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Blockchain is disruptive, but it doesn’t change human nature. In fact, Plato and Aristotle considered technology — which has roots in the ancient Greek word “techne,” or craftsmanship — an extension of nature. Today, many innovators’ techniques are flawed. Exciting solutions are unnecessarily complex, hard to understand and impractical.
Regular folks don’t meddle with applications like crytpocurrencies, therefore tokens are derided with nicknames like “shitcoin.” It’s an innovation that elides potential target customers like small-business owners who are too busy to read a technical manual.
Simple vs. Complicated Currency
Human nature should encourage technologists to create a streamlined user journey. In the office, people want ergonomic furniture so that work is pleasant and effortless. And when it comes to the wallet, people want currencies that are simple and don’t fluctuate in value. Aristotle’s commodity theory of money declares that money is a commodity with three functions: medium of exchange, a unit of account and store of value.
But to function in daily life, money should be convenient to handle, store and transport. It should be easy to measure and divide. And money should be difficult to destroy so that it lasts many generations.
Fiat works well, but its major weakness is the destruction of purchasing power by a quantitative easing of central banks around the world. Since the Federal Reserve issued the current version of U.S. dollar in 1913, the greenback has lost almost 97% of its value.
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That’s unacceptable. And so it creates an opening for Bitcoin and non-sovereign, decentralized coins to become newly accepted denominations of money. Unfortunately, cryptos fail to fulfill the aforementioned essential functions. (Yes, Bitcoin is sustainable, but many wannabe currencies have precipitated the loss of hard-earned wages and savings, resulting in the loss of trust in unbacked mediums of exchange.)
Regulators’ Sanctioning of Digital Coins
Governments and central banks are cautiously exploring, experimenting with and regulating digital currencies, and that’s because history is on the side of digital, not paper. Moreover, officials are recognizing that fiat users want borderless and frictionless transactions. If they don’t give what the customer wants, then part of the population may leave for the crypto Wild West for good due to lack of alternatives.
In September, the Office of the Comptroller of the Currency issued a letter that allows regulated banks and thrifts to hold deposits as reserves for stablecoins that represent the U.S. dollar. Stablecoins aren’t the same thing as Bitcoin or other non-sovereign coins, but they at least provide tokenized, borderless and frictionless settlements.
“Companies that issue stablecoins often desire to place the funds backing the stablecoin, or reserve funds, with a U.S. bank,” the letter states. “Public independent auditors’ statements of several stablecoin issuers indicate reserve funds are placed as deposits with U.S. banks. Several of these issuers promote these reserves — and the fact that they are held by banks — to support the trustworthiness of their stablecoin. In light of the public interest in these reserve accounts, this letter addresses the legal authority of national banks to hold stablecoin reserves on behalf of customers.”
Aside from 1:1 pegged stablecoins, state regulators are making fiat and cryptocurrencies interoperable for daily use. Last month, the Wyoming Banking Board approved Kraken’s application for a Special Purpose Depositary Institution (SPDI) banking charter.
The San Francisco-based crypto exchange “will be the first regulated, U.S. bank to provide comprehensive deposit-taking, custody and fiduciary services for digital assets,” according to a Sept. 16 company announcement. “From paying bills and receiving salaries in cryptocurrency to incorporating digital assets into investment and trading portfolios, Kraken Financial will enable Kraken clients in the U.S. to bank seamlessly between digital assets and national currencies.”
Creating a Streamlined User Journey
Blockchain innovators are realizing the critical need to make the customer journey painless and effortless. In September, crypto exchange BitMax.io announced support of deposits and withdrawals with FIO Addresses. These are human-readable addresses (like bob@wallet) as part of FIO Protocol’s initiative to make crypto products usable by anyone. Cryptocurrency addresses can have dozens of characters that make irreversible errors common, and simple addresses are considered by some observers as a step in gaining more mainstream adoption.
Moreover, FIO Requests let users respond to requests for funds knowing the exact amount and proper token chain. As more tokens like USDT operate on multiple chains, it’s becoming important that users only send tokens from the expected chain. The blockchain industry is heading down the path of cross chain communication. Such details can be hidden from the end user with FIO.
HARD Protocol is another example of how cryptocurrency can become more integrated and user-friendly. Tapping into the appetite for decentralized finance, HARD Protocol allows users to lend, borrow and earn with their digital assets. However, whereas DeFi has evolved to be hard-wired to Ethereum — and as such, clunky and difficult to use — HARD Protocol is transcending global investments through crypto technology. It’s based on the Kava DeFi hub, providing an intuitive user interface along with cross-chain capabilities, supporting multiple assets, including BTC, XRP and BNB.
Cross-chain interoperability is proving to be a big hit among holders of non-Ethereum assets who were previously locked out of the so-called “open finance” ecosystem. HARD Protocol only launched in mid-October; however, it already shows close to $19 million in value locked at the time of this writing. Further, HARD Protocol and Kava are also the only DeFi protocols supporting multi-chain assets.
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Money should be easy to use, convenient and difficult to destroy. Innovators can and do more to make the user experience simple and pleasant.