A cashless society may well be the future of how you spend money, but Australian scientists, engineers and bankers are testing a new type of currency altogether.
Can a new form of money actually save money in the long term? That’s one of the questions being asked by an Australian team of engineers and scientists, as well as bankers from the Commonwealth Bank of Australia, as CSIRO’s Data61 and the CBA trial a new type of money.
It’s not just any money, either. It’s a new “smart money”, with this money able to be programmed to do more than just pay something, but rather manage payments.
This concept of smart money is one based on another technology, and in this case, it’s blockchain, the technology idea underlying the popular online currency Bitcoin. Used in this trial, Data61 developed a proof of concept and applied it to the National Disability Insurance Scheme, attempting to solve the problem of conditional payments based on when specific requirements were met.
Used with blockchain, the programmable smart money connects smart contracts to parts of the blockchain (tokens) that can then be redeemed for payment in Australian money. Smart money can not only work out when to pay for something automatically, but also be programmed to track budgetary information natively, with the smart money concept able to work out what you have and when you should spend it, logging payments and receipts, and reducing the chance to see money misspent.
In the blockchain, information is stored in one long file, and while it can’t necessarily be seen by everyone, evidence of all activity is stored and analysed, potentially giving the proof of concept in smart money all the information to analyse about a spender, and making decisions based on preset requirements.
While it might seem confusing, the bottom line for smart money is that it can be programmed to make complicated budget management more mainstreamed for the spender, and indeed businesses, cutting back on paperwork by forcing the money to do the awkward job, identifying when payouts need to occur and acting on it as and when the money needs to.
It’s a complicated approach and one Data61 has been working with the CBA to achieve economic benefits for the people using it, though it’s also one that’s shown the potential to deliver benefits to all, improving public policy programs, reduction costs and friction for businesses, and helping to optimise individual spending.
Though it’s also one that Data61 suggests requires careful consideration for governance arrangements, as well as an understanding to who has access to the view the entire blockchain.
“This has been an important research project for understanding the benefits and limitations of blockchain technology in the context of conditional payment environments, such as the NDIS,” said Dr Mark Staples, Data61’s Senior Principal Researcher in the Software and Computational Systems program.
“Our use of blockchain added new kinds of programmable behaviours to the smart money in the prototype system. This automation and flexibility could reduce friction and enable greater innovation in many payment environments and unlock network-effect benefits,” he said.
“This could include more directly connecting citizens to public policy programs, empowering people to optimise their spending through things like smart savings plans and smart diets, and reducing costs for businesses, including through the potential for self-taxing transactions.”