Crypto’s Remaining Path to Spending Relevance

It’s 2022, and cryptocurrencies have hit something of an impasse. While assets like Bitcoin and Ethereum are firmly established in the public consciousness, many questions still remain about crypto security and long-term viability. Even now, in the age of wild NFT hype and rampant digitalization (of seemingly everything), there’s as much discussion about the safety of the various exchanges and wallets you’d use for digital dealings as there is about the actual marketplaces.

Amidst this uncertainty, cryptocurrencies are still being used primarily as investment assets, and haven’t made much of an impact on how we physically (or virtually) spend our money. Volatility in particular remains a big issue; vendors are reluctant to accept currencies with such wild value swings as some cryptos –– and by the same token, those with crypto assets may be loathe to spend them and risk potentially missing out on value gains.

All of this begs the question though: What opportunities remain for crypto to make the jump from being something to have into something to use? A few options with legitimate potential come to mind

Travel Money

El Salvador caused a storm in September of 2021 when the country itself started to accept Bitcoin as legal tender. With 1.4 million Salvadorans living and working in the U.S. and foreign remittance accounting for some $6 billion (or about 23% of El Salvador’s GDP), crypto’s speed and potentially lower cost compared to traditional money transfer methods make it an attractive proposition. Accused of pandering to rich currency speculators, President Nayib Bukele went to pains to show how crypto would benefit the average family with the launch of payment app Chivo, which Salvadorans can use to pay directly with Bitcoin at both local vendors and global chains such as McDonald’s and Starbucks in San Salvador.

This is, of course only one country’s journey with crypto. But we know that Panama, Paraguay, Brazil, and Argentina at minimum are among the nations monitoring how El Salvador’s integration of crypto into daily life progresses. It appears possible that in the near future there may be countries and regions for which cryptocurrency will become a favored if not necessary option among travelers (not to mention entire local populations).

Online Shopping

When Elon Musk announced in January that Tesla would accept Dogecoin for certain company-branded merchandise, the headlines were focused on the acceptance of what was once seen as a “joke” crypto. However, even when we look beyond Musk’s high profile, many retailers have been quietly accepting many cryptos for some years now.

Unsurprisingly, tech vendors were among the first to get on board, with Newegg having welcomed Bitcoin transactions since 2014, and added Dogecoin, Shiba Inu, and Litecoin to its payment methods in 2021. Meanwhile, Chinese vendor FastTech ships worldwide and accepts 22 different cryptocurrencies as of this writing. And Home Depot has gone one step further; the biggest hardware chain in the U.S. has accepted Bitcoin for both website and in-store purchases since 2019.

Gaming

Given that the internet is where cryptos are stored and traded, gaming seems like a natural outlet for spending. Accordingly, Microsoft accepts Bitcoin payments for both hardware and software, through users’ Microsoft accounts. The game streaming platform Twitch allows users to tip their favorite accounts using multiple cryptocurrencies. And in the emerging Decentraland metaverse, poker salons where players wager the in-house crypto MANA have become some of the most popular locations in the platform’s digital world.

Online Poker

Traditional poker sites have also been quick to capitalize on cryptocurrency being held by growing numbers of people. Indeed, with more than 100 million individuals now holding some form of crypto asset, the market has diversified well beyond “tech bros” and fund managers and now more closely mirrors the general public –– much of which plays poker online.

As this mainstream transition has occurred, it has also become clear that crypto in poker has numerous potential benefits. First and foremost, the security the blockchain offers means a safer (and more anonymous) way of depositing funds. Additionally, payouts can be actioned almost instantaneously. And as a sort of added bonus –– depending on how you look at it –– the volatility of cryptos adds potential perks to gambling, in that winnings can appreciate in value, and lost cryptocurrency might eventually become less valuable (though of course both of these perceived perks can also work the other way around). Because of these factors, we have already seen some adoption of crypto by poker sites, and it’s likely the trend will continue.

Dining and Entertainment

On the dining front, it sometimes goes overlooked that some major restaurants now accept crypto payments. Food at the countrywide Mastro’s steakhouse chain can be paid for with Bitcoin or Bitcoin Cash, for instance. The delivery app Menufy also accepts Bitcoin, as can the Takeaway app in Europe.

As for entertainment, there seem to be more examples with each passing month. Crypto advocate Mark Cuban has ensured fans can use Bitcoin and Dogecoin to buy tickets and merchandise connected to his NBA franchise (the Dallas Mavericks). AMC Theaters now accept various cryptos as payment methods for movie tickets as well. And these are just a few highlights in the entertainment sector.



It’s true that cryptocurrencies haven’t become as much a part of our daily lives as some acolytes have predicted over the years. Chances are they won’t until federal government regulations lay out formal structures for a safer ecosystem that more traditional companies can get on board with. At this point though, there are still plenty of ways to use crypto in day-to-day spending, and the use cases are only growing.


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Published 2022-04-12 07:00:00

Bitcoin – What’s Next?

When Bitcoin was started in Jan. 3, 2009, it was a mystery. No one was ever credited with its invention, and while many people have falsely claimed to be the author, the real inventor still has yet to be verified. “Satoshi Nakamoto” is the name of the alias that the team of people or person used when publishing papers on how Bitcoin would work.

An overview of Bitcoin

Bitcoin has a couple of neat features built into its design. Most people are aware by now of “mining” Bitcoin, which consists of using powerful computer components to, essentially, check math equations verifying other users transactions with the coin to keep fraud or hacks from occurring. The more computers verifying the transactions, the safer, as theoretically a bad actor could take 51% control of the network and verify forged Bitcoin transactions.

When mining Bitcoin, a ‘block reward’ is paid out to the one computer who verifies the transaction correctly first, and guesses the solution to the math problem the fastest. The ‘transaction fees’ that you pay when sending Bitcoin are paid out as a way of compensation for helping the network, and are separate from the block reward.

The block reward, originally, was 50 BTC. This would be an astronomical $3,027,800.00 in today’s currency with the current conversion rate of Bitcoin (1:60556).

Naturally, if that much Bitcoin was given out with today’s popularity of the coin, it would cause rapid inflation. This is because as more Bitcoin entered the market, it would become more easily obtained, and the demand would drop, making the value of Bitcoin decrease.

However, as the authors were aware of economic theory, they implemented a few safeguards to try to mitigate that situation. First, there is a hard limit on the amount of Bitcoin that can ever be created. That limit is 21 million. This is set in the source code and a fundamental rule that cannot be changed without disrupting the entire network. Once that number is reached, no more Bitcoin can be given out as a block reward. We are estimated to reach the upper limits of Bitcoin around 2140, but at least 97% of all Bitcoins will be mined into existence in the next decade. The last 3% will take much more time, due to another one of the cryptocurrency’s features.

Bitcoin has a process built into its underlying framework and code that is known as “halving”. Bitcoin’s framework contains instructions to decrease the block reward every 210,000 blocks rewarded. This means about every 4 years at our current pace, the block reward divided by 2. In 2009, it was 50 BTC, as stated above. In 2012, it halved to 25. In 2016, 12.5. Now, most recently, in 2020, it’s dropped to 6.25. This will continue until the block rewards become negligible amounts of Bitcoin.

This process helps maintain the scarcity of Bitcoin as a resource and a currency.

If you want to learn more about cryptocurrencies, you can look at “how do blockchains work?”, for an easy to understand explanation.

Let’s talk about usage

Bitcoin uses a lot of energy. Mining Bitcoin is a very electricity intensive task, and “Cambridge researchers say it consumes around 121.36 terawatt-hours (TWh) a year”. This is more than the whole of Argentina uses per year, and that number will only increase as Bitcoin becomes more widespread.

This, additionally, is by design. The more power and effort it takes to compute a block’s solution and get that BTC reward, the better for BTC. This method also keeps the value of the currency in check because it requires more effort and money to produce, therefore it must be worth more, right? 🙄

When looking at utility use of Bitcoin, it’s hard to argue for it modern day. Most of the ideas people are rallying behind do not apply to Bitcoin anymore, and can be found elsewhere in far better cryptocurrencies. Bitcoin, as a whole, has been surpassed technologically many times over at this point. This is to be expected. Bitcoin should be seen as the framework for cryptocurrencies, the origin idea, but not the final version, or anywhere close to it. The first phone was nothing like what we have today, just like the first computer. There is a necessary step in the process of adoption for technology of all levels, and this is the next technology that will take a while to refine.

Bitcoin is unchanging because of its code, which means it’s difficult to keep modern. Many other cryptocurrencies that have implemented Bitcoin’s core ideals have been released since 2009 however, and many that do it better. For instance, one such “feature” of Bitcoin is that it is supposedly anonymous. However, it is not. This is a fact. Many government agencies and even private companies have developed extremely sophisticated solutions to parse the blockchain and create connections to online identities. Personally supplied information to exchanges for verification is readily sold and shared with many partners, or such government agencies. This along with computer usage, location, and withdrawal location tracking can paint a clear picture of how Bitcoin is being used, where, and how much.

Okay, so it isn’t private. What about speed? Is Bitcoin fast?

Well, no. It’s not fast by digital standards anyway. It is definitely better than a 3-5 day ACH transaction by your bank or a wire, but it still takes around 30-60 minutes depending on transaction fees. If you pay a higher transaction fee, you can send it in as little as 10 minutes or lower. There was a recent change to the Bitcoin network called segwit that is a whole other technological explanation, but basically increased the speed of the network, decreased transaction fees, and freed up more space for transactions by removing unnecessary data.

Modern cryptocurrencies have this beat, however. Ethereum transactions on average are confirmed in around 5 minutes, and NEO confirms in 15 seconds. Ripple can be sent in 4 seconds.

Monero, a cryptocurrency that takes the idea of anonymity from Bitcoin and runs with it, makes a nice balance between security and speed with 30 minute transaction times on average. Monero is unable to be tracked or linked to identities easily with today’s technology, as it was/is built with a security-first focus in mind. In fact, it’s so effective that the IRS has offered up to $625,000 to anyone that can successfully crack it or track transactions taking place.

Well, do people use it? Not really, either. Most of Bitcoin is stored in long-term holding wallets, or people want to purchase it like a stock, because they think the value will rise. A currency is effective and useful when it can be used as just that: a stable currency. Bitcoin is not stable by any means price-wise, and that means it is treated more as a store of value. Because of this, it’s difficult to use in transactions because the prices change so quickly, in the next 10 minutes the Bitcoin you just got paid for your services could be worth less than half of what it was originally.

Despite all this, cryptocurrencies are still a promising technological advancement – we simply need more iterations like every level of technology that has ever been developed.

What’s next?

Bitcoin is a great framework and foundation for future ideals of cryptocurrencies that will eventually rule the world. The era of slow banking apps and waiting days to transfer money have already largely been eased with the introduction of apps like PayPal, Venmo, or Cashapp, and they will be eliminated in the future when cryptocurrencies are refined and implemented properly into everyday conveniences.

If you want my opinion on what cryptocurrency will be the next widely adopted coin? None of the current ones available.

2032


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Published 2021-10-16 11:48:38