One of the biggest advantages to cryptocurrency is the removal of friction. Of course, this is being challenges as centralized institutions, notably Wall Street, immerse themselves into the space.
That said, the vision of Satoshi was an electronic payment system without the need for centralized financial institutions. The greatest contribution that Satoshi made with Bitcoin was the ability to have consensus without a centralized entity.
This was revolutionary.
Over the years, the state of networks has changed through technological advancement and innovation. This has led to a myriad of alternatives, all within the crypto realm.
It is something that the financial industry took note of. Politicians are also well aware of what is taking place.
Image generated by Ideogram
Crypto payments Akin To An Instant Message
How difficult is it to send an instant message?
We all know how simply it is. This is a frictionless action. Even though we typically are dealing with centralized applications, the ability to send data simply by typing (or speaking) a few words on a keyboard and hitting some type of send button makes it so easy anyone can do it.
To me, the key in the entire discussion is that crypto is nothing more than data. We even use the same terminology "tokens". Anyone who has played with chatbots knows how this applies.
A token is a quantified measure of data. That is all it is. There is some type of data amount with each instant message. Naturally, the end user doesn't consider what it takes to process something like this. It all happens on the back end.
Service providers have to be aware of bandwidth. There is a cost to running these networks. Compute also is not free. Hence, the ability to quantify what is taking place is crucial.
AI is bringing this to the forefront with applications such as ChatGPT or Groq.
Nevertheless, it is all data. This is what cryptocurrency is.
This is why the remarks by Brian Armstrong, the CEO of Coinbase, are accurate. There is no reason why sending crypto should not be as easy as sending an instant message (or email for some of those older readers).
After all, it is still simply a data transaction.
Micropayments
Cryptocurrency is going to excel in the AI era due to the fact that micropayments are possible.
Friction comes at a cost. Those who are involved extract from the transactions. With so many entities immersing themselves, this means we are looking at the baseline going up.
This is why micropayments are not possible in the traditional financial system.
Going back to the data concept, an instant message can be one letter. There are often caps on how but the text can be but this is overwhelmed when a video or image are attached.
In other words, the amount of data can be significantly bigger than a single character.
With payments, Visa cannot do this. There are so many networks involved, with each take a sliver of the activity.
Cryptocurrency networks are a different story, at least at their base. When we look at the ability to transact, especially on a blockchain like Hive where there are fee-less transactions, we see a new world opening up.
The data is the same. What changes with cryptocurrency is the market value. What I mean by this is a token sent, from the network perspective, is identical whether the market price is 3 cents or $30. It is all data.
Therefore, if we are seeing a a fraction of a token (crypto) token, the data component is the same yet the value being transferred can differ.
It is not something that can be duplicated in TradFi.
To present this in a different way, let us look at email versus "snail mail".
An individual will often to respond to an email with a simply "yes" or "no". Not every email is elaborate and long form. Replies are often nothing more than a conveying is simple information.
Would the same be true using the traditional mail service? Obviously not. Someone is not going to take the time to write out "no" on a piece of paper, address the envelop, put a stamp on it, and take the time to head to the mailbox.
The time alone isn't worth it even before we factor in the cost of the envelop, sheet of paper, and stamp.
We can see how this example shows what happens when friction is removed. The digital world has none of those characteristics involved. We can communicate without envelops and stamps. The speed is also many orders of magnitude higher.
Payments are going to be the same. Comparing the existing financial system to crypto is akin to email versus "snail mail".
So Armstrong is right, there will come a time when enough infrastructure is in place to ensure transactions that are akin to instant messages.