Monday, June 17, 2024

Tribe Payments: A focus on “cashing out” undermines cryptocurrency’s growing use cases

by Alex Reddish, MD, Tribe Payments

In mid-November 2021, a short video appeared on Twitter showing how easy it was to buy beer in El Salvador using cryptocurrency. A phone, a QR code, a few seconds, and the beer was purchased. We were being asked to “watch regional Bitcoin adoption unfold in real-time”.

The reaction was not enthusiastic—in fact, the tweet was “ratioed”, attracting way more mocking replies and retweets than likes. Why bother with crypto, most asked, when it’s just a slightly more awkward version of paying by contactless? It’s a good point, if all there was to cryptocurrency was a new way to buy beer. What it may offer is far more choice for consumers. To get there, however, we need to shift the focus from ‘cashing out’ to a wider range of possible use cases—of which buying beer is only one.

Cashing in on cashing out

Crypto, for some, is not a currency. It’s a temporary investment, where it will—hopefully—increase in value over time.

This has been inevitable given the huge gains Bitcoin and other currencies have made in the last decade. Laszlo Hanyecz, who bought two pizzas for 10,000 BTC in 2010, would have had $372 million had he held on to the Bitcoin for eleven years. Others have been inspired by his hastiness to do exactly the opposite, holding on to their crypto with an almost religious fervor, encouraging fellow investors to “buy the dip” when the currency falls, and refuse to sell when it rises – just in case bigger rises are around the corner.

For these investors, crypto is just another option alongside more regular mechanisms such as stocks, shares and bonds. It may have a little more risk attached, but the end goal is to buy low, sell high and nothing more. This has led to a focus on just two crypto experiences: buying it and cashing out. And while these are important, the focus on just these two aspects undermines the potential of cryptocurrencies and similar digital assets.

Offering consumer choice

NFTs have proved to be incredibly divisive, and again the huge amounts of money people have made, the regular tales of scams, and a focus on ape-like avatars are enough to make anyone wary. But the technology does point towards a future where digital assets, proof of ownership, and the ability to digitally transfer ownership, are an important part of the economy.

The idea of digital assets isn’t really new, and video games have led the way. The market that has built up around cosmetic add-ons for games such as Counter-Strike: GO is worth billions. The massive DOTA 2 prize pool is built by people paying to unlock new tiers in their “battle pass”. And many streamers make a living thanks to their subscribers paying them with “bits”. None of these are based on blockchain technology, but it’s telling that video game publishers have rushed to announce that they will be experimenting with NFTs and NFT-like technology.

This is likely to be the future—we won’t rely on payments to access crypto, but instead rely on crypto to provide payments. Using fiat currency won’t be replaced, but instead we will be able to spend and trade with a combination of digital assets, and do so anywhere in the world. Buying a beer in El Salvador? Maybe you want to pay with fiat currency… or with a cryptocurrency, or part of a portfolio of digital assets, or some combination of all three. Those tokens of ownership may link to a digital asset, or they may link to something more tangible. Buying an alcoholic drink in a South American country could be, by the future’s standard, small beer.

Cryptocurrencies will enable consumers to personalise and choose how their money and assets work for them, enabling high speed international remittances, and making both large and small purchases securely. To enable this, there will need to be a shift in attitudes from both consumers and providers: cryptocurrencies need to be seen as more than just a bet, and this can only happen if providers enable more use cases.

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