If you’ve ever done any accounting, you know just how much tedious human input goes into the process. It’s incredibly inefficient… subject to errors, modifications, and… dare we say… tampering. But what if our money was its own accounting system? And, not only that, what if our money was programmed to behave a certain way? Well, that’s becoming a reality and it’s called programmable money. But what exactly is it, and how is it different from what we’ve had in the past?

At a core level, programmable money is characterized by existing digitally and being programmable (automated)… it’s really that simple. Now, these capabilities have existed for some time, but it’s different today. Why, you ask… the blockchain, that’s why. Prior to the blockchain, we could automate transactions and we could have digital representations of money, but what we didn’t have was a system that exists as both components simultaneously and interdependently.

Traditionally (at least as it pertains to banking with computers), “money” has consisted of ones and zeros in a database representing the value of bills or coins (to simplify) existing outside the database… blockchain changes all that. Blockchain is not only the database, but it is also the money (again, oversimplification, but it works to illustrate the point).

Usually, to “automate” money, we’d need to reach into a database with what’s called an API (fancy tech talk for special code that allows one software to talk to another) and pull that information onto a front-end user interface. Think of it this way… if you bank with an application, that application is simply a graphically pleasing, usable representation of the data about your bank account. That information is being pulled out of a database with an API.

However, with the blockchain… things are going to get… weird. We all need a little more weird in our lives, right? Where a traditional database connects to an API, a blockchain database stores both value records and program logic and has some intrinsic mechanism enabling interaction between the two. The bottom line is, technical components of programmable money are inseparable and consistently functional (think stable, usable).

Using this understanding of blockchain technology in programmable money, we can then update our understanding of the definition of programmable money to mean a uniform product with both the components of storage of value and programmability built simultaneously, without the need for outside mechanisms to accomplish either. Cool, now that we know that… let’s find out how it’ll change our world, and how we think about money, make transactions, and even invest.

CBDCs And Everything Else For Sale

When we think about “our stuff” and how we get “our stuff”, we tend to think macro… and for good reason. For a long time, if you wanted something, you bought a whole lot for a lump sum. Again, this was for good reason. We all lived so far apart, things were hard to come by, transportation, care, and storage were an issue, as was communication. That’s not true any longer. We’re moving from “get a lot all at once for a lump sum” to “get a little bit when you need it for a little chunk of payment”.

Technically, this is referred to as tokenization. All it really means is that a real-world object has a digital twin representing its value on a blockchain network. Once this happens, that real world object can be traded or sold, and that process will be represented on the blockchain as a store of value as well as a record of the transaction.

We can effectively do what is done on the stock market, make everything have literal, transactable value. But let’s push it to where we’re all already going in our minds… let’s walk through a few scenarios about how programmable money could apply to a Central Bank Digital Currency (CBDC) should one be launched.

With built-in rules that constrain users, we can envision a multitude of problems that could be solved. For instance, imagine there’s a natural disaster in your state and you are granted federal money. With a programmable CBDC, those controlling the purse at a federal level could program the allocation of the funds directly into the money. And just like that… no more fat-cats at a state level syphoning off emergency funds.

Down to the last cent, the money could be programmed. In fact, it could be programmed down to the level of which vendors the money is compatible with, along with a spending amount. Just imagine, we’d never have to worry again if our local air conditioner repair man turned governor is being crooked. Think how many of our useless problems that would solve… it’s a beautiful vision. Perhaps naive, but beautiful.

Or… the money could be programmed to expire at a certain time. Let’s say we get more stimulus money. If it were a programmable CBDC, each person’s money could be set to allow them to only spend it on food and gas, and perhaps restrictions placed on how long the money can sit in the bank account so stimulating the economy would not be a choice, but built in. You don’t use your stimulus money to buy food within two months, the funds are then dead. Now, how that would work… well, people way smarter than us are probably already on the case.

Dream or Dystopian Nightmare?

To be fair, it’s easy to imagine all the good programmable money could do. We are aware, however, that the human element always tosses a wild card into our equations. Just as easily as the money could be programmed for good, it could be used in ways that could damage society beyond repair. So, will programmable money be a dream or a nightmare?  Well, the jury is out on that. But we have a feeling we’re about to find out. Keep coming back, as we race into the future of money, we want you here with us.