The amount of non-speculator money flowing into crypto is miniscule
I think this is false. ~17% of crypto at this point is stablecoins (roughly, coins that are pegged to a fiat currency, usually the dollar). I think a reasonable fraction of the use of cryptocurrency is a replacement currency for either evading capital controls directly (e.g. East Asia, Venezuala), or for when a country’s currency is very unstable for other reasons (e.g. Ukraine). Whether this use case is legitimate or not seems like a somewhat subjective question and reliant on both how much you respect various nontrivially shady political entities and how much you trust nontrivially shady crypto entities.
My current guess is that stablecoins would be net positive if not for the exposure to the rest of the crypto ecosystem, but unclear in practice given such exposure.
How clear is it that stablecoins have value other than by enabling speculative transactions on blockchains? My main model of stablecoins, borrowing from Matt Levine, is that if you do a lot of stuff on-chain, it is also useful to have an on-chain way to transact in fiat.
I could definitely think of many situations in which stablecoins would be useful, but on priors I would guess they’re fairly small compared to uses facilitating speculation.
How clear is it that stablecoins have value other than by enabling speculative transactions on blockchains?
I don’t have a good sense of this tbh, I mostly got this from pretty anecdotal evidence rather than looking at data (and realistically I won’t do a deep dive on this data unless some analysis was handed to me on a platter).[1]
My current guess is that there is significant uses for stablecoins in practice right now. My guess is that their theoretical value is probably lower than if you were to use the same resources to build more centralized systems like MPesa or Wave, but of course there’s less VC interest and also less of an easy path to profitability than from being subsidized by crypto speculation/fraud.
It’s hard to get a good gauge of stablecoins while a sizeable portion of them are possibly fraudulent. For example the largest stablecoin, Tether, is widely considered to be suspect and have been caught out lying about their reserves before. There may be more Terra-Luna style crashes in the making as well (I’m not sure how many algorithmic stablecoins are left, but I doubt a single one will survive long term).
Sending money across borders is a use case for crypto, but I find it highly unlikely to generate enough revenue to pay out much compared to the billions of dollars in speculation. I also doubt this of “alternative” currency use. Stablecoins only work when they are backed by another currency like the USD, so why not just use USD? For digital payments, developing countries have overwhelmingly chosen to use mobile money over crypto, and I trust their judgement on that matter, it seems far more convenient.
I think this is false. ~17% of crypto at this point is stablecoins (roughly, coins that are pegged to a fiat currency, usually the dollar). I think a reasonable fraction of the use of cryptocurrency is a replacement currency for either evading capital controls directly (e.g. East Asia, Venezuala), or for when a country’s currency is very unstable for other reasons (e.g. Ukraine). Whether this use case is legitimate or not seems like a somewhat subjective question and reliant on both how much you respect various nontrivially shady political entities and how much you trust nontrivially shady crypto entities.
My current guess is that stablecoins would be net positive if not for the exposure to the rest of the crypto ecosystem, but unclear in practice given such exposure.
How clear is it that stablecoins have value other than by enabling speculative transactions on blockchains? My main model of stablecoins, borrowing from Matt Levine, is that if you do a lot of stuff on-chain, it is also useful to have an on-chain way to transact in fiat.
I could definitely think of many situations in which stablecoins would be useful, but on priors I would guess they’re fairly small compared to uses facilitating speculation.
I don’t have a good sense of this tbh, I mostly got this from pretty anecdotal evidence rather than looking at data (and realistically I won’t do a deep dive on this data unless some analysis was handed to me on a platter).[1]
My current guess is that there is significant uses for stablecoins in practice right now. My guess is that their theoretical value is probably lower than if you were to use the same resources to build more centralized systems like MPesa or Wave, but of course there’s less VC interest and also less of an easy path to profitability than from being subsidized by crypto speculation/fraud.
If I search around there’s certainly evidence of significant crypto uses in some places, but I’m not sure about the reliability of this evidence.
It’s hard to get a good gauge of stablecoins while a sizeable portion of them are possibly fraudulent. For example the largest stablecoin, Tether, is widely considered to be suspect and have been caught out lying about their reserves before. There may be more Terra-Luna style crashes in the making as well (I’m not sure how many algorithmic stablecoins are left, but I doubt a single one will survive long term).
Sending money across borders is a use case for crypto, but I find it highly unlikely to generate enough revenue to pay out much compared to the billions of dollars in speculation. I also doubt this of “alternative” currency use. Stablecoins only work when they are backed by another currency like the USD, so why not just use USD? For digital payments, developing countries have overwhelmingly chosen to use mobile money over crypto, and I trust their judgement on that matter, it seems far more convenient.
I think I agree with most if not everything you said. I don’t see any of them as good arguments for
Actually that’s a fair point, I meant miniscule relative to the amount of speculator money and market caps of these coins. I’ll edit the comment.