“What ARE cryptocurrencies, really?”

  • A store of value: People invest in objects of perceived value (especially if the objects are scarce). As proven by NFT (Non-Fungible Token)s, such objects need not be tangible/physical. They are, nonetheless, assets. The poster boy of this attribute is, of course, Bitcoin. Bitcoin has enjoyed exponential value appreciation from the “network effect” more than any other “coin” to date.
  • A collateral that can be lent or borrowed against, just like any other asset. Stablecoin lending and DeFi lending are ways to generate interest income from crypto ownership. Currently, USDC is the most popular stablecoin and Etherium is the go-to platform for DeFi (based on the native cryptocurrency by the same name).
  • A medium of exchange, — i.e. a digital currency with which to acquire/ exchange goods or services which are increasingly created in a digital, networked economy. It will disintermediate first-gen social network platforms like Youtube which own the content but compensate the creator with a mere cut of ad revenue. It will facilitate a direct relationship between content creator and content consumer via Web 3.0. Bitcoin is the most used for such transactions.
  • The basis for smart contracts between any principals for any purpose, without intermediaries like banks, brokerages, law firms or realtors. Etherium is the best (layer 1) platform for that. (Other layer 1 platforms are Solana, Cardano et al.)
  • A mechanism for transmitting payments over networks, — especially in the trans-border context. Obviously, this can be used to circumvent capital control by countries like China and Russia, thus either of concern to, or outright banned by, such countries. Bitcoin is the most used for such a purpose.
  • The building block for a parallel anonymous and “permission-less” universe to the current financial industry. A stablecoin pegged to the U.S. dollar is an anonymous “representation” of the U.S. dollar unrecognized by the banking cartel (which grants “permission” per its rules and regulations). Yet it is a tradeable and redeemable asset within its own universe, unbeknownst to the banking cartel.
  • A catalyst for redefining finance as we know it (they wouldn’t be able to rewrite textbooks fast enough). By changing the format and duration of “store of value”, creating smart contracts between any parties for any reason, and instantly creating and transmitting value and ownership, the crypto movement will inevitably redefine the capital structure (how much equity and how much debt from which “markets”) of an enterprise. The exact business models (who plays what roles for what rewards) in an ever expansive digital, networked economy will most likely be simulated in Metaverse (i.e. virtual reality) before launch. When launched, this will replace the current financial industry in whole.
  • A catalyst for social equality. By disintermediating the financial industry, the crypto movement will reverse the decades-long wealth-divide trend, and allow wealth building by the bottom rung. McDonald’s can use tokens to reward its customers with equity ownership of the company and make them even more loyal evangelists, much like the Apple and Tesla model. As well, “tokenized” crowd-funding will turn the “vulture capital” model on its head.
  • A catalyst for ushering in a new currency regime and thus, a new world order. This time, unlike centuries past, it won’t be on the heel of a global war, hopefully.

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Morpheus

Morpheus

A Boomer, I write to encourage and inspire Millennials, because they are key to revitalizing a middle class fast becoming extinct.