Crypto is pretty bad internet cash
It’s hard to believe right now that crypto — even with all of its flexibility and massive capabilities — could ever be like cash on the internet
Artwork by Crystal Le
There’s still no version of cold hard cash on the internet. There’s no way, person-to-person, to give someone cash money. Not a way to spot someone who’s having a hard time with a $20 bill. There’s no digital dollar. There sure has been plenty of conversation about a digital dollar. But it still seems like a pipe dream.
The invention of cryptocurrencies was, in part, to help solve this quandary. Yet over a decade since bitcoin’s advent, there just hasn’t been enough progress.
Crypto’s failure to achieve its original cash-like promise is not good. But just because crypto can’t be used as cash right now doesn’t mean that it could never be.
Despite what some might think about crypto reaching maturity, it’s really still in its early stages — it’s like a teenager rebelling and still not sure what its purpose in life really is.
Privacy-eroding options replacing cash
For ages, cash was the only way to pay. And cash is still a viable option in 2024, especially for the unbanked and financially underserved.
While payment methods like cards, Apple and Google tap-to-pay and services like Venmo and Square Cash are super useful, it’s important to remember they can erode freedoms. Freedoms that crypto was supposed to protect by bringing about a digital form of cash.
Even if you’re not aware of it, big payment companies are collecting lots of data every time you make a purchase. This information includes sender/receiver, amount and often exactly what the transaction is for. This will, in time, be leveraged more and more to advertise and try to sell you more products and services.
And this data is breached every once in a while, as has happened with Equifax, Capital One, Square — the list goes on and on. There is a trade-off for the ease of use with these kinds of payments, even if it’s not clear to many.
What happened to the promise of crypto?
“A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.”
This is the very first line of Bitcoin’s whitepaper: The network was designed as an “electronic cash system.” But one bitcoin is now worth tens of thousands of dollars — hardly any sort of method for payments. No one wants to spend something that is going to become super valuable, even small amounts like satoshis — it’s all about the “HODL” and “stacking sats.”
Speculation has eroded the ability for something like $40,000 bitcoin to be used for spending and payments. As some in crypto realized that bitcoin payments would not be widely used, the lens shifted towards stablecoins instead. These blockchain-based assets, tied to a certain value, have been around for many years. It started with projects like the now-defunct Nubits and of course Realcoin, which later rebranded to Tether, held by 80% of stablecoin owners according to CoinGecko.
However, most of the utility of stablecoins has gone into byzantine decentralized finance (DeFi) uses instead of payments that could replicate actual cash money on the internet. Unfortunately, stablecoins are mostly relegated to DeFi and crypto trading for now — but they could be used as cash on the internet if there weren’t so many ridiculous roadblocks.
Beanie babies, not digital cash
Crypto was designed to foster a more equitable financial world. However, that’s no longer a very convincing argument. There’s too many hoops — compared to the ease of cash — to go through to set up digital payments for the underserved, cryptocurrencies included.
Maybe that’s why Coinbase has been using that Beanie Babies argument in its legal case with the Securities and Exchange Commission. Coinbase’s lawyers are arguing that the assets on its exchange aren’t securities — instead, they’re more like digital collectibles, and therefore the exchange doesn’t need regulatory capture and oversight like a stock exchange.
It’s going to be difficult to bring about the “increase financial freedom” goal of Coinbase’s mission statement if the exchange platform is full of Beanie Babies.
It’s hard to believe right now that crypto, even with all of its flexibility and massive capabilities, could ever be like cash on the internet. There’s just too many incumbents, too many regulations, too much bureaucracy. The industry is stuck with Wall Street. ETFs. Derivatives.
Is this what economic freedom looks like?
It appears so, at least in the United States. In other places, paradoxically, cash is like Beanie Babies — its value can go worthless at any time. This happens in South America, Africa, Southeast Asia. These places may be the engines of incredible growth and opportunity for crypto’s internet cash promise.
I’m hopeful this is the case, that “FOMO,” “aping in” and “going to the moon” will spark some ingenuity to get us back to thinking about real internet cash. Because right now, crypto is a pretty poor version of it despite Nakamoto’s original intentions.
Get the news in your inbox. Explore Blockworks newsletters:
- Blockworks Daily: Unpacking crypto and the markets.
- Empire: Crypto news and analysis to start your day.
- Forward Guidance: The intersection of crypto, macro and policy.
- 0xResearch: Alpha directly in your inbox.
- Lightspeed: All things Solana.
- The Drop: Apps, games, memes and more.
- Supply Shock: Bitcoin, bitcoin, bitcoin.
