Blockchain is so much bigger than Bitcoin. Crypto is so much bigger than currency. Yet all the average person knows about crypto is that it’s an alternative form of payment–a poor alternative, the naysayers argue, given its trading price volatility. (Unlike the U.S. dollar…? That statement may not age well ¯\_(ツ)_/¯ )
Crypto’s potential as a medium of exchange is interesting, but not nearly as interesting as the other potential applications of the distributed ledger concept (which I explained in laymen’s terms in my last post). Below are just a few examples.
Decentralized Finance. Large institutions rule the traditional finance system. Decentralized finance, or “DeFi,” stands to disrupt that system. As one example, some DeFi lending protocols make it possible for individuals to lend funds into a money market, and for other individuals to borrow from those funds, without any intermediary involved.
Decentralized File Storage. Remember when Amazon Web Services shut down the social media app, Parler, because reasons? I’m certainly no Parler fan, but that incident showed the world the insane amount of control AWS has over content. Networks like Filecoin, Storj, and Siacoin provide decentralized file storage solutions, which, through technological wizardry, split files into bits and pieces, store those files on separate computers, and reassemble the bits and pieces into whole files upon request.
Decentralized Exchanges. For centralized exchanges (such as stock exchanges) to work, there must be either 1) a willing buyer and a willing seller on either end, or 2) a liquidity provider, a.k.a. “market maker”–an entity that agrees to buy and sell in large volumes to facilitate trading, in exchange for a profit on the bid-ask spread. A decentralized exchange (or a “DEX”) like Uniswap empowers the everyday person to be a mini market maker by contributing assets to a liquidity pool. Others can then trade with the liquidity pool, and liquidity providers earn fees.
Decentralized Property Records. Property records are generally kept by a centralized governmental entity, such as a county register of deeds. At best, these record-keeping systems tend to be outdated, clunky, and influenced by human error. At worst, they are susceptible to corruption, particularly in places with unstable governments. A distributed ledger of property records, powered by smart contract technology, would mean records that update flawlessly and instantaneously (for instance, during a real estate closing), with very little potential for later alteration by a bad actor.
Crypto may have potential as a currency, but it’s so much more than that. And that is why I move to take the “currency” out of cryptocurrency. Maybe then, crypto will start getting mainstream recognition for its true potential, not just for its flaws as a medium of exchange.