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Digital currencies are coming. It’s not a matter of if, but rather when and which type. Right now, despite heroic efforts by developers and early adopters of decentralized crypto, once central banks start introducing their digital currencies the game will change. If these offerings actually bring some level of perceived improvement over existing fiat systems, they are likely to have the wind at their back for a period of time in terms of gaining market share relative to the decentralized crypto market. Why? It will certainly be country dependent but in general, their new systems are likely to be easier to understand as they will be anchored in familiar concepts. That greater level of familiarity, along with the endorsements/partnerships that the governments will announce as they are rolled out will naturally attract a lot of low-hanging fruit. This low hanging fruit are the people, and there are a lot of them, who either don’t want to transition to the unfamiliar or who stand to lose a lot if private crypto takes off.
If the FED sticks with its commitment to issue a Fed Dollar that compliments the current system (publicly issued currency with private accounts), economic participants may suddenly be presented with several different platform options: A. Stick with the old. B. Go with the new government sponsored platform. C. Go with a decentralized crypto platform. My guess is many people will probably do some combination of the three if given that option. All of this leads me to believe that if the governments manage the introduction well, the marginal flow to the digital space will likely go to the CBDC’s. Thus, we may see a significant short term momentum swing away from decentralized crypto towards CBDC’s at that point. However, what I am not saying here is that I think the CBDC movement will win long term. As we all know, it really doesn’t solve the core problems that are driving people away from centralized systems, which will still be controlled by the same people that have made a mess of the current system. I do have a question though of how strong and how long that pendulum will swing the other way though.
As early adopters in the decentralized crypto movement, what can we be doing now before that momentum swing comes? I actually believe the answer is simple, though not easy: Better education through better metaphors. By that, I mean that we have to learn to communicate what really needs to be communicated about the decentralized crypto in a way that is more easily understood. Its got to be sharper, more relevant, and easier to understand. For the average noob, getting into this space is a bit like opening Pandoras’s box and I just don’t think the average consumer will want to deal with that. They don’t want to have to learn about unfamiliar concepts like proof of stake, proof of work, or the potential threat of a 51% attack. They just want to know that their money is safe, dependable, and usable. In my opinion, that means the movement must work to sharpen the communication on the points that really matter and learn how to explain more complex concepts in a way that is more easily understood. With that, I would love to hear from you. What are the best metaphors about crypto concepts that you've heard?
Cheers,
NZFX
