Cryptocurrency is meant to be a form of money, so I think the following quote doesn’t really make sense as a bar:
I cannot think of a single application of cryptocurrency where it’s worth spending money on something if I then know for certain I can then never sell it.
Would you spend dollars for euros if you then knew for certain you could never “sell” ( i.e. trade it for something else) your euros? The only difference in principal is that crypto is backed by math and cryptography rather than government enforcement.
More practically, as Habryka noted, crypto is useful for international payments. Because it relies on a blockchain (a public ledger that is operated by thousands of computers around the world), you can send payments from/to anywhere in the world as long as you have electricity and internet access. This means you can send money more or less instantly with low fees, which seems like a big improvement over current SWIFT infrastructure, though there are downsides.[1]
The blockchain/crypto enable use cases like DeFi (decentralized finance) that seem high potential. There’s borrowing/lending protocols that allow depositors to get yield on their assets and borrowers to get access to additional capital. There are decentralized exchanges that enable participants to exchange assets. In principal this could extend to all viable financial services including insurance and derivatives.
Because these applications rely on smart contracts on the blockchain, they can provide financial services without the middlemen, enabling lower costs. There are also the benefits of financial inclusion since anyone around the world with electricity and internet access can participate, regardless of location, which in principal should help the global poor.
I’ve tried to highlight some of the upsides/potential upsides of the industry and technology, but the truth is that the entire space is incredibly young, and we don’t know exactly how valuable this is going to end up being.
You might wince at the analogy, but I think it’s similar to someone in 1993 asking about the utility of the internet. There are fledgling applications that seem like they could be valuable, but it’s still too early to tell with certainty, and many valuable applications haven’t even been discovered yet.
I’d also like to acknowledge that there obviously is a lot of speculation and scammy behavior in crypto currently, but I don’t think that represents everything that’s going on in the space. It’s difficult to say how potential upsides net out with speculation/scams, but it seems likely to me that there are enough potential and already existing use cases to make the industry long-term net positive.
Would you spend dollars for euros if you then knew for certain you could never “sell” ( i.e. trade it for something else) your euros?
Could you elaborate on this analogy? I feel like this is supposed to be a point for crypto, in context, but this feels like it’s supporting my point. The answer to this is unequivocally “no”. The only reason I would want euros, or dollars for that matter, is so I could then buy something with it. Money that can never be spent is useless.
Right, I’m trying to say—just like normal fiat currency, crypto is meant to be a money, it’s not an end in itself. So using the bar “I wouldn’t buy this thing if I couldn’t then trade it for something else” doesn’t really make sense, because the whole point of the thing is that you can eventually trade it for something else.
The value in money is in its properties to facilitate store of value, unit of account, and unit of exchange. Crypto in principal can do these things.
Also, insofar as there is value in other blockchain based applications (e.g. DeFi), you need crypto in order to use those applications (for “gas” to pay for transactions).
Also, you can use crypto/blockchain to transact in dollars—so called “stablecoins”. So you can get the international transfer benefits but without the natural volatility that occurs in crypto prices.
I may be overpleading the case here, but I feel like a big reason why there is default skepticism about crypto is that in most people’s minds, they think “crypto” equals “bitcoin”.
Bitcoin makes up a plurality of total crypto market cap, but imo it’s generally boring, uninteresting, and not a particularly high potential part of the space. If crypto was just bitcoin, I wouldn’t think that highly of it either. Bitcoin may still be able serve as a kind of “digital gold”, but that seems overall not that net positive or interesting.
Imo by far the most interesting part of the space is “smart contract blockchains”, the most prominent being Ethereum. That is where the actual innovation and interesting potential use cases are.
Some examples (sorry for using specific projects, I feel like it’s easier to illustrate with concrete examples rather than abstractions):
Aave, the leading borrowing/lending protocol. Users can earn yield on their assets and borrow loans against their collateral. It’s basically a bank that runs entirely on code that anyone around the world can access 24⁄7.
Uniswap, the leading decentralized exchange. Users can swap assets or earn yield by providing liquidity for any token pair. It’s basically an exchange that runs entirely on code that anyone around the world can access 24⁄7.
Lens, the leading decentralized social media protocol (this one is still very early, but it shows the potential of the technology). It enables Twitter/FB style social networks, but where everything is on a blockchain so it’s impossible to censor or de-platform users, and users can take their followers/friends to other sites (instead of the current siloing we see in current social media platforms).
Proof of Humanity, a project that is trying to build a sybil-proof digital identification system that could enable things like a true global UBI (this project is also very early and I have no idea if it will actually end up being valuable).
There are hundreds, maybe thousands of projects like these that are building cool stuff enabled by blockchain and smart contracts.
Right, I’m trying to say—just like normal fiat currency, crypto is meant to be a money, it’s not an end in itself. So using the bar “I wouldn’t buy this thing if I couldn’t then trade it for something else” doesn’t really make sense, because the whole point of the thing is that you can eventually trade it for something else.
So, my understanding of your argument is that the ability to buy things with currency is literally the purpose of currency—it’s a necessary but not sufficient condition for a valid cryptocurrency. Using it as a bar makes about as much sense as saying “I wouldn’t buy a car if I couldn’t drive it places”—true, but trivially obvious.
But in that case...are there cryptocurrencies where I can do this now? Can I buy cryptocurrency and then buy a useful assortment of things quickly and cheaply with it?
Cryptocurrency is meant to be a form of money, so I think the following quote doesn’t really make sense as a bar:
Would you spend dollars for euros if you then knew for certain you could never “sell” ( i.e. trade it for something else) your euros? The only difference in principal is that crypto is backed by math and cryptography rather than government enforcement.
More practically, as Habryka noted, crypto is useful for international payments. Because it relies on a blockchain (a public ledger that is operated by thousands of computers around the world), you can send payments from/to anywhere in the world as long as you have electricity and internet access. This means you can send money more or less instantly with low fees, which seems like a big improvement over current SWIFT infrastructure, though there are downsides.[1]
The blockchain/crypto enable use cases like DeFi (decentralized finance) that seem high potential. There’s borrowing/lending protocols that allow depositors to get yield on their assets and borrowers to get access to additional capital. There are decentralized exchanges that enable participants to exchange assets. In principal this could extend to all viable financial services including insurance and derivatives.
Because these applications rely on smart contracts on the blockchain, they can provide financial services without the middlemen, enabling lower costs. There are also the benefits of financial inclusion since anyone around the world with electricity and internet access can participate, regardless of location, which in principal should help the global poor.
I’ve tried to highlight some of the upsides/potential upsides of the industry and technology, but the truth is that the entire space is incredibly young, and we don’t know exactly how valuable this is going to end up being.
You might wince at the analogy, but I think it’s similar to someone in 1993 asking about the utility of the internet. There are fledgling applications that seem like they could be valuable, but it’s still too early to tell with certainty, and many valuable applications haven’t even been discovered yet.
I’d also like to acknowledge that there obviously is a lot of speculation and scammy behavior in crypto currently, but I don’t think that represents everything that’s going on in the space. It’s difficult to say how potential upsides net out with speculation/scams, but it seems likely to me that there are enough potential and already existing use cases to make the industry long-term net positive.
Because crypto can be accessed by anyone with internet/electricity, it does enable some crime and money laundering. There is a debate over how much crime it enables relative to the US dollar, however.
The immutability of the blockchain (transactions, once sent, cannot be reversed) also can lead to users losing funds with effectively no recourse.
Could you elaborate on this analogy? I feel like this is supposed to be a point for crypto, in context, but this feels like it’s supporting my point. The answer to this is unequivocally “no”. The only reason I would want euros, or dollars for that matter, is so I could then buy something with it. Money that can never be spent is useless.
Right, I’m trying to say—just like normal fiat currency, crypto is meant to be a money, it’s not an end in itself. So using the bar “I wouldn’t buy this thing if I couldn’t then trade it for something else” doesn’t really make sense, because the whole point of the thing is that you can eventually trade it for something else.
The value in money is in its properties to facilitate store of value, unit of account, and unit of exchange. Crypto in principal can do these things.
Also, insofar as there is value in other blockchain based applications (e.g. DeFi), you need crypto in order to use those applications (for “gas” to pay for transactions).
Also, you can use crypto/blockchain to transact in dollars—so called “stablecoins”. So you can get the international transfer benefits but without the natural volatility that occurs in crypto prices.
I may be overpleading the case here, but I feel like a big reason why there is default skepticism about crypto is that in most people’s minds, they think “crypto” equals “bitcoin”.
Bitcoin makes up a plurality of total crypto market cap, but imo it’s generally boring, uninteresting, and not a particularly high potential part of the space. If crypto was just bitcoin, I wouldn’t think that highly of it either. Bitcoin may still be able serve as a kind of “digital gold”, but that seems overall not that net positive or interesting.
Imo by far the most interesting part of the space is “smart contract blockchains”, the most prominent being Ethereum. That is where the actual innovation and interesting potential use cases are.
Some examples (sorry for using specific projects, I feel like it’s easier to illustrate with concrete examples rather than abstractions):
Aave, the leading borrowing/lending protocol. Users can earn yield on their assets and borrow loans against their collateral. It’s basically a bank that runs entirely on code that anyone around the world can access 24⁄7.
Uniswap, the leading decentralized exchange. Users can swap assets or earn yield by providing liquidity for any token pair. It’s basically an exchange that runs entirely on code that anyone around the world can access 24⁄7.
Lens, the leading decentralized social media protocol (this one is still very early, but it shows the potential of the technology). It enables Twitter/FB style social networks, but where everything is on a blockchain so it’s impossible to censor or de-platform users, and users can take their followers/friends to other sites (instead of the current siloing we see in current social media platforms).
Proof of Humanity, a project that is trying to build a sybil-proof digital identification system that could enable things like a true global UBI (this project is also very early and I have no idea if it will actually end up being valuable).
There are hundreds, maybe thousands of projects like these that are building cool stuff enabled by blockchain and smart contracts.
So, my understanding of your argument is that the ability to buy things with currency is literally the purpose of currency—it’s a necessary but not sufficient condition for a valid cryptocurrency. Using it as a bar makes about as much sense as saying “I wouldn’t buy a car if I couldn’t drive it places”—true, but trivially obvious.
But in that case...are there cryptocurrencies where I can do this now? Can I buy cryptocurrency and then buy a useful assortment of things quickly and cheaply with it?