Technology waves are driven more by the “killer app” than by the tech itself. Just because this wave involves money, why should we expect anything different?
In many cases, the underlying tech has been there for a while, and it will sit there until someone creative enough sees a killer use case. It will stay dormant until someone prioritizes making the tech easy enough for all ages to become addicted to. The most crucial point of technological innovation is that we must get the societal timing right in order for monumental shifts to happen in the way we transact.
Digital Wallets are the killer app for Bitcoin and the emergence of the cryptocurrency ecosystem for three reasons:
- Wallets will integrate bitcoin and digital assets into our traditional economy.
- Wallets will allow choice of what “money” to use. We have many monies and they all have varying velocities and tradoffs or associated cost to use.
- More importantly, wallets will allow us to carry *all* assets, money, and information in one place, at all times.
Money is more than just a single unit. It’s anything that can store value for various periods of time while also being a unit others have a commmon belief in. We use many different units as “money”. Each form depends on the timing of our needs and how quickly they can be exchanged for goods and services to match our tangible desires.
To date, we’ve built siloed financial systems that have created numerous forms of money, varying delays of liquidity, and numerous hurdles of settlement across a wide spectrum of ability to store or destroy value over time.
A digital wallet that can hold *all* assets, monies, and data (data is the new oil), solves the settlement issue and allows us to access our entire amount of value with much less friction because of the multiple points integration possibilities.
Once Your Grandmother Can Do It
When people from all ages can “get it”, it’s game over. Think about the cloud. You could have one in 2000 and before. Long before it was common or the term even existed. But, you had to setup and manage an FTP server in order for your data to be available anytime from anywhere. Not very many people wanted to do that… until Google and Amazon built server farms and made it as simple as entering your email address and password. Then everyone wanted it.
The cloud wasn’t exactly a tech limitation. It didn’t *exist* because it wasn’t easy enough for the below-average user to use. Tech advancements are about solving problems for the lowest common denominator in areas of society that will make our lives easier; more efficient
The iPhone. It wasn’t that original after all. It turns out, it wasn’t even thought up by Steve Jobs either. Hat tip to Jeff Booth for sharing recently.
Ever heard of General Magic? Me either. It was the iPhone. Long before the iPhone, but it failed because it came along at the wrong time. All the right stuff but too big, needed wifi, and gave access to a tool people didn’t see a need for → email.
Palm Pilot? Also an iPhone, before the iPhone. It failed as well. Due to timing and its complex alphabet, you needed to learn. The lesson here? Until your grandmother can use it, mass adoption doesn’t happen.
The iPhone was most likely the third attempted at pushing a handheld internet enabled device to users so they could do things on the go, from a screen. Several versions were first, but due to complexity and being too early, they didn’t make it.
Timing, having the right person at the right time, is what has driven the last several waves of innovation and I think that’s where we are with the next wave.
The Killer App, Digital Wallets, Are Here
Digital Wallets are here but the timing has so far been wrong. That’s why, we’re not quite there yet with Bitcoin. It has nothing to do with supply-demand, halvings, integrations or all that other stuff. Sure, they all play a part and have major roles in the growth of the cryptocurrency ecosystem, but the real issue is that it’s too complex for the below-average user at the moment. Additionally, it’s still not ready to scale for 8 billion people. But, neither was the internet in 1960, 1980, or 1990.
However, I think we’re close. Getting really close, because the killer app already exists. We just haven’t quite made them easy enough yet.
Digital wallets are getting better. They’re getting more commonly integrated. In my opinion, they will eventually become the single source for all of our financial needs.
When that happens we’ll see these new financial rails dwarf the old traditional financial rails. Why? Because having a single place for all our data and digital information will allow us to connect value, information, money to the infrastructure that drives our economy and daily lives in a way like never before. That’s the future of money. The rebirth of infrastructure is happening to support the use of wallets.
Assuming this is correct we’ll likely see our physical wallets be replaced by our phones.
Why? Because who needs to carry all the paper around when the rails of our economy are digital? When our wallets can hold a token for every single datapoint, reward, contract, or asset we have. Is there still a need to have a bifold? Sure, there will still be paper trails, but they will be less important when digital contracts create more efficiencies. When your house token can create liquidity (similar to a HELOC) and proof of ownership at the same time. When all items can be held in the same place, so your driver’s license token, passport token, proof of insurance token, etc. all are excessable, exchangable, verifiable, and transportable. This opens up avenues that we don’t have access because of the way things are today.
This is the only physical book you need when medical help is not on the way.
Financial systems thrive on liquidity and liquidity is the ability for all components to be fungible. We aren’t there yet, but can be much closer with digital wallets.
When all (or most) items can be held in the same digital wallet as my Bitcoin, stock tokens, bond tokens, commodity tokens, and all the other financial assets one *might* actually own (yes, people might own crypto too :/), then my ability to have access to and to create liquidity from *all* of my holdings becomes much, much easier than it is today. I become much more integrated into the financial system, into the world, than I am today.
That’s the entire problem of the unbanked. They aren’t integrated into the financial system, leaving them out of the world.
What if I had no cash or credit card, but was at a store and needed to pay? If all my assets were in a digital wallet, I could sell a stock, a bond, a digital currency, or use fiat tokens to pay (note: I’m not an advocate of CBDCs).
The thing that keeps this from happening is siloes within our financial system. Lack of real-time information. Too much rehypothecation, slow settlements, and antiquated infratstructure. All of these points are opportunities that will be updated as we move further into a digital ecosystem.
The timing around the ability for one to create, use, and acquire liquidity is the major flaw in our existing system. Not from a FED and Keynesian perspective of “we need infinite elasticity”, but from a standpoint of there being too many siloes in our financial lives.
Too much friction and too little verifiable insight into our systems. This creates hurdles and rolling boom and bust cycles. This creates a never ending environment of credit crisis that are not an “if” but a “when” because we have very little ability to see how the underlying financial assets are *actually* being used. We are required to trust someone at there were.
This leaves us to having to inherently trust people and systems that together, if nothing else, have proven to be untrustworthy for thousands of years. Particularly untrustworthy when it comes to the topic of money and financial interests. When you take all that disparate financial information and all of those varying financial assets and stick them in one place we can easily change the path of the world.
This is what is happening. Albeit, ever so slowly. This is what the Digital Wallet will bring us once it becomes simple.