A Few Use Cases of Cryptocurrency That Seem Inevitable
I think it’s always a bit crazy to predict the future, but it’s also a fun exercise to do. I have definitely blogged and been very wrong on a number of technology predictions (what ever happened to Google Wave… ). Anyways, with that caveat, here are a few predictions that I think feel like inevitable use cases of cryptocurrency that proves it has huge value even if it does not achieve everything everyone claims it can.
Replace wire and ACH transfers
Right now when we send ACH transfers for our business it takes usually between 2–5 days. If we send wire transfers to arrive the same day we pay a $30 fee. Cryptocurrency provides an obvious value here. Right now you can stream a show instantly from Netflix but it takes days to send money via banks.
Right now the bank transfer goes through but takes a few days to really confirm. With cryptocurrency the transfer goes through right away, with Bitcoin right now the confirmation time is about 10 minutes. This is already a significant improvement. Also, currently Bitcoin transaction fees are between 2 cents and 10 cents, 300x-1500x cheaper than a wire transfer.
So even if you just had two side by side accounts where you transfer USD to BTC, send a transfer to another bank that has the same side-by-side setup, you have made an instant low fee transaction which arrives right away and is confirmed in 10 minutes. In terms of currency risk, you have really only a minute and maximum 10 minutes of currency risk, which is not a lot. I think if the banks built this as a product where they had a pool of USD and BTC, the transaction really is instantaneous so has no currency risk. Right now looking at todays’ chart, even as volatile as bitcoin is, it seems to move less than 0.1% per block (again this is high relatively, but it’s already at this point today, which is still cheaper for many transactions).
So if you can enable fast to instant cheap payments between parties who do not know each other, what else can you do?
Replace credit card transactions and fees
Right now credit card fees are around 2–4% of the transaction value (source via square), maybe 3% average. For large payments, the fees are quite large. For example a $500 payment may cost $15 in processing fees. This is just a tax on the whole system, and a reason why some small businesses still want to use cash. However it is convenient to use cards. If cryptocurrency could replace credit cards, or move fees down to say 0.1% of the transaction or even a fixed fee of 10–30 cents, this is huge savings. This could be 30x savings on fees.
In 2016 in the US, the credit card transaction volume was $5.936 trillion,which at around 3% is $180 billion in credit card fees. The total global card volume was $26.043 trillion[page 9], so could be around $780 billion in fees. The fees here are rough estimates but it shows you how valuable lowering transaction fees is. Again even a 50% reduction — which cryptocurrency is more than capable of doing — is massive.
It seems to me anywhere where you use check payments should be replaced with cryptocurrency. I’m not sure if that will happen, because that workflow is so ingrained, but again, it is crazy that you can send so many things instantly across the world, but the most trusted way for many people to send money is to send a piece of paper across the world through the mail, which then you have to take to your bank or scan, when you are just trying to send the account numbers. Also, they are very insecure in that it shares your bank account information (yes, there are safeguards in some ways, but overall it is not secure). As an example, if someone could help schools switch to non-check payments it would save the education system so much money.
Easy international payments
International payments are very expensive now, and cryptocurrency payments seem like a way to speed that up and make it cheaper.
Right now our payroll takes 2–4 days because of ACH processing times. You could switch this to same day, and allow people to get paid faster.
Real estate purchases
Cryptocurrency can handle large payment amounts well, so I think real estate transactions will move to cryptocurrencies more frequently.
Those are a few ideas on some possible use cases of cryptocurrency, but still curious to see how it all develops.
published on the ethereum blockchain https://etherstatic.com/t/#0xc42cba95b6e954f2dce264576342af235592d5ae37e0d4bb53a0ede4b98db2de