The Key To Building Crypto-Economies

in LeoFinance2 months ago

Much is theorized on what it will take to reach mass adoption with cryptocurrency. This is a discussion that could go many directions. There is little doubt we have a lot left to do in terms of development, especially when it comes to making things easier for the average user, before this happens.


However, there is one area that is severely lacking when it comes to cryptocurrency. Sadly, it is something that was asked years ago and we still do not have a true answer.

What can I do once I get some cryptocurrency?

This is something that harkens back a number of years. Many of us asked the same question when we joined and the answer received was not much better than what we can provide today.

Since there are not many viable options, the solution for most of HODL. This leads to the casino mentality that is so prevalent within the crypto world. That is okay since most are drawn in due to the financial nature of this and the prospect of Lambos and mansions.

What can I buy with my cryptocurrency?

For the most part, in 95% of the cases, the answer is buy cryptocurrency. We major in swapping of coins and tokens. However, there is really little else outside of that. This is something that really needs to change before we can see a major economic impact due to crypto.

Marketplaces: Crossing the Rubicon

The solution is not really difficult. To be successful, and close the gap on the mainstream, crypto needs marketplaces where people can acquire many of the goods and services they need. This will be a major step forward in the evolution of the industry.

When that happens, on a large scale, suddenly people will have options they did not have before. Real world utility becomes part of the use case for cryptocurrency. It is not something that is just relegated to a few areas of our digital lives. Instead, we can acquire those things that impact our families on a regular basis.

A lot is made of the two pizzas that were bought using Bitcoin a number of years ago. The problem is how much have things changed since then? Consider the ability to pay for pizzas using Bitcoin today. How easy is it? Certainly there are some cryptocurrency cards that one could use. However, that is basically another layer over the existing system.

Can we buy food at the local supermarket? How about clothing? Are we able to get the works of our favorite author?

For the most part, the answer is no. And this is a major hindrance to the formation of the crypto-economy.

Velocity of Money

In economics, one of the major indicators on the health of an economy is the velocity of money. This is a gauge which tells us how often a unit of the currency is able to move through the system in a given period of time. Obviously, the greater the velocity of money, the healthier the economy. When money is moving from person-to-person, it means that economic activity is taking place.

This is not evident in cryptocurrency. In fact, we see a velocity of money that is stalled. HODLing is not the path to a healthy, growing economy. It is the exact opposite. When the VOM is low, the economy is thought to be stagnating.

It is easy to understand how this is happening in the crypto-economy.

The lack of commerce in the traditional sense is what holds things back. Money cannot flow through the system, enhancing the economic impact upon more people. Instead, as mentioned, it leads to the speculative nature of things, resulting in the casino mindset. On this end, cryptocurrency is treated more like stock than it is currency.

Use Cases

We often discuss use cases, or utility, in the crypto-sphere. This is vital to the evolution of what we are developing. Unless use cases, in general, are radically expanded, we will see an economic system that is rather niche. The growth rate will be slowed as compared to what it should be.

This would be rather disappointing because we are sitting upon possible the greatest explosion we have seen in economic history. Operating in the digital realm offers the potential for a massive network effect that will spread to many layers. With automation becoming a likely part of each human's future, we can see how the tokenization process, coupled with trillions of node, results in massive economic potential.

Of course, if there are no use cases other than to buy and hold, that will quickly fizzle out.

Obviously, the speculative, financial aspect of cryptocurrency is important. We are not saying that it should not exist. Market conditions which include price discovery are vital. The financial arena is enormous for a reason: it carries great importance for the economic plight of the planet.

However, not everything revolves around the equities or bond markets. Speculation is not the only game that is available. In fact, most businesses shy away from this. In those industries where there is the potential for massive price moves, like with oil/gas, many of them hedge to remove the risk. The idea is counter to what they are trying to accomplish.

Presently, cryptocurrency does not really hedge. We simply dive into the deep end looking for everything to moon. Naturally, when something is new, if successful, the value should explode over time. Again, this is all part of a healthy process.

Nevertheless, and maybe it is because this is still young, we are left with little else. It is the all or none situation. Projects are developed with the prospect of mooning or they end up worthless. Tokenization offers little middle ground.

All of this is an evolution. At the moment, we are in the phase where people are trying to amass whatever they can. Hopefully, as this happens, more opportunities start to arise whereby people are able to utilize cryptocurrency in a way that stimulates economic activity. We are starting to see a bit of that with gaming. However, to truly be a force, we have to move well beyond that.

We will know cryptocurrency is ready for mainstream when average people can get rewarded in a currency and easily use it to buy some goods or services they require in their daily lives.

Until we get to that point, we will remain a fringe industry that is interesting, speculative, and stalling as an economy.

If you found this article informative, please give an upvote and rehive.

gif by @doze


logo by @st8z

Posted Using LeoFinance Beta


I think that we need to focus on an intermediate step first, increaaes p2p sales. In this way the growth of the counter economy will be bottom up and more universally accepted.

At this point big movers will step in and create retail markets with the trading and conversion frictions removed.
Economies are built over time in a sort of feedback loop.
This is often seen as the boom bust cycle. The boom period contains rapid expansion and the bust period will stabilize and consolidate.
We need this process to be slow to ensure that the new economy is organic and robust.
We gotta crawl before we can walk.

Hello there mate,

There are a lot of true statements in your post and I have myself reflected a lot on this.

The truth is through PayPal Revolut or whatever we can buy things with crypto, we just need to go back to the USD/EUR or whatever fiat money in between.

But this is doable and legal. We are seeing adoption of new creditcard such as (company which I am not a huge fan in the long run), Fold or even Blockfi. They seem to be able to do the conversion automatically therefore erasing the friction.

Next step is merchant and companies accepting Bitcoin and holding it on their balance sheet but we have a long way to go before this as I do not even know how this would work in “accounting terms”.

Cheers !


Posted Using LeoFinance Beta

For people to be able to use crypto in real-time especially to have the option to spend it and marketplaces would be a real big deal. If feels like it'll really take a lot to happen but its honestly very possible, that will even give it viability in real-time the more.

Posted Using LeoFinance Beta

Bang, I did it again... I just rehived your post!
Week 57 of my contest just can now check the winners of the previous week!

Hey @taskmaster4450, here is a little bit of BEER from @pixresteemer for you. Enjoy it!

Learn how to earn FREE BEER each day by staking your BEER.

My two cents on this subject is that we need stronger (and preferably trustless and decentralized) stable coins to be able to truly build crypto-economies. We are on the right path, with stable coins becoming stronger lately, but USDT is still highly dominant and all three from the top are backed by single entities (USDT, USDC and BUSD).

Posted Using LeoFinance Beta

All of this is an evolution. At the moment, we are in the phase where people are trying to amass whatever they can.

We're at the point of crypto adoption where people now see how valuable it is currently and they are being futuristic to think about how valuable it'll be in the future. This is causing mass adoption and mass destruction at the same time.

The future of crypto is getting clearer. Government regulations are proof that it's evolving faster than they expected.

Posted Using LeoFinance Beta

I think that things will only be able to gain (attract more people) more mass membership when there are more cryptocurrencies with stable prices. Of course, there are many other aspects, but that would be one of the main ones in my point of view.

If we were to judge the crypto world by the metrics you laid out, it didn't progress that much in the pass few years. We still have long way to go.

Posted Using LeoFinance Beta

you can't even buy the eponymous Bitcoin Pizza with BTC. they don't even have a Lightning node.

interesting also that the narrative around Bitcoin these days is that it was always meant for HODLing. and Lightning is meant to give you the ability to spend your HODL'd BTC, but it's just abstracted accounting with zero settlement. there has to be a point where no one wants the smelly old coins you've been hiding under your mattress for years, because they don't do anything else.

projects that gives the largest number of people the ability to put their ideas to work will most likely produce the solutions we're looking for. the accessibility of Hive and Hive-Engine tokenization kind of blows the doors off of other options at the moment. a bit exciting, glad to be here.

Posted Using LeoFinance Beta

I just feel like it needs to be easier to talk to people about crypto first. I know that I don't talk about what I am doing outside these circles because I am still to new to it to begin to be able to explain what I am doing with crypto to people in my family. I have mentioned it to my husband and told him that right now I am not putting very much if anything out of pocket and just staking what I earn until I can build it up and there are more ways to use it to buy merchandise or even groceries online. I know I need to spend more time learning about it to explain it so that is first.


Posted Using LeoFinance Beta

Because this is such an awesome post, here is a BBH Tip for you. . Keep up the fantastic work

This is a helpful analysis of where we are and what still needs to happen. !BBH

Posted Using LeoFinance Beta

Because this is such an awesome post, here is a BBH Tip for you. . Keep up the fantastic work

At this point crypto really doesn't have as many use cases in real life. I am hoping this changes over time though. I think as it expands more and people are more willing to use electronic wallets, we should see this grow. As such, the crypto space is only in its early stage.

Posted Using LeoFinance Beta

The use case of being able to spend your crypto on a product of your choice is what I believe will be the biggest boost to the growth of the ecosystem. We are seeing centralized exchanges rolling out their crypto debit/credit cards at a wild rate.

Posted Using LeoFinance Beta