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The Utility of Cryptocurrency



Note: views are original and my own. Not investment advice.

Of all of the great benefits that crypto possesses (economic access, freedom, inclusion), the greatest innovation of all lies in the area of utility.

As Vitalik Buterin elegantly said in a recent interview, the purpose of crypto is not for another playground for the rich to speculate and to get richer, but it is to do more meaningful things such as provide more economic equity, access, inclusion, provide greater efficiencies in transactions, cross border payments, perhaps providing universal basic income, and improving everyday modern infrastructure.

What is meant by utility?

Utility means that the ability for the everyday individual, to be able to do something useful with their crypto.

A common example would be for the everyday individual to be able to transact in crypto very seamlessly and easily.

Over the last 22 years, we have achieved utility at scale with everyday use cases with the internet such as sending an email, visiting a website, buying products on Amazon, performing a Google search, or networking on social media.

Crypto went mainstream in 2017, but has not yet achieved the point where everyday people will be able to tap into broader types of crypto use cases.

When we reach the point where individuals will be able to transact for everyday with crypto for purchases at the point-of-sale, we will have reached the tipping point. We will have reached utility at scale.

Additionally, when infrastructure, protocols, applications, regulation, policy, safety, and utility have converged, we will have turned the corner, allowing a new financial infrastructure and system as well as introduced a potentially new monetary system.

In order for utility to occur, it has to be:

1. Seamless (easy)

2. Near instantaneous 3. Efficient (near zero wait times) 4. Safe 5. Legal, compliant 6. Inexpensive

One such example is Jack Mallers, the founder of Zap, which created Strike, an app that allows the seamless transfer of money to anyone, anywhere in the world, instantaneously, with near-zero fees to anyone using the Lightning network.

At the Miami Bitcoin conference this year, he unveiled new partnerships with Shopify, Wal-Mart, CVS, and other major brand retailers so that people could transact using Bitcoin for everyday purchases.

The Lightning network is the layer 2 solution on top of the Bitcoin protocol which is being developed to solve the scalability issues with the layer 1 Bitcoin protocol. The Bitcoin network can handle 7 transactions per second, and takes 10 minutes to settle, whereas the new Lightning layer 2 counterpart can handle up to 1,000,000 transactions per second, and settle in milliseconds. As a comparison, the Visa, Mastercard networks handle up to several thousand transactions per second (claiming up to 24,000 tps), but take a long time to settle on the back end, resulting in extremely high friction costs.

Block’s Cash App is another example that is onboarding millions of customers by making the user experience extremely easy, safe, and efficient to use.

I personally tried using the app for buying crypto and using the funds to pay for everyday goods and services at vendors and retailers, and found the user interface and user experience to be very easy to learn and use. You can check the app out here, using my affiliate link, and get $5 at no additional cost to you.

The biggest example of mass onboarding of customers onto the Bitcoin network can be seen with the country of El Salvador, which has seen it fair share of challenges with the process, but much remains to be seen in the coming years ahead.

The adoption of crypto for payments will begin slowly, and then reach a “tipping point” where the growth will be exponential, as countries and cities begin to take notice and follow in the footsteps of innovators such as El Salvador and Miami in adopting Bitcoin as legal tender and/or payments.


About: Dr. Christopher Loo is a physician who became financially free at the age of 29, and retired early at the age of 38, as a result of making strategic investments after the 2008 financial crisis. A graduate of the MD-PhD program offered jointly through the Baylor College of Medicine and Department of Bioengineering at Rice University, he is the author of “How I Quit My Lucrative Career and Achieved Financial Freedom Using Real Estate”, and is the host of the Financial Freedom for Physicians Podcast. He is a regular contributor to KevinMD and has spoken about the importance of financial literacy for Passive Income MD, the White Coat Investor, Board Vitals, SEAK Non-Clinical Careers, SoMe Docs, Doximity, Medpage Today, FinCon, and other high-profile financial brands geared towards high-income professionals. He is passionate about the role that crypto, fintech, and innovation will play in enabling financial freedom, economic inclusion, access and opportunity for the entire world in the upcoming decades.


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