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“A NICKEL AIN’T WORTH A DIME ANYMORE.” - Yogi Berra
Is money not simply an instrument that people agree to pay attention to? Whether it’s seashells in Papua New Guinea, Grecian coins made of precious metals, tobacco sticks in a prison yard, or custom chips at a poker table, group attention flows through these instruments just as vibration runs through strings, making them “money”, charged with the harmonic value of an agreed upon medium of exchange.
Perhaps money’s fluid nature spawned its numerous water-based terminologies. Assets which cannot move are said to be frozen. A person who is highly liquid has lots of cash. Holding an asset valued at less than its initial cost means you’re underwater. Just as boats are collectively stored in a port, a collection of stocks is called a portfolio. Products priced to move are said to be on sale, admittedly a mere homonym, though akin to the sails that move windblown vessels across the seas of commerce. Currency, (from Latin currere, meaning “to run”), shares the same root as current.
Money is an instrument people agree to pay attention to. - Frank America
Currency is historically controlled by banks while a current’s movement is always directed by nature’s propensity to find the fastest way forward, the path of least resistance. With that in mind, could the current of financial progress, as it has evolved across land, water, air, and wire, be why we’ve found ourselves in this new era of cryptocurrency?
Digital money is powered by an electric current, which carries a charge. The digitization of fiat via credit and debit cards, or in analogous value structures like airline miles or game tokens, are things we are familiar with. The evolution into this digital money transfer system dates back to the mid 20th century, with the introduction of credit and debit cards. VISA launched a credit card in the United States in 1958, went international with it in 1974, and debuted the debit card in 1975.¹ Interestingly, the credit card went overseas just three years after we left the gold standard.
Fast forward to today where cryptocurrency exists as a different version of digital money; it is a currency that does not have a direct correlation to fiat. Cryptocurrency operates on an electric current just like digital transactions enabled by credit and debit cards, but unlike these digital representations of fiat, cryptocurrency is set apart by an additional layer of security, which is essentially how it defined its value outside of a fiat economy.
To understand what cryptocurrency is first requires a definition of crypto and currency. Crypto refers to cryptography, which, in the context of cryptocurrency, uses complex math problems to protect information. Cryptography at its core solves the double-spend problem, incentivizes the completion of a hash (a tough math problem), and synchronizes the verification of transactions on a blockchain via a decentralized ledger.
Currency means a medium of exchange that is in circulation, which is a form of movement, like a current. Cryptocurrency is therefore a digital currency that protects information in circulation with cryptography. Many things have been and could be money. However, as a medium of exchange, money works best if the items chosen to represent units of exchange are small, scarce, predictably similar, and difficult to fake. Think exotic shells, precious coins, illustrated notes, custom chips, etc.
Cryptocurrency is a digital currency that protects information in circulation with cryptography.
Cryptocurrency, or code-based money, isn’t just small, it’s physically absent. It’s not just scarce, the total supply, like with Bitcoin, can be pre-determined. It’s not merely predictably similar, but each unit is an exact replica of any other. This is peak fungibility. An example of deteriorated fungibility within the world of fiat comes from buying trinkets in local markets or bazaars where the cash returned to the purchaser is typically the most weathered, torn, and undesirable version of that fungible currency. Lastly, forgery isn’t even possible because of the value proposition of cryptography. It is this code-based protection which has given rise to its characteristic “trustlessness.”
Cryptocurrency protocols are full of code that can be copied anytime (what’s called a fork), which is why the value truly resides within the specific instrument we agree to pay attention to. As far as intellectual property rights or “stealing someone’s ideas” go, the status quo is to say, “Yes, please go ahead and copy this code. See if you can make it better.”
Historically, forks in blockchains have proven the value lies with attention. Is there more value in Bitcoin or the forked Bitcoin Cash? Is there more value in Ethereum Classic or the forked Ethereum? These consensus-driven decisions prove that it is the social layer, layer zero — or what lies beneath the blockchain — that is the ultimate arbiter of value. What people pay attention to is what counts.
Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver.
-Ayn Rand
Similar to how the shift from newspapers to news websites reached a critical mass, we’ve seen a shift from paper-based fiat to secure digital money.
Verified users in crypto has gone from 5 million in 2016 to 225 million in 2021.² According to Chainalysis, global adoption has grown 2300% from Q3 2019 to Q2 2021, with Vietnam, India, Pakistan, Ukraine, Kenya, Nigeria, and the United States leading the way.³ Notably, Kenya had the highest peer-to-peer (P2P) exchange volume. Crypto adoption in Africa is well underway.
With this in mind let’s look at some traditional payment transactions tools. As of last year, Paypal has started accepting Bitcoin,⁴ Cash App sends and receives Bitcoin,⁵ VISA settles transactions in a dollar-pegged stablecoin called USDC,⁶ and Venmo offers a menu of cryptocurrencies complete with educational materials.⁷
When it comes to banks, Goldman Sachs has started offering Bitcoin, Ethereum and other cryptocurrencies to its wealth management clients.⁸ Morgan Stanley plans to offer up to 2.5% Bitcoin exposure to its clients with an “aggressive risk tolerance”, individuals with $2 million or more to spare. Clearly, these are signals mainstream adoption is afoot.
Millennials are the largest demographic group in America, at over 73 million, due to inherit $30 trillion from baby boomers over the next three decades.⁹ ¹⁰ Morgan Stanley’s research arm forecasted in 2019 that millennials will be the largest borrowers over this next decade, and that digitally native Gen-Z will reach 78 million in population by 2034.¹¹
This wealth, like water, will run downhill, and it’ll settle in the estuaries of demographics that prefer mobile banking and cryptocurrency. A 2021 study by Chase showed that “98% of Millennials use a mobile banking app for a wide range of tasks”.¹² Smart-phone owning Gen-Z is already keeping pace with Millennials in terms of mobile banking activity, checking accounts, and transferring money on their phones.¹³
According to a 2022 Financial Literacy study that surveyed 4,000 Americans, at least one in four millennials, Generation X-ers, and Generation Z-ers invest in cryptocurrency, and all of those who do believe “the greatest returns from their investments will come from cryptocurrency.”¹⁴
CNBC recently published a finding that among millennials with over $1 million in investable assets, almost half (47%) of them had a quarter of their portfolio in crypto.¹⁵ Business Insider reports that the number of millennial millionaires hovers at around 618,000.¹⁶
Although “the great wealth transfer” may be a slow trickle, and this wealth may be spent by boomers on Mai-Tais and beach vacations,¹⁷ there will be an increased wealth running downhill over the next few decades, and an increase in borrowing and earning from millennials and eventually Gen-Z. We’ll probably grow into an age where “mobile banking” sounds as redundant as “internet store”.
The wealthiest portion of the largest demographic in America, the world’s wealthiest nation, uses their smartphone for banking, holds a quarter of their finances in crypto, and is scheduled to receive $30 trillion in inheritance over the next few decades. If this isn’t a perfect crypto-cocktail storm, primed to expand the parameters of traditional banking and digital money, then what is?
We’re already in a full-blown digital fiat system. The credit card, which issues debt, is a digital loan. The debit card, which pulls from deposit balances, is a digital checkbook. Few people carry cash. Swipes and taps are the norm. If anything, the pervasiveness of this digital economy is evidenced in how nonchalantly we send money to one another on Venmo after dinner.
Perhaps soon, the money we exchange on our smartphones won’t just be digital fiat, but a secure cryptocurrency on a decentralized blockchain. Paypal, Venmo, Cash App, and VISA are signaling this cultural shift. The mainstream adoption of the new digital crypto economy could be a rising tide that lifts all boats floating on the digital current.
A cryptography-governed asset, which is viewable on a blockchain and baked into the native language of computers, is arguably a more enduring version of money. Whether this becomes a dollar-pegged stablecoin, fractions of bitcoin and Ether, or some future token, remains to be seen.
Regardless of form, a knowledge of how cryptocurrency works isn’t necessary for it to become the predominantly used medium of exchange. But paying attention to it is. This attention doesn’t require technical know-how or expertise. After all, most people don’t know how a car runs, and they drive them just fine.
For example, a litany of celebrities and talk show hosts purchased jpegs of cartoon apes in human clothing.¹⁸ The mass adoption that ensued didn’t necessitate a technical understanding of what a non-fungible token is. The only barrier to growth was easier on-ramps for fiat-to-crypto purchases.
These smoother routes, or paths of least resistance, to passing the crypto driver’s test are already happening, and will continue to happen under the hood, while everyone keeps pursuing the nearest and fastest on-ramp.
Meanwhile, a new highway is being paved beneath our feet.
Bitcoin started as a peer-to-peer money exchange platform. Over the last thirteen years, Bitcoin has shifted from a means of payment for small purchases, to more of a store of value. One of the most persistent arguments against Bitcoin is that you can’t easily buy groceries or gas with it. Of course, you could obtain a Bitcoin-backed debit card, which converts your crypto automatically upon purchase, but this is another adoption barrier.¹⁹ The point here is that you can’t buy groceries with gold or stocks either, but both are worth hanging on to!
If you bought $1,000 worth of bitcoin on Aug 21st of 2011,²⁰ five years later you’d have had over $50,000, and if you had waited a decade, those same bitcoins would have been worth $4.3M.²¹ Granted today it would have dropped to a measly $1.8M, but we’re looking at 5 year increments. By Aug 21st of 2026, we may see a similar jump.
Consider that in the same decade Bitcoin went from shady drug-dealer money on Silk Road, which the US government seized and auctioned off,²² to official legal tender alongside the US dollar in El-Salvador.²³
The phenomenon of a peer-to-peer financial transaction system wasn’t revolutionary with Bitcoin; PayPal launched P2P financial transactions in 1998, and blew up after being acquired by eBay in 2002. Bitcoin is revolutionary though because it offered peer-to-peer financial transactions without a bank or other intermediary*.* Bitcoin is like PayPal except the money isn’t stored in your checking account, it’s stored in your self-custody wallet. This money isn’t even digital dollars, it is digital code.
Bitcoin, the blockchain, is like a digital vault. Its math-locked code is like digital gold. When people talk about buying bitcoin the cryptocurrency (BTC), they mean purchasing access to specific and unique information stored on that blockchain, and retaining private keys for that access. If one loses the keys, they lose the coin. There is no need for a custodian. There’s no such thing as a bank run on Bitcoin that leads to a loss of funds. The blockchain is the bank and the network of users own it. The value of bitcoin is self-evident, because unlike a dollar or a euro, which gets watered down over time, one bitcoin will always be equal to one bitcoin, it’s inflation proof.
Bitcoin is like a digital vault with keys of math-locked code.
Bitcoin can’t be over-printed and hyper-inflated because there is a limited amount of them. There are only, and will only ever be 21 million bitcoins. About 90% of those are already in circulation.²⁴
Bitcoin’s market cap, which is the amount of bitcoins in circulation times the value of each bitcoin, at its current value of 409 billion dollars,²⁵ is worth more than 97.8% of the companies making up the S&P 500.²
As the first out of the digital money gate, Bitcoin secured the perimeter of a new financial fortress. The blockchain became the vault, the bitcoins are the gold, and the culture is now the moat that protects it. Ethereum, on the other hand, is like a bridge over this moat leading to uncharted lands further westward, where the decentralized world could operate in a faster and more flexible way.
If Bitcoin is a safe, one could think of Ethereum as a Swiss Army knife. What makes Ethereum so versatile is its smart contracts.
Smart contracts execute customizable functions on a blockchain for financial, legal, social, and governance purposes. These use cases for Ethereum are non-exhaustive, and still relatively unexplored. The possibilities range from secure and transparent voting systems to managing supply chain operations, from deploying loans and executing trades to granting music,²⁷ or film royalties in real time, from proof-of-ownership tools to peer-to-peer fundraising platforms without a middleman (take a hike Kickstarter).
The strongest use case on Ethereum, since its inception in 2015, was turning ordinary lending and borrowing into a human-error free, automated process. This is broadly known as decentralized finance, or DeFi. DeFi is to finance what Uber was to transportation.
Uber replaced a centralized monopoly that overcharged for a service by offering the same service at a better value in a decentralized manner. Ethereum’s blockchain offers something similar with lending, borrowing, and trading.²⁸ So long as the services are legitimate, enjoyable, comparable in price, and dependable, the “Uber-version” always cannibalizes the centralized version via the force of market adoption.
DeFi is to finance what Uber was to transportation.
DeFi applications went from holding $1 billion in 2019 to over $100 billion in less than three years.²⁹ What may result with DeFi is the financial equivalent of no more yellow taxis.
Insert Coinbase, a popular cryptocurrency exchange company publicly traded on the NASDAQ stock exchange under the ticker COIN, which designed a lending program in 2021. Keep in mind the current annual percentage yield (APY) in most traditional savings accounts is 6/10ths of 1%. That means if you put $10,000 in a savings account in a year you’d get $60 back. As part of its lending program, Coinbase was prepared to offer 4% APY. That’s more than 6X what you get from a savings account for keeping your money with them. Move that $10K over to Coinbase, convert it to USDC, and you’d see $400 come back a year later. A sizable difference for money just sitting there. The kind of difference that could cannibalize traditional bank savings accounts across the nation.
The Securities and Exchange Commission (SEC) sent a letter to Coinbase informing them they would get in trouble if they went forward with it. Coinbase rescinded its lending program shortly after.³⁰ Their Chief Legal Officer shared their side of the story in a blog post titled “The SEC has told us it wants to sue us over Lend. We don’t know why”.³¹
The point here isn’t Coinbase getting blocked by the SEC, but rather that a $50 billion dollar cryptocurrency company³² was confident enough in DeFi to offer all of its customers a risk-reduced rate of return of ~4% APY. Can you imagine what that would do to centralized banking? Who would park their money in a savings account when they could earn six times that with similar guarantees on an app downloaded to their smartphone? The SEC blocked this mainstream adoption valve, but the tools Coinbase was going to use to supply 4% APY are still here.
Hamstringing a user-friendly front end for DeFi can only be a speed bump in the inevitable mass-adoption of a superior financial system using better code-based instruments, i.e. smart contracts. DeFi is trustless, automated, secure, and open 24/7 just like 7–11.
Regulating DeFi growth incentivizes and redirects currency flow beyond constrictive jurisdictions, and passes on a boatload of what would have been taxable income. DeFi will never be beholden to the jurisdictions of regulatory giants like the United States or China. However, DeFi will always look to major financial players like the US and China to provide meaningful regulatory insight that prevents bad actors and creates guide rails for doing digital business in a morally fair way. But the US thinking everyone should take a yellow cab will not stop DeFi. Uber drivers appeared where the passengers were, not the other way around. DeFi will show up at the doorstep of an accessible IP address. Countries that dial in a smooth front end for DeFi will be the first to benefit from faster financial "transportation", much like the flow of a current always finding the most efficient route guided by the natural contours of the land. Plus, with DeFi, your compounding APY will make that trip down the river at record speed.
DeFi is trustless, automated, secure, and open 24/7 just like 7–11.
To quote the Red Sox owner in Moneyball written by Aaron Sorkin, about being the first guy through the wall, “He always gets bloody, always. It’s the threat of not just the way of doing business, but in their minds it’s threatening the game. But really what it’s threatening is their livelihoods… and anybody who’s not building a team right, and rebuilding it using your model right now, they’re dinosaurs.” So long Tyrannosaurus USA and The People’s Republic of Triceratops.
The Bitcoin and Ethereum blockchains are too important to stop, too helpful to ridicule, and too profitable to ignore. Both arrived at financial prominence by climbing up the ladder of economic influence instead of printing money from the top of it. At the heart of the behemoth that is Bitcoin and within the head of the leviathan that is Ethereum isn’t greed, control, or usury, but observable code and as such moral transparency. No more secrets.
Money, in any moment, like some sort of emergent autonomous zone, is that which people agree to pay attention to. Cryptocurrency may be an innovation on par with the steam engine and electricity. Just as the steam engine shrunk the earth, and electricity lit up the night, blockchain promises liquidity in your own bank.
*This article originally appeared on BanklessPublishing.com on 7/1/2022.
Frank America is an author, researcher, comedian, and musician. He has a background in English Literature, Philosophy, and Communications. Frank is a co-founder of The Rug News, and content manager at Bankless Publishing.
Zero Mass* is a writer exploring the unique space of DAOs and crypto. His pseudonym is purposefully designed to test the “trustless” concept.*
Sixian* is an editor at BanklessDAO. She’s interested in the potential of decentralized technologies, especially the ways in which individuals and communities can self-organize, activate alternative economies, and explore deeper notions of wealth.*
¹ “The History of Credit Cards”, creditcards.com, 12 Aug 2021, https://www.creditcards.com/credit-card-news/history-of-credit-cards/, Accessed 22 Aug 2021.
² Debest, Raynor. “Cryptocurrency Adoption Amongst Consumers Statistics and Fact”. Statista.com, 29 Mar 2021, https://www.statista.com/topics/7705/cryptocurrency-adoption-among-consumers, Accessed 16 June 2022.
³Chainalysis Team. “The 2021 Global Crypto Adoption Index”, chainalysis.com, 14 Oct 2021, https://blog.chainalysis.com/reports/2021-global-crypto-adoption-index/, Accessed 26 June 2022.
⁴Manning, Landon. “Paypal Accepts Bitcoin for Merchant Payment”. Nasdaq.com, 5 Apr 2021, https://www.nasdaq.com/articles/paypal-accepts-Bitcoin-for-merchant-payment-2021-04-05, Accessed 15 Aug 2021.
⁶ https://usa.visa.com/about-visa/newsroom/press-releases.releaseId.17821.html
⁷https://venmo.com/about/crypto/
⁸Hale, Kori, Goldman Sachs Cryptocurrency Endorsement Boosts Wealth Management, forbes.com, 5 April, 2021, https://www.forbes.com/sites/korihale/2021/04/05/goldman-sachs-cryptocurrency-endorsement-boosts-wealth-management/, Accessed 8 Aug 2021.
⁹ McKeefy, Shane, “4 Ways Banks Can Keep and Win Millennial Customers”, gallup.com, 3 Apr 2018, https://www.gallup.com/workplace/237734/ways-banks-win-keep-millennial-customers.aspx?, accessed 15 Aug 2021.
¹⁰ Choi, Audrey, “How Younger Investors Could Reshape the World”, morganstanley.com, 24 Jan 2018, “https://www.morganstanley.com/access/why-millennial-investors-are-different”, accessed 25 June, 2022.
¹¹How Millennial and Gen Z Could Reinvent Banking”, morganstanley.com, Jul 31, 2019, https://www.morganstanley.com/ideas/millennial-gen-z-loan-growth, Accessed 19 Aug 2021
¹² White, Alexandra, “millennials and Gen Z are the Most Likely to Use Mobile Apps” — here’s why, plus budgeting tips”, cnbc.com, 29 Jan 2021, https://www.cnbc.com/select/why-millennials-gen-z-use-mobile-banking-apps/, Accessed 22 Aug 2021.
¹³ How Millennial and Gen Z Could Reinvent Banking”, morganstanley.com, 31 July 2019, https://www.morganstanley.com/ideas/millennial-gen-z-loan-growth, Accessed 19 Aug 2021
¹⁴ Rosenberg, Eric and Valasquez, Vikki. “Younger Generations More Bullish on Cryptocurrencies”, investopedia.com, 4 Apr 2022, https://www.investopedia.com/younger-generations-bullish-on-cryptocurrencies-5223563, Accessed 16 June 2022.
¹⁵ Frank, Robert, “Millennial Millionaires Have a Large Share of Their Wealth in Crypto, CNBC Survey Says”, 10 Jun 2021, cnbc.com, https://www.cnbc.com/2021/06/10/millennial-millionaires-have-large-share-of-wealth-in-crypto-cnbc-survey-.html, Accessed 22 Aug 2021
¹⁶ Hoffower, Hillary, “Meet the Typical Millennial Millionaire in America…” businessinsider.com, 9 Nov 2019, https://www.businessinsider.com/typical-american-millennial-millionaire-net-worth-building-wealth-2019-11, Accessed 16 June 2022.
¹⁷ Garcia, Gabriel, “That 30 Trillion Great Wealth Transfer is a Myth”,cnbc.com, 22 May 2018, “https://www.cnbc.com/2018/05/22/that-30-trillion-great-wealth-transfer-is-a-myth.html”Accessed 26 June 2022.
¹⁸Dickens, Sean, “TV Host Jimmy Fallon Reveals He Owns a Bored Ape Yacht Club NFT”, finance.yahoo.com, 11 Nov 2021, https://finance.yahoo.com/news/tv-host-jimmy-fallon-reveals-164716453.html, Accessed 16 June, 2022.
¹⁹ Metz, Cade, “Coinbase Just Debuted the First Bitcoin Debit Card in the US”, wired.com, 20 Nov 2015, https://www.wired.com/2015/11/coinbase-unveils-countrys-first-bitcoin-debit-card/[,](https://www.wired.com/2015/11/coinbase-unveils-countrys-first-Bitcoin-debit-card/,) Accessed 16 June, 2022.
²⁰ “Bitcoin Price USD”, Bitcoin.zorinaq.com, 21 Aug 2011, https://Bitcoin.zorinaq.com/price/, accessed 21 Aug 2021.
²¹Ibid.
²² Higgins, Stand. “US Government to sell over 44,000 Bitcoins Today”, coindesk.com, 6 Nov 2015. https://www.coindesk.com/us-marshals-final-silk-road-Bitcoin-auction, Accessed 22 Aug 2021.
²³ Avelar, Brain. Jones, Sam. “El Salvador Becomes First Country to Adopt Bitcoin as Legal Tender”, theguardian.com, 9 Jun, 2021, https://www.theguardian.com/world/2021/jun/09/el-salvador-Bitcoin-legal-tender-congress, Accessed 22 Aug, 2021.
²⁴ Chanalysis Team, “60% of Bitcoin is Held Longterm as Digital Gold, What About the Res?” chainalysis.com,18 Jun 2020, https://blog.chainalysis.com/reports/Bitcoin-market-data-exchanges-trading
²⁵ https://www.coingecko.com/en/coins/bitcoin
²⁶ https://fknol.com/list/market-cap-sp-500-index-companies.php
²⁷ Bain, Katie. “The Chainsmokers Giving Fans a Share of New Album’s Royalties as Free NFTs” billboard.com 12, May, 2022. https://www.billboard.com/business/tech/chainsmokers-free-nfts-royalties-new-album-royal-1235069874/
²⁸ Gupa, Nakul. “How Defi is eating financial services” cyptechie.com 30 June, 2021. https://www.cryptechie.com/p/defi
²⁹ DeFi Market Cap. 26 Sep 2021. Coingecko.com https://www.coingecko.com/en/categories/decentralized-finance-defi
³⁰Bosch, Christopher, J. “A September to Remember: Coinbase Avoids SEC Clash by Dropping Crypto Lend Product”, natlawreview.com, Sep 29, 2021. https://www.natlawreview.com/article/september-to-remember-coinbase-avoids-sec-clash-dropping-crypto-lend-product, Accessed 26 June 2022
³¹ Grewal, Paul, “The SEC has told us it wants to sue us over Lend. We don’t know why.” blog.coinbase.com, Sep 7, 2021. https://blog.coinbase.com/the-sec-has-told-us-it-wants-to-sue-us-over-lend-we-have-no-idea-why-a3a1b6507009, Accessed 26 June 2022
³²Leder, Michelle. “What Was Coinbase Thinking When it Dissed the SEC?” 15 Sept, 2021, https://www.bloomberg.com/opinion/articles/2021-09-15/what-was-coinbase-thinking-when-it-dissed-the-sec, Accessed 26 June 2022
“A NICKEL AIN’T WORTH A DIME ANYMORE.” - Yogi Berra
Is money not simply an instrument that people agree to pay attention to? Whether it’s seashells in Papua New Guinea, Grecian coins made of precious metals, tobacco sticks in a prison yard, or custom chips at a poker table, group attention flows through these instruments just as vibration runs through strings, making them “money”, charged with the harmonic value of an agreed upon medium of exchange.
Perhaps money’s fluid nature spawned its numerous water-based terminologies. Assets which cannot move are said to be frozen. A person who is highly liquid has lots of cash. Holding an asset valued at less than its initial cost means you’re underwater. Just as boats are collectively stored in a port, a collection of stocks is called a portfolio. Products priced to move are said to be on sale, admittedly a mere homonym, though akin to the sails that move windblown vessels across the seas of commerce. Currency, (from Latin currere, meaning “to run”), shares the same root as current.
Money is an instrument people agree to pay attention to. - Frank America
Currency is historically controlled by banks while a current’s movement is always directed by nature’s propensity to find the fastest way forward, the path of least resistance. With that in mind, could the current of financial progress, as it has evolved across land, water, air, and wire, be why we’ve found ourselves in this new era of cryptocurrency?
Digital money is powered by an electric current, which carries a charge. The digitization of fiat via credit and debit cards, or in analogous value structures like airline miles or game tokens, are things we are familiar with. The evolution into this digital money transfer system dates back to the mid 20th century, with the introduction of credit and debit cards. VISA launched a credit card in the United States in 1958, went international with it in 1974, and debuted the debit card in 1975.¹ Interestingly, the credit card went overseas just three years after we left the gold standard.
Fast forward to today where cryptocurrency exists as a different version of digital money; it is a currency that does not have a direct correlation to fiat. Cryptocurrency operates on an electric current just like digital transactions enabled by credit and debit cards, but unlike these digital representations of fiat, cryptocurrency is set apart by an additional layer of security, which is essentially how it defined its value outside of a fiat economy.
To understand what cryptocurrency is first requires a definition of crypto and currency. Crypto refers to cryptography, which, in the context of cryptocurrency, uses complex math problems to protect information. Cryptography at its core solves the double-spend problem, incentivizes the completion of a hash (a tough math problem), and synchronizes the verification of transactions on a blockchain via a decentralized ledger.
Currency means a medium of exchange that is in circulation, which is a form of movement, like a current. Cryptocurrency is therefore a digital currency that protects information in circulation with cryptography. Many things have been and could be money. However, as a medium of exchange, money works best if the items chosen to represent units of exchange are small, scarce, predictably similar, and difficult to fake. Think exotic shells, precious coins, illustrated notes, custom chips, etc.
Cryptocurrency is a digital currency that protects information in circulation with cryptography.
Cryptocurrency, or code-based money, isn’t just small, it’s physically absent. It’s not just scarce, the total supply, like with Bitcoin, can be pre-determined. It’s not merely predictably similar, but each unit is an exact replica of any other. This is peak fungibility. An example of deteriorated fungibility within the world of fiat comes from buying trinkets in local markets or bazaars where the cash returned to the purchaser is typically the most weathered, torn, and undesirable version of that fungible currency. Lastly, forgery isn’t even possible because of the value proposition of cryptography. It is this code-based protection which has given rise to its characteristic “trustlessness.”
Cryptocurrency protocols are full of code that can be copied anytime (what’s called a fork), which is why the value truly resides within the specific instrument we agree to pay attention to. As far as intellectual property rights or “stealing someone’s ideas” go, the status quo is to say, “Yes, please go ahead and copy this code. See if you can make it better.”
Historically, forks in blockchains have proven the value lies with attention. Is there more value in Bitcoin or the forked Bitcoin Cash? Is there more value in Ethereum Classic or the forked Ethereum? These consensus-driven decisions prove that it is the social layer, layer zero — or what lies beneath the blockchain — that is the ultimate arbiter of value. What people pay attention to is what counts.
Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver.
-Ayn Rand
Similar to how the shift from newspapers to news websites reached a critical mass, we’ve seen a shift from paper-based fiat to secure digital money.
Verified users in crypto has gone from 5 million in 2016 to 225 million in 2021.² According to Chainalysis, global adoption has grown 2300% from Q3 2019 to Q2 2021, with Vietnam, India, Pakistan, Ukraine, Kenya, Nigeria, and the United States leading the way.³ Notably, Kenya had the highest peer-to-peer (P2P) exchange volume. Crypto adoption in Africa is well underway.
With this in mind let’s look at some traditional payment transactions tools. As of last year, Paypal has started accepting Bitcoin,⁴ Cash App sends and receives Bitcoin,⁵ VISA settles transactions in a dollar-pegged stablecoin called USDC,⁶ and Venmo offers a menu of cryptocurrencies complete with educational materials.⁷
When it comes to banks, Goldman Sachs has started offering Bitcoin, Ethereum and other cryptocurrencies to its wealth management clients.⁸ Morgan Stanley plans to offer up to 2.5% Bitcoin exposure to its clients with an “aggressive risk tolerance”, individuals with $2 million or more to spare. Clearly, these are signals mainstream adoption is afoot.
Millennials are the largest demographic group in America, at over 73 million, due to inherit $30 trillion from baby boomers over the next three decades.⁹ ¹⁰ Morgan Stanley’s research arm forecasted in 2019 that millennials will be the largest borrowers over this next decade, and that digitally native Gen-Z will reach 78 million in population by 2034.¹¹
This wealth, like water, will run downhill, and it’ll settle in the estuaries of demographics that prefer mobile banking and cryptocurrency. A 2021 study by Chase showed that “98% of Millennials use a mobile banking app for a wide range of tasks”.¹² Smart-phone owning Gen-Z is already keeping pace with Millennials in terms of mobile banking activity, checking accounts, and transferring money on their phones.¹³
According to a 2022 Financial Literacy study that surveyed 4,000 Americans, at least one in four millennials, Generation X-ers, and Generation Z-ers invest in cryptocurrency, and all of those who do believe “the greatest returns from their investments will come from cryptocurrency.”¹⁴
CNBC recently published a finding that among millennials with over $1 million in investable assets, almost half (47%) of them had a quarter of their portfolio in crypto.¹⁵ Business Insider reports that the number of millennial millionaires hovers at around 618,000.¹⁶
Although “the great wealth transfer” may be a slow trickle, and this wealth may be spent by boomers on Mai-Tais and beach vacations,¹⁷ there will be an increased wealth running downhill over the next few decades, and an increase in borrowing and earning from millennials and eventually Gen-Z. We’ll probably grow into an age where “mobile banking” sounds as redundant as “internet store”.
The wealthiest portion of the largest demographic in America, the world’s wealthiest nation, uses their smartphone for banking, holds a quarter of their finances in crypto, and is scheduled to receive $30 trillion in inheritance over the next few decades. If this isn’t a perfect crypto-cocktail storm, primed to expand the parameters of traditional banking and digital money, then what is?
We’re already in a full-blown digital fiat system. The credit card, which issues debt, is a digital loan. The debit card, which pulls from deposit balances, is a digital checkbook. Few people carry cash. Swipes and taps are the norm. If anything, the pervasiveness of this digital economy is evidenced in how nonchalantly we send money to one another on Venmo after dinner.
Perhaps soon, the money we exchange on our smartphones won’t just be digital fiat, but a secure cryptocurrency on a decentralized blockchain. Paypal, Venmo, Cash App, and VISA are signaling this cultural shift. The mainstream adoption of the new digital crypto economy could be a rising tide that lifts all boats floating on the digital current.
A cryptography-governed asset, which is viewable on a blockchain and baked into the native language of computers, is arguably a more enduring version of money. Whether this becomes a dollar-pegged stablecoin, fractions of bitcoin and Ether, or some future token, remains to be seen.
Regardless of form, a knowledge of how cryptocurrency works isn’t necessary for it to become the predominantly used medium of exchange. But paying attention to it is. This attention doesn’t require technical know-how or expertise. After all, most people don’t know how a car runs, and they drive them just fine.
For example, a litany of celebrities and talk show hosts purchased jpegs of cartoon apes in human clothing.¹⁸ The mass adoption that ensued didn’t necessitate a technical understanding of what a non-fungible token is. The only barrier to growth was easier on-ramps for fiat-to-crypto purchases.
These smoother routes, or paths of least resistance, to passing the crypto driver’s test are already happening, and will continue to happen under the hood, while everyone keeps pursuing the nearest and fastest on-ramp.
Meanwhile, a new highway is being paved beneath our feet.
Bitcoin started as a peer-to-peer money exchange platform. Over the last thirteen years, Bitcoin has shifted from a means of payment for small purchases, to more of a store of value. One of the most persistent arguments against Bitcoin is that you can’t easily buy groceries or gas with it. Of course, you could obtain a Bitcoin-backed debit card, which converts your crypto automatically upon purchase, but this is another adoption barrier.¹⁹ The point here is that you can’t buy groceries with gold or stocks either, but both are worth hanging on to!
If you bought $1,000 worth of bitcoin on Aug 21st of 2011,²⁰ five years later you’d have had over $50,000, and if you had waited a decade, those same bitcoins would have been worth $4.3M.²¹ Granted today it would have dropped to a measly $1.8M, but we’re looking at 5 year increments. By Aug 21st of 2026, we may see a similar jump.
Consider that in the same decade Bitcoin went from shady drug-dealer money on Silk Road, which the US government seized and auctioned off,²² to official legal tender alongside the US dollar in El-Salvador.²³
The phenomenon of a peer-to-peer financial transaction system wasn’t revolutionary with Bitcoin; PayPal launched P2P financial transactions in 1998, and blew up after being acquired by eBay in 2002. Bitcoin is revolutionary though because it offered peer-to-peer financial transactions without a bank or other intermediary*.* Bitcoin is like PayPal except the money isn’t stored in your checking account, it’s stored in your self-custody wallet. This money isn’t even digital dollars, it is digital code.
Bitcoin, the blockchain, is like a digital vault. Its math-locked code is like digital gold. When people talk about buying bitcoin the cryptocurrency (BTC), they mean purchasing access to specific and unique information stored on that blockchain, and retaining private keys for that access. If one loses the keys, they lose the coin. There is no need for a custodian. There’s no such thing as a bank run on Bitcoin that leads to a loss of funds. The blockchain is the bank and the network of users own it. The value of bitcoin is self-evident, because unlike a dollar or a euro, which gets watered down over time, one bitcoin will always be equal to one bitcoin, it’s inflation proof.
Bitcoin is like a digital vault with keys of math-locked code.
Bitcoin can’t be over-printed and hyper-inflated because there is a limited amount of them. There are only, and will only ever be 21 million bitcoins. About 90% of those are already in circulation.²⁴
Bitcoin’s market cap, which is the amount of bitcoins in circulation times the value of each bitcoin, at its current value of 409 billion dollars,²⁵ is worth more than 97.8% of the companies making up the S&P 500.²
As the first out of the digital money gate, Bitcoin secured the perimeter of a new financial fortress. The blockchain became the vault, the bitcoins are the gold, and the culture is now the moat that protects it. Ethereum, on the other hand, is like a bridge over this moat leading to uncharted lands further westward, where the decentralized world could operate in a faster and more flexible way.
If Bitcoin is a safe, one could think of Ethereum as a Swiss Army knife. What makes Ethereum so versatile is its smart contracts.
Smart contracts execute customizable functions on a blockchain for financial, legal, social, and governance purposes. These use cases for Ethereum are non-exhaustive, and still relatively unexplored. The possibilities range from secure and transparent voting systems to managing supply chain operations, from deploying loans and executing trades to granting music,²⁷ or film royalties in real time, from proof-of-ownership tools to peer-to-peer fundraising platforms without a middleman (take a hike Kickstarter).
The strongest use case on Ethereum, since its inception in 2015, was turning ordinary lending and borrowing into a human-error free, automated process. This is broadly known as decentralized finance, or DeFi. DeFi is to finance what Uber was to transportation.
Uber replaced a centralized monopoly that overcharged for a service by offering the same service at a better value in a decentralized manner. Ethereum’s blockchain offers something similar with lending, borrowing, and trading.²⁸ So long as the services are legitimate, enjoyable, comparable in price, and dependable, the “Uber-version” always cannibalizes the centralized version via the force of market adoption.
DeFi is to finance what Uber was to transportation.
DeFi applications went from holding $1 billion in 2019 to over $100 billion in less than three years.²⁹ What may result with DeFi is the financial equivalent of no more yellow taxis.
Insert Coinbase, a popular cryptocurrency exchange company publicly traded on the NASDAQ stock exchange under the ticker COIN, which designed a lending program in 2021. Keep in mind the current annual percentage yield (APY) in most traditional savings accounts is 6/10ths of 1%. That means if you put $10,000 in a savings account in a year you’d get $60 back. As part of its lending program, Coinbase was prepared to offer 4% APY. That’s more than 6X what you get from a savings account for keeping your money with them. Move that $10K over to Coinbase, convert it to USDC, and you’d see $400 come back a year later. A sizable difference for money just sitting there. The kind of difference that could cannibalize traditional bank savings accounts across the nation.
The Securities and Exchange Commission (SEC) sent a letter to Coinbase informing them they would get in trouble if they went forward with it. Coinbase rescinded its lending program shortly after.³⁰ Their Chief Legal Officer shared their side of the story in a blog post titled “The SEC has told us it wants to sue us over Lend. We don’t know why”.³¹
The point here isn’t Coinbase getting blocked by the SEC, but rather that a $50 billion dollar cryptocurrency company³² was confident enough in DeFi to offer all of its customers a risk-reduced rate of return of ~4% APY. Can you imagine what that would do to centralized banking? Who would park their money in a savings account when they could earn six times that with similar guarantees on an app downloaded to their smartphone? The SEC blocked this mainstream adoption valve, but the tools Coinbase was going to use to supply 4% APY are still here.
Hamstringing a user-friendly front end for DeFi can only be a speed bump in the inevitable mass-adoption of a superior financial system using better code-based instruments, i.e. smart contracts. DeFi is trustless, automated, secure, and open 24/7 just like 7–11.
Regulating DeFi growth incentivizes and redirects currency flow beyond constrictive jurisdictions, and passes on a boatload of what would have been taxable income. DeFi will never be beholden to the jurisdictions of regulatory giants like the United States or China. However, DeFi will always look to major financial players like the US and China to provide meaningful regulatory insight that prevents bad actors and creates guide rails for doing digital business in a morally fair way. But the US thinking everyone should take a yellow cab will not stop DeFi. Uber drivers appeared where the passengers were, not the other way around. DeFi will show up at the doorstep of an accessible IP address. Countries that dial in a smooth front end for DeFi will be the first to benefit from faster financial "transportation", much like the flow of a current always finding the most efficient route guided by the natural contours of the land. Plus, with DeFi, your compounding APY will make that trip down the river at record speed.
DeFi is trustless, automated, secure, and open 24/7 just like 7–11.
To quote the Red Sox owner in Moneyball written by Aaron Sorkin, about being the first guy through the wall, “He always gets bloody, always. It’s the threat of not just the way of doing business, but in their minds it’s threatening the game. But really what it’s threatening is their livelihoods… and anybody who’s not building a team right, and rebuilding it using your model right now, they’re dinosaurs.” So long Tyrannosaurus USA and The People’s Republic of Triceratops.
The Bitcoin and Ethereum blockchains are too important to stop, too helpful to ridicule, and too profitable to ignore. Both arrived at financial prominence by climbing up the ladder of economic influence instead of printing money from the top of it. At the heart of the behemoth that is Bitcoin and within the head of the leviathan that is Ethereum isn’t greed, control, or usury, but observable code and as such moral transparency. No more secrets.
Money, in any moment, like some sort of emergent autonomous zone, is that which people agree to pay attention to. Cryptocurrency may be an innovation on par with the steam engine and electricity. Just as the steam engine shrunk the earth, and electricity lit up the night, blockchain promises liquidity in your own bank.
*This article originally appeared on BanklessPublishing.com on 7/1/2022.
Frank America is an author, researcher, comedian, and musician. He has a background in English Literature, Philosophy, and Communications. Frank is a co-founder of The Rug News, and content manager at Bankless Publishing.
Zero Mass* is a writer exploring the unique space of DAOs and crypto. His pseudonym is purposefully designed to test the “trustless” concept.*
Sixian* is an editor at BanklessDAO. She’s interested in the potential of decentralized technologies, especially the ways in which individuals and communities can self-organize, activate alternative economies, and explore deeper notions of wealth.*
¹ “The History of Credit Cards”, creditcards.com, 12 Aug 2021, https://www.creditcards.com/credit-card-news/history-of-credit-cards/, Accessed 22 Aug 2021.
² Debest, Raynor. “Cryptocurrency Adoption Amongst Consumers Statistics and Fact”. Statista.com, 29 Mar 2021, https://www.statista.com/topics/7705/cryptocurrency-adoption-among-consumers, Accessed 16 June 2022.
³Chainalysis Team. “The 2021 Global Crypto Adoption Index”, chainalysis.com, 14 Oct 2021, https://blog.chainalysis.com/reports/2021-global-crypto-adoption-index/, Accessed 26 June 2022.
⁴Manning, Landon. “Paypal Accepts Bitcoin for Merchant Payment”. Nasdaq.com, 5 Apr 2021, https://www.nasdaq.com/articles/paypal-accepts-Bitcoin-for-merchant-payment-2021-04-05, Accessed 15 Aug 2021.
⁶ https://usa.visa.com/about-visa/newsroom/press-releases.releaseId.17821.html
⁷https://venmo.com/about/crypto/
⁸Hale, Kori, Goldman Sachs Cryptocurrency Endorsement Boosts Wealth Management, forbes.com, 5 April, 2021, https://www.forbes.com/sites/korihale/2021/04/05/goldman-sachs-cryptocurrency-endorsement-boosts-wealth-management/, Accessed 8 Aug 2021.
⁹ McKeefy, Shane, “4 Ways Banks Can Keep and Win Millennial Customers”, gallup.com, 3 Apr 2018, https://www.gallup.com/workplace/237734/ways-banks-win-keep-millennial-customers.aspx?, accessed 15 Aug 2021.
¹⁰ Choi, Audrey, “How Younger Investors Could Reshape the World”, morganstanley.com, 24 Jan 2018, “https://www.morganstanley.com/access/why-millennial-investors-are-different”, accessed 25 June, 2022.
¹¹How Millennial and Gen Z Could Reinvent Banking”, morganstanley.com, Jul 31, 2019, https://www.morganstanley.com/ideas/millennial-gen-z-loan-growth, Accessed 19 Aug 2021
¹² White, Alexandra, “millennials and Gen Z are the Most Likely to Use Mobile Apps” — here’s why, plus budgeting tips”, cnbc.com, 29 Jan 2021, https://www.cnbc.com/select/why-millennials-gen-z-use-mobile-banking-apps/, Accessed 22 Aug 2021.
¹³ How Millennial and Gen Z Could Reinvent Banking”, morganstanley.com, 31 July 2019, https://www.morganstanley.com/ideas/millennial-gen-z-loan-growth, Accessed 19 Aug 2021
¹⁴ Rosenberg, Eric and Valasquez, Vikki. “Younger Generations More Bullish on Cryptocurrencies”, investopedia.com, 4 Apr 2022, https://www.investopedia.com/younger-generations-bullish-on-cryptocurrencies-5223563, Accessed 16 June 2022.
¹⁵ Frank, Robert, “Millennial Millionaires Have a Large Share of Their Wealth in Crypto, CNBC Survey Says”, 10 Jun 2021, cnbc.com, https://www.cnbc.com/2021/06/10/millennial-millionaires-have-large-share-of-wealth-in-crypto-cnbc-survey-.html, Accessed 22 Aug 2021
¹⁶ Hoffower, Hillary, “Meet the Typical Millennial Millionaire in America…” businessinsider.com, 9 Nov 2019, https://www.businessinsider.com/typical-american-millennial-millionaire-net-worth-building-wealth-2019-11, Accessed 16 June 2022.
¹⁷ Garcia, Gabriel, “That 30 Trillion Great Wealth Transfer is a Myth”,cnbc.com, 22 May 2018, “https://www.cnbc.com/2018/05/22/that-30-trillion-great-wealth-transfer-is-a-myth.html”Accessed 26 June 2022.
¹⁸Dickens, Sean, “TV Host Jimmy Fallon Reveals He Owns a Bored Ape Yacht Club NFT”, finance.yahoo.com, 11 Nov 2021, https://finance.yahoo.com/news/tv-host-jimmy-fallon-reveals-164716453.html, Accessed 16 June, 2022.
¹⁹ Metz, Cade, “Coinbase Just Debuted the First Bitcoin Debit Card in the US”, wired.com, 20 Nov 2015, https://www.wired.com/2015/11/coinbase-unveils-countrys-first-bitcoin-debit-card/[,](https://www.wired.com/2015/11/coinbase-unveils-countrys-first-Bitcoin-debit-card/,) Accessed 16 June, 2022.
²⁰ “Bitcoin Price USD”, Bitcoin.zorinaq.com, 21 Aug 2011, https://Bitcoin.zorinaq.com/price/, accessed 21 Aug 2021.
²¹Ibid.
²² Higgins, Stand. “US Government to sell over 44,000 Bitcoins Today”, coindesk.com, 6 Nov 2015. https://www.coindesk.com/us-marshals-final-silk-road-Bitcoin-auction, Accessed 22 Aug 2021.
²³ Avelar, Brain. Jones, Sam. “El Salvador Becomes First Country to Adopt Bitcoin as Legal Tender”, theguardian.com, 9 Jun, 2021, https://www.theguardian.com/world/2021/jun/09/el-salvador-Bitcoin-legal-tender-congress, Accessed 22 Aug, 2021.
²⁴ Chanalysis Team, “60% of Bitcoin is Held Longterm as Digital Gold, What About the Res?” chainalysis.com,18 Jun 2020, https://blog.chainalysis.com/reports/Bitcoin-market-data-exchanges-trading
²⁵ https://www.coingecko.com/en/coins/bitcoin
²⁶ https://fknol.com/list/market-cap-sp-500-index-companies.php
²⁷ Bain, Katie. “The Chainsmokers Giving Fans a Share of New Album’s Royalties as Free NFTs” billboard.com 12, May, 2022. https://www.billboard.com/business/tech/chainsmokers-free-nfts-royalties-new-album-royal-1235069874/
²⁸ Gupa, Nakul. “How Defi is eating financial services” cyptechie.com 30 June, 2021. https://www.cryptechie.com/p/defi
²⁹ DeFi Market Cap. 26 Sep 2021. Coingecko.com https://www.coingecko.com/en/categories/decentralized-finance-defi
³⁰Bosch, Christopher, J. “A September to Remember: Coinbase Avoids SEC Clash by Dropping Crypto Lend Product”, natlawreview.com, Sep 29, 2021. https://www.natlawreview.com/article/september-to-remember-coinbase-avoids-sec-clash-dropping-crypto-lend-product, Accessed 26 June 2022
³¹ Grewal, Paul, “The SEC has told us it wants to sue us over Lend. We don’t know why.” blog.coinbase.com, Sep 7, 2021. https://blog.coinbase.com/the-sec-has-told-us-it-wants-to-sue-us-over-lend-we-have-no-idea-why-a3a1b6507009, Accessed 26 June 2022
³²Leder, Michelle. “What Was Coinbase Thinking When it Dissed the SEC?” 15 Sept, 2021, https://www.bloomberg.com/opinion/articles/2021-09-15/what-was-coinbase-thinking-when-it-dissed-the-sec, Accessed 26 June 2022
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