1/31
I think Ethereum is set to dramatically change the way we think about payments.
Not just in terms of capturing a component of the $2T in payments revenue that is generated each year, but in entirely new market concepts.
I think Ethereum is set to dramatically change the way we think about payments.
Not just in terms of capturing a component of the $2T in payments revenue that is generated each year, but in entirely new market concepts.
2/31
As it stands right now, Ethereum isn't *yet* a strong way to process simple payments. It can be slow and costly.
While that gets resolved as ETH 2.0 resolves capacity issues, there are new payment structures that ETH does really well.
As it stands right now, Ethereum isn't *yet* a strong way to process simple payments. It can be slow and costly.
While that gets resolved as ETH 2.0 resolves capacity issues, there are new payment structures that ETH does really well.
3/31
Ethereum can enable us to improve:
-The liveness of money.
-The auditability of money.
While these may be overkill for small payments, they actually really begin to matter for large payments.
But, let's come back to that.
Ethereum can enable us to improve:
-The liveness of money.
-The auditability of money.
While these may be overkill for small payments, they actually really begin to matter for large payments.
But, let's come back to that.
4/31
What do we mean by the "liveness" of money?
Right now, payments and work are capital inefficient.
If I want to buy something from you, I either pay upfront for work or craft that you are going to do, or I pay on completion (or a split)
What do we mean by the "liveness" of money?
Right now, payments and work are capital inefficient.
If I want to buy something from you, I either pay upfront for work or craft that you are going to do, or I pay on completion (or a split)
5/31
Either way this means either I have lost out on capital before getting my benefit (good or service) in return, or you have lost out on labor or craft before getting capital in return.
Either way this means either I have lost out on capital before getting my benefit (good or service) in return, or you have lost out on labor or craft before getting capital in return.
6/31
This inefficiency not only has an opportunity cost (losing out on the potential of earning more money) but it is where a lot of short-term lending comes from in our traditional finance system.
This inefficiency not only has an opportunity cost (losing out on the potential of earning more money) but it is where a lot of short-term lending comes from in our traditional finance system.
7/31
Merchant cash advances ($50B/year), SME loans ($4T), payday loans ($50B), consumer credit card debt ($930B), commercial paper ($1T) are all generated by inefficient capital.
Meaning roughly $6T~ in capital is not only currently underused, but also being charged interest.
Merchant cash advances ($50B/year), SME loans ($4T), payday loans ($50B), consumer credit card debt ($930B), commercial paper ($1T) are all generated by inefficient capital.
Meaning roughly $6T~ in capital is not only currently underused, but also being charged interest.
8/31
Even if the average interest on all this debt was a modest 8% (which is generous as these lending models are often the most predatory) then that means $480B/year is being charged in fees for inefficient capital.
Even if the average interest on all this debt was a modest 8% (which is generous as these lending models are often the most predatory) then that means $480B/year is being charged in fees for inefficient capital.
9/31
At the day price of Ethereum ($3851) that means each year more interest payments from small businesses and consumers alone are spent than *the entire marketcap of Ethereum* ($480B vs $455B).
Every. Single. Year.
At the day price of Ethereum ($3851) that means each year more interest payments from small businesses and consumers alone are spent than *the entire marketcap of Ethereum* ($480B vs $455B).
Every. Single. Year.
10/31
Governments on the other hand, owe about $50T in debt.
With the US alone paying around $525B/year in interest payments to service their existing debt.
Governments on the other hand, owe about $50T in debt.
With the US alone paying around $525B/year in interest payments to service their existing debt.
11/31
Now as I said, the $2T a year in consumer payments is interesting, but it is also fractured, low individual volume and doesn't need the same system auditability.
Now as I said, the $2T a year in consumer payments is interesting, but it is also fractured, low individual volume and doesn't need the same system auditability.
12/31
But right now, there exists $56T in debt getting paid, and each year the US government alone spends an additional $6T, while collecting $3.2T in taxes.
Overall that means the US government alone does $9.2T in payments flow each year.
But right now, there exists $56T in debt getting paid, and each year the US government alone spends an additional $6T, while collecting $3.2T in taxes.
Overall that means the US government alone does $9.2T in payments flow each year.
13/31
Payments that are capital inefficient, and highly in need of audit trials, especially when governments are infamous for overspending in the procurement process, such as spending $48 on a hammer. washingtonpost.com
Payments that are capital inefficient, and highly in need of audit trials, especially when governments are infamous for overspending in the procurement process, such as spending $48 on a hammer. washingtonpost.com
14/31
This brings us back to the liveness of money.
Protocols like @Superfluid_HQ are creating models of 'streaming money' that allow money to be paid out second-by-second over time rather than in a lumpsum.
This brings us back to the liveness of money.
Protocols like @Superfluid_HQ are creating models of 'streaming money' that allow money to be paid out second-by-second over time rather than in a lumpsum.
15/31
Since this capital is onchain, it's also easy to audit and monitor the flows of, meaning you have government accountability and can cut out over spending.
Since this capital is onchain, it's also easy to audit and monitor the flows of, meaning you have government accountability and can cut out over spending.
16/31
It also means the government pays as needed and can earn yield by putting the remaining capital to work.
Even if they got 2% on their capital, that's $120B/year (50% of the tax revenue the US collects in corporate income tax.
It also means the government pays as needed and can earn yield by putting the remaining capital to work.
Even if they got 2% on their capital, that's $120B/year (50% of the tax revenue the US collects in corporate income tax.
17/31
It then starts to cut down on that $480B/year in consumer and small business debt, as people are getting paid and paying as they need it.
Allowing more money to be injected back into the economy.
It then starts to cut down on that $480B/year in consumer and small business debt, as people are getting paid and paying as they need it.
Allowing more money to be injected back into the economy.
18/31
And that capital isn't going into the pocketbooks of wealthy bankers, or shareholders in payment processors.
It goes directly back into the purchasing power of consumers and small business owners. Straight to the middle class.
Something @ewarren could get behind!
And that capital isn't going into the pocketbooks of wealthy bankers, or shareholders in payment processors.
It goes directly back into the purchasing power of consumers and small business owners. Straight to the middle class.
Something @ewarren could get behind!
19/31
How does this all help Ethereum?
Well even if you charged $0 on all that payment flow, the constant gas burning on Ethereum would be staggering as hundreds of thousands of payments streamed around the world.
How does this all help Ethereum?
Well even if you charged $0 on all that payment flow, the constant gas burning on Ethereum would be staggering as hundreds of thousands of payments streamed around the world.
20/31
But, if a payment processor captured any of that market, there is trillions of dollars up for grabs.
And it doesn't really matter who captures it because a portion of their profits has to come back to securing the network they use.
But, if a payment processor captured any of that market, there is trillions of dollars up for grabs.
And it doesn't really matter who captures it because a portion of their profits has to come back to securing the network they use.
21/31
While there are other networks that could do things faster, or cheaper, that isn't the point. (Otherwise it'd just be a federal payments database)
While there are other networks that could do things faster, or cheaper, that isn't the point. (Otherwise it'd just be a federal payments database)
22/31
Instead, the really big payments flow, between institutions, between countries, and within federal spending, the type of payments that need the utmost trust and accountability, will land on the most decentralized network.
Instead, the really big payments flow, between institutions, between countries, and within federal spending, the type of payments that need the utmost trust and accountability, will land on the most decentralized network.
23/31
When it comes down to it, smart contracts and blockchains are not about simply doing things better, or faster, or even cheaper.
They are about doing things differently.
When it comes down to it, smart contracts and blockchains are not about simply doing things better, or faster, or even cheaper.
They are about doing things differently.
24/31
Decentralization is about leveraging trustless, automated, uncensorable, open systems to do things that other systems couldn't achieve.
Decentralization is about leveraging trustless, automated, uncensorable, open systems to do things that other systems couldn't achieve.
25/31
There are a lot of projects racing to simply do current finance better.
They'll be successful in that. It's lucrative and it's probably a good thing.
There are a lot of projects racing to simply do current finance better.
They'll be successful in that. It's lucrative and it's probably a good thing.
26/31
There is also a lot of crap in this industry that is scams and vaporware. It's horrible, it drags us down and it should be stamped out.
There is also a lot of crap in this industry that is scams and vaporware. It's horrible, it drags us down and it should be stamped out.
27/31
But the real value of decentralized systems doesn't come quick, because it means redesigning our concepts from the ground up in new ways, by doing what existing titans can't.
But the real value of decentralized systems doesn't come quick, because it means redesigning our concepts from the ground up in new ways, by doing what existing titans can't.
28/31
When we talk about the largest problems in global finance, government-to-government spending, spending accountability and global debt - these entities are slow to move and change.
But, when they do, it's at a scale private industry couldn't dream of.
When we talk about the largest problems in global finance, government-to-government spending, spending accountability and global debt - these entities are slow to move and change.
But, when they do, it's at a scale private industry couldn't dream of.
29/31
Ethereum is the first time you can really build a public style system in a way that everyone can still take part in.
It makes it a no-brainer for these government shifts.
Ethereum is the first time you can really build a public style system in a way that everyone can still take part in.
It makes it a no-brainer for these government shifts.
30/31
And I think as we start to look at the future of crypto, it will come down to the ideas that fundamentally reshape our approaches.
They'll look a little crazy at first, but those are the ones that will change everything.
And I think as we start to look at the future of crypto, it will come down to the ideas that fundamentally reshape our approaches.
They'll look a little crazy at first, but those are the ones that will change everything.
31/31
PS - not financial advice. As far as I know @Superfluid_HQ has no token. It does have private investors, neither I nor my fund are an investor (although, if they read this, I'd obviously be very happy to change that when they do their next round)
PS - not financial advice. As far as I know @Superfluid_HQ has no token. It does have private investors, neither I nor my fund are an investor (although, if they read this, I'd obviously be very happy to change that when they do their next round)
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