I have been thinking about this for a while and never got around to really putting it into words until now. I think at times we are all caught up in the excitement of Bitcoin or whatever currency we are talking about at the time. Don't get me wrong, it's a fun and exciting new front of currency. But I like to look at life through a pessimistic optimist perspective (I know it doesn’t make sense but neither does my brain).
There a so many different cryptocurrencies that in order to really talk about them we need to classify them. I came across an article on Kraken that divides them up in a neat way that I will model here.
Payment Cryptocurrencies:
They are the tokens you pay for goods with.
I think a lot of times we can get caught thinking all crypto is a payment cryptocurrency. But they really are not all the same. Sure, we buy, trade, sell all tokens. So, in that sense they are payment tokens. I can take my BAT and sell it for USD or trade it for Ethereum. But that is just a happen chance that benefits us now.
To really dive into this, I want to look a very small subset of the Payment tokens, Bitcoin and Nano. Let’s start with the King of crypto Bitcoin. BTC is the reigning beast of the crypto world, at the time of writing BTC hold a 68% dominance. That to me is incredibly insane and not sustainable. Bitcoin is worth somewhere in the ballpark of $34,000 per Bitcoin, but it can be broken down into “satoshi’s”. If you want to buy a Pizza you don’t have to pay $34,000 for a pizza, you can pay a very small fraction of 1 BTC that is more in line with the USD price of the pizza. Each Bitcoin is made up of 100 million Satoshi.
But my problem isn’t with the value of Bitcoin or even how it’s used. My issue with bitcoin is with its foundation. Bitcoin was built to be future proof and reliable while also not being dependent on modern banks or governments. It relies on normal every day users running nodes/mining rigs to verify transactions. It makes it very effective at guaranteeing authenticity. But it has 2 massive drawbacks that I see and am nervous of.
- The value of Bitcoin fluctuates way too much to be used as a currency. Think about it in a simple way. I want to go to the grocery store and buy a loaf of bread for $3 USD. If a terrorist attack happens on US soil again and the stock markets freak out and all hells breaks loose like last time. I can still go to that grocery store tomorrow and buy that loaf of bread for $3 USD. That is because the USD is backed by the United States government and therefore is stable and not at the mercy of huge price fluctuations. If my boss pays me in BTC and for sake of discussion he pays me 1,000 satoshi’s each week. What I can buy with those 1,000 satoshi’s is going to greatly change each week. Some weeks I could buy a car, while other weeks I could only afford 5 loaves of bread. That is not sustainable as a main currency.
Sure that could be solved down the road if exchanges started to stop the buying/selling of BTC is there is a price difference of say 5% in a day. Or something along those lines, but that would then be changing the backing of the USD from the government to the backing of BTC to the exchanges and we would be right back in the same position we are in today.
- Time! Time is the bigger threat to BTC than the price, in my opinion. What I mean is that when I want to pay the pizza place for my pizza it takes times for them to get the money. If the delivery guy gets to my door and I swipe my phone over a reader or scan a QR code to pay for the food, the store won’t get paid until the transaction is completed. To me that in and of itself makes BTC not a long-term payment token. Even today if we were going to pay the pizza guy with a Check they don’t get the money until they cash they check, but there are checks and balances with that which make the stores more accepting to take it because there are these big Banks backing those pieces of paper saying they are worth the same amount as the USD. It is a lower risk to accept a check. Because even if you submitted the payment of BTC and showed the delivery man, there is no guarantee that the transaction will be completed in 5 minutes let alone 5 hours. Because the miners dictate which payments are processed through first and which ones can wait because of the gas fees. (Don’t get me started on gas fees either because that was almost my #3).
Now let’s look at a token like Nano. I must admit I am a little biased in this discussion because I love Nano and everything that is brings to the table. Nano to me could very easily be the de’facto currency of the Crypto world. 1 Nano can also be broken down into smaller parts like bitcoin.
The thing that Nano does that Bitcoin can never do is deliver instant payments. If you have ever sent or been on the receiving end of a Nano transaction you will know that it happens quicker than paying a store with your Debit Card and seeing your Account Balance change at your bank. It is lightning quick and that alone makes it a better payment token than Bitcoin. If that same delivery guy came to my door, I could pay him in Nano and within seconds he would get paid and I would have my pizza.
Nano, though itself is still a victim of price fluctuation the same as bitcoin. What I pay for a price of bread today in Nano may be different tomorrow for the same loaf of bread. Where Nano fails in that regard the currencies like Dai don’t. Dai is worth $1 and always will be. But I would argue that too is a fault because years down the road when cryptocurrencies are the world payment system what good is a token based on a currency value that has no value anymore?
Infrastructure Cryptocurrencies:
Infrastructure Currencies are a little different breed than payment currencies. They support the backend of a blockchain. They allow programs or apps to run on the blockchain. Think of them as a payment token for the upkeep of the blockchains. So, if you want to send a Ethereum based token to someone to need to pay a “gas fee” of ETH to support the transaction and pay the miners for their effort of minting that transaction into the blockchain.
Years and years down the road I think that their tokens will still be needed. Not nearly as many as we have now but it will be needed. Cosmos is a very interesting idea in that is wants to bring the different blockchains together and work together. I like to think of it as the server that enables Xbox players to play again PlayStation players in an online game. Two different ecosystems that are enables to talk to each other.
If the world doesn’t end up with 1 universal payment token, say Bitcoin or Nano for instance, then we are going to need Infrastructure tokens. If the Western world embraces Bitcoin as their standard payment token and the East decides to utilize Nano, there must be a way for the 2 different regions to convert their tokens and talk to each other. Think about countries exports and imports. If America gets shipments from China what do we pay them in? Nano or Bitcoin? They will have no use for Bitcoin and the US would have no use for Nano.
I understand that I am highly oversimplifying the intricacies of each blockchain. I am only using the names and their actions as place holders.
We will need exchanges in the future if that is the way the tokens are used then. If the whole world embraces 1 token as a payment token then I could see Infrastructure token being useless but that outcome would be highly highly unlikely.
Financial Cryptocurrencies:
These types of tokens I am torn between on how they will play out. On the one hand you will need a token to manage or exchange on an Exchange. But on the other hand, we are assuming our financial institutions will remain mostly unchanged on how they do business if cryptocurrencies replace cash, which is a stupid mentality to have. If the USD goes out the window and we all use Bitcoin for payments, then at the same time all business that deal with the Dollar will have to change. We will still have loans the same way with interest rates and will we still use Bitcoin as we previously used the Dollar? I think the way we handle our money and handle our finances will look drastically different many years from now. I don’t think the US will turn into a Socialist country, but things will have to change. Will the stock market change and replaced with a Bitcoin Stock market? Will there even be a stock market when the USD is gone?
Some of you may think my ideas or crazy or that I am overlooking so many things. The point I am trying to make here is that if businesses don’t adapt, they die. If we as a society don’t adapt to the crypto world it will die. And it will be replaced by something else, because people need a way to pay for goods and services.
Service Cryptocurrencies:
I like to think of the Service Crypto space as combining the physical asset and world into the Crypto world. If we truly embrace the Crypto world, we will need a way to track individual assets and records. Like the deed to my house will need to be on a blockchain and it will need to be owned by me in my wallet. Digital files will need to be store on the blockchain and how will we retrieve them? How will we pay to keep them there? How will there be inter-access through other blockchains?
I think Service cryptocurrencies are needed but I also believe in the End game of converting from physical money to Cryptocurrencies we could figure out a way to maybe combine Service cryptocurrencies with say Financial or Infrastructure currencies. I envision a world where most of the people would utilize a singular token for payments. Then there will always be up and coming tokens trying to grab at the market share that offer something different. But we would have a token for maybe American based Infrastructure. And maybe a token for Europe based Infrastructure. A world where a normal US citizen would hold maybe only a handful of tokens.
Media & Entertainment Cryptocurrencies:
Everyone loves BAT because it is a token for the people! Do I think BAT will be here years and years down the road? Maybe. Because it is revolutionizing the digital marketing area. Companies will always want to market to people and need to pay for it. There may not always be a browser that pays the users a portion of the proceeds for watching those ads, but the Digital Marketing Asset will always be there in some way shape or form.
To me what is more exciting to talk about is the THETA Network. They are revolutionizing the digital media field. They are taking Twitch and making it purely Peer to Peer and that is what the new world is going to look more like. Peer to Peer! And that is because people are losing trust in huge big entities controlling things. Theta is making live video available to the masses and will only work when enough people have access to it, and to have access to it enough people need to be relaying it. The Guardian Node does that. You let it run on your computer and based on what people want to watch around the world your node picks and chooses watch to cache and then relay to another node until it gets to the person who wants to watch it. That principle can be applied to many other areas of the world system we live in today.
I believe there will always be Media Cryptocurrencies because we are in the digital age. We as humans want to consume digital assets and digital media. It is the world we created for ourselves and now we must live in it until we change it.
I don’t claim to be super smart. I don’t claim to know the future about any token out there right now. But I do claim to look at the crypto space from a point a view that I think is needed. Right now, on CoinGecko it has an astonishing 6,135 different tokens/coins listed. It also has 420 exchanges. That is not sustainable for the long term. It just can’t be. Its sustainable now because in the grand scheme of things Crypto assets and Crypto tokens are play money. We can play with it because we have the USD to fall back on. Or whatever currency you have that your country backs for you. That is our safety net for us to make Bitcoin worth $34,000 and have everybody freak out.
But if we are to usher in a new era of currency for the world; having 6,000+ different payment coins are not feasible. Just think about having your parents or grandparents go to a store and must pay with Bitcoin, and then they leave and go to a grocery store and they only accept Dai. Then when you all go out for a movie that night the Theatre only accept Litecoin. In the world we have now it just isn’t doable. Over time so many coins are going to fall off. I do believe the value in them will be transferred to other tokens and then over more time there will be governments meeting to discuss which coins to accept and use and those will gain even more traction and market value.
But until we have some coin that is scalable and isn’t affected by huge price fluctuations, crypto as a real currency isn’t viable. Also don’t get me wrong the value of the USD fluctuates to the world. So, I don’t think we will ever have a currency that doesn’t fluctuate in price but there needs to be some sort of order to it. Even Dai fluctuates because it is based on the USD which fluctuates.
I hope you all enjoyed something about my look into the future of Cryptocurrency. If you think I'm wrong or have anything to add please let me know because they only way Crypto becomes better is by discussion of viewing other peoples ideas on it!
