Banks are now betting on crypto; but the smart play is to invest in people.
On October 1, 2018, CleanApp predicted the announcement of JPMCoin (we called it ChaseCash). We explained why bank-issued crypto instruments would go on to become the most valuable business units in those banks’ histories.
Four months later, JP Morgan Chase & Co. introduced the first or what will surely be many crypto instruments and business cases.
In our original analysis, we focused on retail crypto lending, and as everyone can see, we’re only scratching the surface.
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Utility > Finance
A lot of analysis has come out after the JP Morgan Chase news. Par for the crypto course, everyone seems to be focusing on finance — and the implications for existing financial structures, both non-crypto and crypto.
Continued fetishization of finance, however, occludes the far-more consequential trends playing out across the economic spectrum, including in the material economy.
JPMCoin is a significant development. But the bigger news for finance is that it opens the floodgates for every other global bank to launch increasingly complex (and, hopefully, useful) forms of private money.
Social Utility > Individual Utility
The reason we’ve been urging the crypto community to de-fetishize finance and focus on non-financial use cases for crypto is simple: there’s a lot more runway there.
CryptoFinance = $B markets
Crypto[Material]Utility = $T markets
Here’s another way of thinking about these themes. Much of today’s crypto discourse proclaims that crypto’s core value proposition is as substitute money. Individuals and firms can thus get greater access to capital markets, which will presumably make everyone better off. Easier CryptoCredit & cheaper CryptoLoans will unleash new waves of economic productivity.
There’s another way of thinking about crypto’s potential — blockchain allows radical efficiency gains in grossly inefficient slices of global material resource & labor markets, among others.
The easier it is for billions of normal people to earn crypto by doing socially-useful work, the more valuable the overall crypto-economic system.
There’s only so much growth that one can unleash through encumbrance, collateralization, and financialization. Crypto social utility propositions are far more valuable than crypto-finance.
Of course, these two approaches are NOT mutually exclusive. But when we posit robust crypto-finance as a prerequisite to crypto non-financial use, the result is a techno-social network structure that preferences financial use cases over non-financial use cases. Concretely, this means “crypto law” that favors powerful crypto incumbents, instead of “crypto law” that benefits everyone.
The potential of non-financial use cases eclipses the potential of crypto finance. At a minimum, financial and non-financial use cases need to be put on equal footing.
Crypto Real Economy
Blockchain is already unleashing vast productivity gains in the real economy. Now, these productivity gains must flow to every participant in the global economy. If the gains flow mainly to first-movers or whales, the system becomes unsustainable and starts to break down.
A focus on crypto’s social utility reflects a common sense observation that everyone must be better off under the new regime. Crypto value propositions have to be Pareto optimal over a world without crypto. This translates directly into crypto regulatory responses/postures, as well as core protocol development efforts.
The way to make everyone better off is to give everyone access to general-purpose markets, not just financial markets.
Social Network Effects
Outside of Wall Street, all eyes are on BigTech, specifically social network giants like Facebook, Twitter, and kin. Everyone knows that crypto micropayment functionality in social networks is a question of when, not if.
Facebook is working on crypto integration. KIK/Kin have a working product that allows users to earn crypto for doing in-app market surveys, and the like. Tron + BitTorrent have launched a new token scheme which they claim “will enable blockchain mass adoption.”
Other players are ramping up development efforts, and over 2019–2020 we will see crypto gain mainstream adoption. The question isn’t whether billions of people will be trading crypto; the bigger question is how they will be doing so — on proprietary closed-ish blockchains, or on reimagined global public general-purpose blockchain foundations.
Crypto v. FAMGA?
Like with Crypto v. Wall Street or Crypto v. Law, much of the crypto rhetoric concerning the “threat” posed by BigTech is oppositional.
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Existing crypto teams (especially those with residual libertarian sensibilities) understand that with billions of active monthly users, BigTech crypto projects can achieve instant global scales.
And yet, most of the current incumbents are blowing their current competitive advantage by severely limiting the utility of their crypto offerings. By its own terms, BitTorrent is focused on “content creators,” “audiences” and “digital currencies.” KIK/Kin promises you can earn its blockchain reward — Kin — for “digital services” like in-app market surveys, social media interactions, and so on.
Yet we’re still missing a crypto platform that allows anyone, anywhere in the world, to go from being a no-coiner to earning crypto for doing socially-useful work.
That type of paradigm shift is urgently needed. It will redefine the very essence of crypto.
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What’s next after JPMCoin?
Lots. Hopefully, JPMCoin puts an end to perennial crypto anxieties about “institutional adoption,” and “mainstreaming.” Crypto is a mainstream phenomenon already. The question now is who will benefit the most from crypto’s global rollout.
Wall Street is investing in crypto because crypto gives the greatest likelihood of great returns and shareholder value. BigTech crypto is similarly constrained, especially because shareholder value is denominated in fiat currencies.
This means the opportunities for truly disruptive “crypto for the masses” networks are still there, ripe for the making.
JPMCoin shows that Wall Street will do everything necessary to preserve its dominance and primacy. Finance-sector incumbents have a major competitive advantage over crypto insurgents, which, of course, they will exploit to the fullest: existing retail banks control CryptoLaw and levers of debt enforcement at the highest and lowest levels.
This means that in order to realize its global scaled potential, crypto must redouble efforts to understand blockchain in far more complex non-financial, inter-financial, and supra-financial terms.
A platform that makes it easy to earn crypto will always be more valuable than a platform that makes it easy to borrow crypto.