In the future, most of the transactions are going to be done using stablecoins. We can forget the idea of central bank digital currencies (CBDC), they will be an epic failure. There will be some utility with them regarding wholesale transactions within the financial system but that is about it.
As for Bitcoin, this is done as a medium of exchange. It is likely going by the wayside as a tool of freedom since Wall Street is taking over. Not only do we see the BTC being scooped up and place in custody with these financial institutions, Blockrock is the largest shareholder in 4 out of the 5 publicly traded mining companies.
How long until others get involved.
What does this leave us with? Stablecoins.
Why Stablecoins Will Dominate Transactions In The Future
Sometimes the green sprouts become giant oak trees.
This is what stablescoins are. Right now, they are noting but the smallest of saplings. Over the next decade, these are going to mature in ways few imagine.
Here is where the world of theory and reality part ways.
Many like to espouse the ideologies and belief regarding certain things. Naturally, when it comes to forecasts, everyone is really just guessing. That said, trends are a different matter and we often can see signs of how things will unfold.
Argentina is showing the world the way. When it comes to currency, we see how this is progressing.
“Having the ability to save in “digital dollars” allows Argentinians to save money in the long run as the local currency loses value,” Ramiero Raposo, vice president at crypto payroll firm Bitwage, said in a note to Cointelegraph.
People in this country, suffering from catastrophic inflation are turning to digital wallets and using things like Tether. That is a huge step forward.
What is interesting is this stablecoin is a USD, asset backed currency. That means those in Argentina are looking for US dollars. This goes counter to the narrative we always hear about de-dollarization. It is a situation that is no different from many areas of the world.
Here is one of the keys: the US dollar is protection for a lot of people against their own governments.
This is what most in the the US or western Europe do not realize. In many countries, there is a black market for dollars, where they are sold like drugs or weapons.
Escudero said that locals can get a far better rate than the official exchange rate if they use crypto caves. Local banks cannot officially accept U.S. dollars, so crypto wallets have become popular to store dollar-pegged stablecoins like Tether
So what are these people looking for? The simple answer is price stability.
The US dollar is less volatile than almost every other currency out there. This is why stablecoins, specifically USD denominated ones, are going to dominate.
Sucking Value Out Of All Currencies
Brent Johnson has something called "the Milkshake Theory".
The basic premise of this idea is the US dollar is going to suck value away from other currencies. It is akin to someone else putting a straw in your milkshake and drinking it.
Here is a prime example of how this is going to happen.
Any of these USD stablecoins are part of the banking system. There is a direct tie, due to the backing, between the two. This means that anyone who uses it in lieu of their local currency is only enhancing the value.
Thus, with USDC or Tether, more value is being pushed to the USD.
Ultimately, any currency that is more volatile than the USD will find people drifting away. When there are option as we see with those in Argentina, shifts occur.
The challenge for the USD, the currency, is the digital version is not available in most countries. Domestic banks do not operate in USD. Instead, all banking is done with their currencies.
That means the people are relegated to using banknotes, i.e. physical cash. We can see the obvious drawbacks to this.
Digital versions of the USD, which USDC and Tether are, provide the advantages of digitization while also allowing people to circumvent their local currencies.
As we can see, this is a huge step forward.
Computer Networks
If we understand what a monetary truly is, we can see that, when dealing with ledger money, the result is something akin to computer networks. This becomes very obvious when we look at cryptocurrency since it is resident solely in the digital world.
This means that network effects are also in play. Realistically, they were always part of money, just people did not easily see it. We can understand it a lot clearer when looking at digital assets.
Stablecoins are going to keep sucking more value away from the traditional currencies simply because of the advantages offered. Since we are dealing with digital versions, anyone with a smartphone is able to participate. Suddenly, regardless of what is going on in one's country, the ability to transact in something on par with the USD is possible.
Here is another key point: we see tremendous power in these network effects.
Ultimately, I foresee the stablecoin market jumping into the tens of trillions. To feed the global economy, especially with the deflationary pressures that come from technology, we are going to see a need for a ton more money.
When people have a choice, they are not going to opt for their local currencies. These are, historically, insufficient to meet their needs.
Governments are naturally going to fight this but they will lose. This is especially true when algorithmic stablecoins really start to emerge. Once we see this, the step outside government control is accelerated. These assets have no ties to any banking system, meaning it is not affected by regulation.
While the developed world might be slow to transition, those developing nations are going to be quick to adopt it. This will not come from a formal agreement. Instead, we will simply see pockets of people starting to switch.
This is how it all starts.
Remember, we are paralleling computer networks. This means that we start slowly and accelerate as the effects take over. This can happen on a global scale, with each new transaction building on the previous.
It is also why stablecoins will dominate transactions going forward.