Mailbag!
Mailbag!
As promised, this issue is made up of reader questions. Let's get to it!
🟢 Question: “Are you seeing any material use cases for crypto on the horizon? So far: Bitcoin store of value”
– Steve from Buffalo
A site called Token Terminal does a great job of putting together financial statements for dozens of crypto projects that mimic what you might find in an 10-Q of a public company.
Let’s take a look at Ethereum for example. For Q1 of this year, users paid $457 million in fees. So this is what people paid to do something on Ethereum: buy an NFT, take out a loan or whatever. I think that’s your first big measure that there is something “there” there. Nearly half a billion dollars of real money (or at least fake money that could be easily converted into real money) was spent doing stuff on Ethereum in the last three months. That feels significant to me.
Where are those fees going? Well, most of them go towards processing trades of some type. Uniswap, a decentralized exchange, is usually the biggest consumer of fees, often following by Blur and OpenSea, two platforms for trading NFTs. So, OK, that’s a bit self-referential. People are paying money to convert their fake money and real GIFs into other fake money and GIFs. But that’s always how these things start.
As an example, in March, Uniswap did $71 billion in trading volume which was 45% more than Coinbase. dYdX is an exchange that trades just perpetuals and they did $112 billion in trading volume in Q1.
Given how much we’ve all learned about banks in the last few months, let’s look at the crypto versions. Aave is closest to a “full reserve bank”. Users can deposit about 30 different types of crypto and earn interest. In turn, those users can borrow against those assets at a highly overcollateralized rate. Currently, Aave has about $5.4 billion in assets/deposits. That would make it the 231st biggest bank in the U.S., right up there with Ridgewood Savings Bank (motto: “Multiplying the Good”). Again, a drop in terms of the U.S. banking system, but also not nothing.
NFTs, meanwhile, are still super early in what they will become, but have already crept into public consciousness as collectible status symbols and we’re seeing all sorts of experimentation into the next level of development.
But I think what this question really gets at is “Where is crypto’s killer app?” I’ve heard this criticism from a number of crypto skeptics, claiming that the lack of a slam dunk use case so far is proof that crypto is just a flash in the pan.
I do think it’s worth remembering how long the Internet took to truly take off. ARPANET launched in 1969 and had 30 locations across multiple countries interconnected a year later. TCP/IP became the standard in the early 80s and the Web was invented in 1990. Only in the mid 90s did the Internet start to take off and it took mobile in the mid 2000s to really become a dominant force in our lives. So depending on how you count it, that’s 20-40 years to truly get going?
Bitcoin went live in 2009. Ethereum, the first blockchain where you could actually “do” something went live in 2015. Considering all it takes to onboard users, create developer networks and build tools, I think it’s actually going pretty quickly.
Today, Bitcoin allows anyone in the world to send any amount of money in 15 minutes for approximately $2. (BTW, the global remittances market is estimated at $700 billion with an average cost of 6.3% to send $200). Ethereum is creating a global standard for all kinds of unique, innovative products with millions of active users. And innovative chains like Solana and Cosmos, each launched in the last three years, are enabling a whole new set of user cases. It is clearly early days and there will be many bumps and delays along the way, but also many, many reasons to remain optimistic.
🟦 Question: "What about the man hole covers from your trip to Japan?”
– Julie from P-Town
Long time readers may recall our discussion of a Japanese app where you could earn crypto by taking photos of man hole covers, which of course led to a discussion about the amazing creativity and variety of Japanese man hole covers and the surprisingly PG rated Japanese Society of Manhole Lovers.
So, to make my trip tax-deductible (just kidding, Mr. IRS and, yes, I actually paid taxes on my crypto holdings), I spent my recent trip looking down most of the time. These were some of my personal favorites.
This Samurai fire fighter is a pretty good representation of how it feels to write about crypto these days:
Octopus is everywhere on Ikuchi Island so it was fitting to find this cover in Setoda:
Finally, is there anything better than the tale of “Peach Boy” where an elderly couple found a large peach floating down the river, cut it open and found a small boy? Of course they raised and loved him as their own and he came to be a local hero, here depicted with his three friends: a dog, a monkey, and a pheasant:
◆ Question: “You promised us dog videos.”
– Jack from San Carlos
Yes, yes I did. Here you go:
Back with a full issue on May Day!
As always, thanks for reading. Send me questions and please share with your crypto curious friends.