ETH is Not Money – Jason Robert Trikakis
And other clickbait trigger worthy atrocities
ETH is not money… at least not in the way you think.
Here are my thoughts on why.
I define money as “a medium-of-exchange that humans use to buy goods and services.”
In 2017, I co-founded HelloSugoi, an event ticketing business leveraging Ethereum smart contracts.
Aside from a few API calls, our product was “decentralized.” We ran our own node (ugh… ), leveraged IPFS where applicable (double ugh… ), and worst of all, required users to use ETH to pay for tickets (fml, smh, lol… ).
These decisions were very much in alignment with ETH’s narrative at the time: “unstoppable applications,” “autonomous smart contracts,” “decentralized world computer,” etc. ETH was less about “money,” and more about “tokens” and “ICOs.” Why use ETH as money when you can simply print your own?
After deploying our product to the Ethereum Mainnet in 2017, we facilitated 18 case study events in 10 cities worldwide… but only sold 30 of the 2,905 tickets we allocated.
Our “best selling” event was in partnership with ConsenSys, where we acted as the “pay with ETH” option for their flagship conference Ethereal in San Francisco. And despite the event being a crypto conference hosted by the very founder of the blockchain upon which we built our product, only 13 of the 700+ attendees used ETH to pay for tickets (in all fairness, we came in pretty late in the ticket sale lifecycle, but still).
Read our detailed case study for more details.
Now I fully admit that our product was crude at best, had a lousy user interface, and was very slow (no thanks to Ethereum transaction speeds). But only 13 of the most engaged audience in all of crypto used it. Again, our product lacked sophistication, but not that much. Even Joe Lubin himself told us that what we built was “more than an MVP.”
Now this was October of 2017. Crypto as going parabolic. Why use ETH to buy a ticket when the opportunity cost was missing out on the insane returns of simply HODLing? Most attendees chose to pay in fiat. Gresham’s Law in action.
After our first few events, we learned very quickly that most event organizers were not comfortable with or even knew how to accept ETH as money.
Lack of education was the first hurdle. Price volatility was the second. Furthermore, most event attendees had never even heard of ETH. Credit cards is how commerce takes place on the Internet. No credit cards, no business.
In hindsight, building an e-commerce platform that only accepted ETH and not credit cards was like shooting ourselves in the foot and expecting it not to hurt. Our blind idealism got the best of us and made us have to rethink our entire business and technology. We were convinced this ETH thing would change the world overnight… or so we thought.
It’s hard to be rational in the face of compelling world changing narratives coupled with strong confirmation bias in conjunction with 20% daily gains. Holy fuck, what a thing to experience.
Side note: Business models that depend on fiat to crypto gateways to facilitate commerce have a steep hill to climb (from both a usability and regulatory perspective). IMHO this reality is what forced the Ethereum community to rethink its narrative from generalized “decentralized apps” to a much narrower set of use cases, primarily those that are crypto-native and have no need to interoperate with traditional finance. And thus the pivot to “DeFi,” where transactions need not to interoperate with the fiat world.
Thing is, the “DeFi” use case limits ETH’s addressable market to ETHusiasts who are already committed to the cause. I think “DeFi” is an interesting financial experiment, but I feel the use case has surfaced to accommodate ETH’s limitations (lack of interoperability with traditional finance and lack of scalability). For DeFi to work, a grand majority of the world would need to use ETH as money (which I’m arguing it’s not yet ready for), which will take a long time to happen (like all things in the crypto space).
Circling back to HelloSugoi, our next move was an attempt to implement credit card to crypto payments, but without completely bastardizing our moral ethos (we’re supposed disrupt the banks, not enable them, right?).
To do this, we partnered with Connext, whose original business model was to enable token purchases with credit cards. Our business was an ideal use case for their technology. However, despite their eloquent technological solution, insurmountable regulatory hurdles stopped us in our path. The banks were simply unwilling to play nice with crypto.
Our next idea was to implement a, dare I say, “centralized” payment processor (e.g., Stripe, Braintree, etc.) and do a bunch of clever workarounds on the backend with our own stablecoin (whatever-the-fuck that means, lol) to power our smart contracts, mitigate price volatility, and facilitate credit card purchases, all without the banks knowing what we were really doing. The “solution” we architected was a Rube Goldberg machine at best, and an illegal money laundering mechanism at worst, so we scraped it and went back to the drawing board.
You may be thinking, “why not use @MakerDAO?” Well unfortunately, Maker had yet to launch, so leveraging DAI wasn’t yet an option (although this wouldn’t have solved our fiat to crypto problems).
In short, leveraging ETH as money essentially killed our business (not to mention lack of transaction throughput, high and unpredictable gas costs, MetaMask timing out, our node taking forever to sync, lack of descriptive error messaging in Solidity, etc.).
These challenges, realizations, and truths ultimately made me weary of the practically of building general purpose “decentralization applications.” The compromise we had to make to uphold decentralization essentially rendered our product unusable.
Now I don’t mean to throw ETH under the bus. There are plenty of people who do that already. ETH is what initially attracted me the blockchain space, and I owe a lot to the community for helping me to get to where I am today.
I’m a fan of ETH as an experimental alternative to traditional finance. Beyond finance, I fail to see how leveraging ETH solves any real problems.
IMO, no crypto is money, at least not yet. It’s way too early. We’re still in the “SoV” phase of money. Opportunity costs keep HODLers from using crypto as money, which makes a lot of sense when you understand its potential future value.
Fiat teaches us to spend.
Crypto teaches us to save.
Okay, so to wrap things up, money is a meme; it’s the belief in a narrative governed by social consensus; it’s a unit of potential energy that asks us to believe that other people believe in something. And despite my belief in ETH as money, that fact that other people were unwilling to extend my belief was the death knell of our product and business.
Belief in a new kind of money will take many decades to realize.
So what is ETH?
ETH is dream. It’s a social movement disguised as technology. It’s an experiment in human coordination. It’s an opportunity for a bunch of beautiful weirdos to explore the ways in which humanity can build a new world of financial inclusion, which is, after all, the whole fucking point of cryptocurrency.
And in case you need a reminder, I’ll leave you both this moving speech by Andreas Antonopoulos.
Published at Thu, 22 Aug 2019 19:16:10 +0000
Bitcoin Pic Of The Moment
✅ This image from Marco Verch (trendingtopics) is available under Creative Commons 2.0. Please link to the original photo and the license. 📝 License for use outside of the Creative Commons is available by request.
By trendingtopics on 2019-03-13 02:30:12
