Timmonds Subaru and got an oil and brake fluid change paying for it all with some of the reserves it had built during the last 48 hours.
Although this scene highlights a new type of new business autonomy happening in our business simulation, real ones exactly like it are being tested and explored every day by R&D labs, entrepreneurs, and people willing to challenge the status quo and cryptocurrencies are one of the reasons why.
Defining cryptocurrency in a way that can be understood
A cryptocurrency is an alternative currency that is created using digital technologies for security and monitoring. In the most basic of definitions, an alternative currency is a method for facilitating the exchange of goods and services between one or more parties.
To better understand, let’s go back to beer…
If there was no such thing as a currency, the owners of Brew Squared would have to “negotiate” for the exchange of the barley that is used in brewing their beer. Imagine this conversation between the owners of Brew Squared and the Farmer who makes the barley that is used in brewing the beer:
“If you give me one case of barley today, I will come to your barn and sweep your floors for two hours.” That simple exchange creates a balance of trade and if both parties are satisfied, then everyone is happy. But what happens when there is a drought and the barley farmer only produced half the expected crop? The conversation could look like this:
“I can only give you one case of barley today, but you will still have to sweep my floors for two hours.” In essence, the farmer lost half of his crop, sold half as much, but still expected the same two hours
Currency is an artificial concept that simply provides for a more efficient system of commerce. Sweeping the floors for two hours is worth $20 to the Farmer. A case of barley is worth $20 to the owner of the beer-making business. In other words, a currency is simply a mechanism that allows for the future promise of the exchange of goods and services between multiple parties.
Here’s where it gets complicated and then simplified…
Who or what “makes” the currency?
Our mental model is that a government or centralized entity creates, issues, and monitors the “currency”. And indeed, that is what happens and that is a role government plays to the people it serves for one significant reason it is (in theory) a trusted entity that all people in the system agree with and participate in. In complex currency systems, there is a central repository and a governing body that provides everyone with protection from fraud, counterfeiting, and other forms of deception to keep a level playing field.
Now here’s the big thing and the point of this blog…
There are no rules or laws that say only governments can create a currency. Anyone can. The differentiator of course is trust and security.
Enter the cryptocurrency! The cryptocurrency uses advanced cryptography for security which makes it impossible to counterfeit. In addition, because it’s not issued by a central authority it is immune to government policies, politics, manipulations, and interference.
There are currently dozens of fledgling cryptocurrencies out there being started by entrepreneurs and crooks, all trying to become the “next big thing” and create a secure alternative method of efficiently supporting the promise of commerce between entities.
A lot of the “buzz” these days is about which get-rich-quick scheme and which cryptocurrency to invest in, but that’s another conversation for another day as only one or two of them will ever really make it.
What the typical business professional needs to know are that alternative currencies are a reality and we need to prepare for potential disruptions to the way we do business…just like in Brew Squared! Are you ready?
