How will native internet money be better than analog money (e.g. Venmo, Paypal)?


#1

To me, cryptocurrencies are internet money, or money OF the internet. Venmo and online banking are money pegged to the internet in very splotchy way. Digital versions of things always exceed the capabilities of their analog counterparts. I’m curious, how do you think digital money will be far superior than fiat currency? For me, the 2 features that stand out are

  • It’s programmable. That means money can be morphed to have software-like functions rather than just be a flat piece of paper. One example is that all payments could eventually be automated (through smart contracts).
  • It’s monetary policy is transparent. People will see how the value of their money is being depleted, and collectively adopt the best money. 1 global currency.

#2

Because it’s programmable …You can literally build digital money into the rules that define the application.

For example, you can build the rules for how your Uber driver’s fees get calculated into a smart contract and execute it automatically — no middleman necessary. Or you can build into a smart contract the rules for how amounts for certain transactions between two parties (e.g. restaurant owner and customer) are calculated — no middleman (e.g. payment vendors) necessary. The possibilities are endless.

Analog money works, but as I suggested above, it’s highly centralized and opaque. There’s a middleman (e.g. Paypal, Venmo, Apple, Square) providing the service for you so they take fees for doing it. You have no say or control over these fees. For example, if I contract with a freelancer and I pay with Paypal, the fees are astronomical, but all Paypal is doing is adding and subtracting numbers on its backend servers. Why wouldn’t I just build a smart contract that the freelancer and I can interact with directly, and that executes as soon as I receive my services? Moreover, because analog money is centralized, the providers have complete control over who’s transactions they want to support — what if I want to buy something from a country which they don’t support? Wouldn’t it just be easier for me and the person in that country to interact directly using a smart contract?


#3

There are various limitations with fiat money. For one, it’s centralized. There is an authority deciding the final value that I can exchange a unit of x currency for what ever goods or service I am in need of. The value of this currency and the authority is decided by our collective consciousness. The difference between say Singapore Dollar and Venezuela Bolívare is our belief that the government of Singapore is more stable than the Venuzuelan government. Hence we trust the Central Banks to control inflation and maintain the value of such currencies. With internet money, this trust is disrupted. We are able to program into the money the specific functionalities we require from each individual currency/token. In centralised currencies, there are often players who take up lot of commission for very little work. Why should banks charge us so much for reducing money from one account and reflecting in another (transfers) or charge a merchant percentage of purchase value for enabling the transaction. With internet money, we can define such parameters. How much should the transaction enabler make etc.


#4
  1. Could you please kindly provide evidence for this claim?
  2. What do your digital spouse and kids think of that? :stuck_out_tongue_winking_eye:

TheDAO is an ancient history but, you know, forgetting the history could be dangerous. Besides, it was a loud but surely not the only example of the dangers of this approach.

What about this strong trend towards the obscured tx/payments (think zk-SNARKs and co), could not it lead to less and less transparency in some crypto currencies?

Are you sure that these wanting to use a transparent currency with KYC/AML, and these wanting to use obscure currencies (not necessary for bad things btw, but maybe they live in a dangerous place and worry for their own safety for example; although I’m afraid the not-so-sweet motives could prevail on these platforms), and these wanting to be able to mine their currency, and these wanting to go without miners at all… in short that all these and different crowds will settle on one single currency?


#5

You could do it, I could do it, that freelancer could probably do it (although if the freelancer is an artist and has no idea about smart contracts they’re already are at a disadvantage).

The problem here starts when you go beyond the narrow crypto crowd - which will probably grow and over the years (and especially decades) it’s likely that just like “everyone” had a TV and now they have a phone, “everyone” will have a crypto wallet and will be able to build simple contracts using a Scratch-like visual languages (or, more likely, using an AI assistant).

Still,… if at this moment they can seek assistance of their bank or Visa/MC or Paypal if something goes wrong with a “contract”, you know well what happens if there’s a problem in a smart contract.
Furthermore, with all the freaky discoveries regarding the security of our hardware (Meltdown/Spectre seems to be just the tip of an iceberg), even a perfectly written/audited contract with some escrow/fallback capabilities still could lead to a disaster I’m afraid.

So while I’m an avid proponent of smart contracts (and try to write/use some too, to run the experiments on myself to begin with), at this point and probably in the near future they’re just not smart enough for the large audience to excessively rely on (hence the Vitalik Non-giver of Ether’s clarification about “persistent scripts” )

And if you offer people to trust their money to a “persistent script”, at this point I’m afraid most of them would rather disagree - at least that would be a wise thing for them to do.

As even if they tried to review a “persistent script” that they’re about to use, with all the quirks of the language (be it Solidity or C++; not sure about Go that you use in your platform but I guess that while it might be better, it’s not really a 100% silver bullet?) and the platform, most likely than not they would miss many “obvious” issues that could lead to them using the money. Even if the people are programmers! But are not versed in smart contract security.

So the majority of the population would have to rely on some trusted party to provide them with the solid scripts that would do just what they need and nothing beyond that.

And considering that millions (and probably billions) of people will be trusting that party, and will have “support questions” there etc, easily that could mean a sub-par user experience if the service is totally free and maintained by enthusiasts (who need to feed their families btw) who would get overwhelmed and tired and bored by millions of people asking the same questions and complaining non-stop! So the enthusiasts (volunteers) will eventually run off.

So many people would actually prefer to pay a little subscription or % of their payments (esp. when it’s “not paid by them” but by the seller) to get great (or at least some!) service and stability etc…

…oh wait we seem to arrive towards some other incarnation of Paypal and co :slight_smile:


#6

Internet money beats out analog money when the benefits of analog money as we know it run dry. Our concept of analog money, i.e. non-gold standard USD, is relatively new and was the result of a unique moment in time (e.g. US was half of global GDP post-WWII, forced global oil producers to accept USD, and built an international system predicated on American relationships). As American dominance recedes due to various factors ( #MAGA #China #DigitalEconomies), we’ll come to see that the premium put on the USD will erode.

Assuming that no replacement capable of mirroring that level of dominance exists, the prospects for fiat currency look weak. The majority of modern non-USD fiat currencies are volatile, and the few that have proven stable (Euro, Pound, Yen) all represent intimate relationships with US markets. As we proceed into an era defined by what Ian Bremmer has coined “G-Zero” power dynamics, it stands to reason that we’ll need an alternative to clout-backed paper. This is where digital currencies come in, as their ability to transact across borders and resist censorship will undoubtedly outperform fiat currencies in a global economy characterized by bilateral relationships and trading blocs.

However, it remains to be seen whether the king crypto will be inflationary or deflationary. Roman history is rife with stories of gold hoarding and the introduction of lesser metals over the centuries to compensate - Bitcoin could face a similar fate. Standardized inflation rates as seen in Ethereum would motivate holders to invest and engage in digital economies as they do in analog Keynesian economies, but determining at what rate to peg inflation at remains an arbitrary calculation. Regardless, we’ll undoubtedly start to see a shift to greater crypto adoption in the coming decade, as more and more low- to mid-tier countries realize that their weak political statures pale in comparison to the network effects found in Bitcoin.


#7

“Internet money” is in fact not fiat money online.

It isn’t your banks numbers being shown on a digital screen instead of on a piece of paper showing you how much money you currently have in the bank.

The money of the internet - what i regard to be Bitcoin - is more like digital gold, rather than digital fiat.
And there is a huge difference between digital fiat and digital gold.

Gold’s supply is fixed. There is only a certain amount of gold on earth.
However fiat money can be, and has been, printed to infinity. Think of the German Reichsmark for example.

Adding more currency to the monetary base is like pouring more water into a glass of lemonade, claiming that there is more of that tasty lemonade as we have added more water.

In a sense this is true, the glass is now filled to the brim, and we can see that we have more than we had before.
However, as soon as we take a sip of that lemonade, we can taste that the lemonade has clearly been diluted.
It’s not lemonade. It’s not lemonade anymore, it’s water.
The reality is clear. There isn’t more lemonade ( value ) because we added more water, all we did was to make it look as if there was.

With Bitcoin this isn’t possible. With Bitcoin you cannot distort the supply, so 1 Bitcoin will always be 1 Bitcoin.
Pretty much as we percieve our currencies to be, while they aren’t.

And as we look at the price of Bitcoin in our respective currencies, we will see that if inflation ramps up, and money printing begins again, the currency will lose value, and Bitcoins price will rise.

This is Bitcoin. The end goal is a currency not possible to distort, free for all to use, unconfiscatable and programmable.

Having programmable gold is a completely new venue for money that the world has never seen, and it requires it’s very own topic of discussion.

Native internet money is better because it simply isn’t controlled by the central banks. It’s not the same
currency. They don’t abide by the same rules not by the same rulers.

And this is the difference between a native internet money, Bitcoin in this case, and a national currency.


#8

This is one of the best answers I have read here.

In a utopian world, one would want to replace Paypal, banks etc. with smart-contracts - i.e. remove the rent seeking middlemen. However, by doing this we increase our dependence on who has written the smart-contract. Not everyone can code their own smart-contract easily. Can that individual/entity be trusted? Funnily, we are back to trusting someone.

I will actively look for developments in this space as a solution for this would improve crypto adoption a lot.


#9

Thank you Ankit, you’re right, without further developments in this space the overall situation looks kind of weird as instead of trusting one company everyone is asked to just trust some other party. And to forget about the possibility of any mediation (unless that affects this new trustee, ha).

What’s more, a couple of days ago at a conference I’ve participated in a chat with a co-founder of a blockchain-enabled betting system. I’m not into betting, but that’s one of these applications where the trust is crucial so people would actually care about how they are protected with all this blockchain etc, right?

Not quite. According to that company’s numbers, only a handful of people (I don’t remember the exact amount but that was smth like 1% I think… if not less) even visited the page with the detailed explanation of why this particular system is transparent and secure.

And one would guess that out of these who visited the pages, … not everyone would proceed to check the smart contracts etc, eh?

Which basically means that people just came to this platform and gave it their money and their blind trust, which makes one wonder if these fellows needed to bother with blockchain at all (apart from the marketing purposes).