The major short-term problem with cryptocurrency adoption? Nobody wants to spend what they think will increase in value.

Hear me out for a moment:

Background:

I'm a student developer/engineer with an entrepreneurial streak who has been getting into decentralized applications and the underlying networks that allow them to exist in the last year or so. I'm also heavily invested in cryptocurrency, as the more I learn the more I realize that I'm in a unique position in time where I can contribute to making the world a more equitable place, and get rich while doing it. (Also, grad school won't pay for itself)

One of the major topics of conversation that comes up in all my discussions with my friends is that in order for cryptocurrency to really take off, as in become an integral part of our society and economy we need to have a spendable, usable currency. Bitcoin started out as such a currency - I remember back in my days living in LA, I occasionally mingled with a team of twenty-somethings who were on a mission to get as many local businesses as possible to accept BTC as payment - and they had decent success, though this was back in 2013 so transaction fees/times weren't the issue they are now. (I wonder how they are doing now, considering I know that they each held thousands of BTC as early adopters - but I digress...)

These days, BTC is obviously not a viable payment choice. It's become the "gold standard" of the crypto world. It has the most pairings with other coins/tokens, and the longest blockchain by far. However, with transaction times that average hours and fees that peaked at around $30 for an above-average processing time, it is clear even now with fees around $10 that BTC will likely never be the spendable currency it set out to become. (I will not wade into the Lightning Network debate - LN has both pros and cons, and that's not the point of this post)

That being said, there are many options out there for faster transaction times, such as LTC, XRB, QASH, etc. and I will also not wade into the technical debates regarding their usability. The main concern that I have with these instant, low-cost/feeless currencies is that they are still not currencies. The purpose of a currency is the transfer of value. The triple mocha skinny latte that costs $35 (or whatever absurd price people pay for coffee these days) is worth that price to many people, and they're willing to spend that money in order to receive their glorious caffeine. However: when purchasing coffee with fiat, we are doing so with the unspoken understanding that $1 today = $1 tomorrow, excluding the minute amounts of inflation (or rarely, deflation).

However, let's talk about deflation. If we all lived in a world where $1 today could buy me 1 cup of coffee, yet tomorrow it could buy me 5 cups of coffee, the entire economy would be turned upside down, as nobody would spend that money with the anticipation that there is a very good chance that same $1 could be worth more tomorrow. The truth is, all crypto investors/enthusiasts live in that world right now.

Crypto isn't currency, it's (a type of) stock/asset: As stated above, fiat currency works because it's stable. For the sake of this example, let's assume two things:

  • RaiBlocks is the de facto "cryptocurrency," with no transaction fees and instant payments.
  • The rest of the world gets their salaries, pensions, welfare in USD.

We've all seen the posts about more and more outlets accepting XRB as payment, which is great for the project and crypto as a whole. However, XRB started out the day yesterday at around $14 per 1.0 XRB, and as of the time of this post is trading at $18.30.

Yesterday, I went to a coffeeshop that accepts both USD and XRB as forms of payment. I decided to put my XRB to use, and bought an extremely overpriced cup of coffee for 1.0 XRB, or roughly $14 worth of XRB. Today, that purchase I made increased by over $4, even though the transaction already happened. That's because if I had paid in USD instead of XRB, I would have $4 more in total assets today than had I paid in XRB.

We must all accept the fact that we haven't bought whatever crypto we may own because we hope to spend it, but because we hope to sell it at a later date for more fiat, which is what we use to keep ourselves alive - we pay bills, buy food, and keep a roof over our heads thanks to stable fiat. This makes the term "cryptocurrency" a misnomer, as it is in fact not a currency. I don't know about you lot, but even if my local supermarket, landlord, and university all accept payments in XRB, I still wouldn't pay in XRB, as I fully expect my XRB holdings to be worth more in USD/Euros tomorrow than it is today, whereas I fully expect the value of my bank accounts in euros/dollars to be worth the same tomorrow as it is today. It's a no-brainer: I'm not spending my cryptocurrency, I'm treating it as a stock in the project. I love seeing projects like XRB, REQ, and OMG take off as they are addressing vital concerns in today's economy and cryptosphere, yet I would never spend them unless I had absolutely no fiat left to spend.

Conclusion:

I think that until one of two things happens, we will never see truly widespread adoption of businesses accepting cryptocurrency as a form of payment:

  • the cryptosphere stabilizes to a point where the value of XRB (or whatever instant, feeless coin exists in the future) doesn't considerably appreciate in value in the short term (<5 years), or
  • the majority (>50%) of all financial transactions in any given economy are performed with cryptocurrency.

Curious to hear the community's thoughts.

TL:DR - We are being incredibly overzealous with our short-term hopes of cryptocurrency adoption, because the profit of investing long-term in cryptocurrency outweighs the benefits of a decentralized currency. Until a Tether-like "stable" currency appears (hopefully with transparency and frequent audits), it doesn't matter if businesses accept cryptocurrency as a form of payment, as it will constitute a very minor proportion of all transactions. Therefore, cryptocurrency is (for the foreseeable future) not a currency, but a weird form of stock or asset that we hold in a specific project.

Edit: words

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