Feb 22nd, 2021 (Bonus Ep): Crypto Use Case

Pat and Amy have taken to clubhouse! Follow them at @patwhitesf, and jump in when we’re recording! Today, after we finished recording we got an audience question, listen in as Pat talks about why he likes Ethereum so much and the different use cases around crypto.


Automatic Transcript:

Amy    00:00:00    Hey everybody. We got a couple of questions after we stopped recording on clubhouse and we are using those questions to, uh, record a little bonus up. So enjoy your boaters that this is not the official DFI daily. This is just a bonus episode. 

Pat    00:00:16    Yeah. So my, my question is if, uh, you know, we’ve been talking about DeFi, so define everything is about like contract based system. Uh, what is, you know, great about Zcash, uh, besides this privacy aspect, but why do you like Z cash, uh, given that you can’t really make contracts out of it? Yeah, 

Amy    00:00:35    It doesn’t have, uh, yeah, it’s given that it doesn’t actually have like a, uh, a smart contract system. I love, I love the smart contracts. So the way I, the way I look at the cryptocurrency landscape is essentially four pillars. There are four use cases for cryptocurrency. I know that’s like a ridiculous thing to say, but that’s, that’s kind of how I think about the world is there’s four use cases for cryptocurrency. You have Bitcoin, which regardless of how it started, where it’s ended today is it’s, it is a store of value. Like it is expensive to make transactions on it. It is worth a lot of money. It is the most secure, uh, in terms of secure from code exploits, secure from government censorship secure from, you know, pretty much every, every form of security you can imagine Bitcoin’s the most secure. And so it is the one that if, if I, if you had to make a bet that I was going to buy a coin today, they will still be around a hundred years from now and we’ll have appreciate, and value. 

Amy    00:01:30    Bitcoin is the, is the one that I make that bet on. So there’s a use case, which is stored value and it was issued as other coins have come into that use case. So like, uh, PAX gold, which is a token on the Ethereum network is literally backed by an ounce of gold. Like one coin is backed by one ounce of gold. So that’s nuts, right? Like that is another store value coin because gold is a store of value. And you can actually, I think if they said, if you have like 87, you can actually redeem them for, uh, for gold. Like you take it into their office and get for compound gold or something. So, so there’s like a store of value coins there’s then cash, cash coins. So coins that will be used to buy cups of coffee. That would be either like CBD, CDCs. 

Amy    00:02:11    Like we talked about like the Yuan, uh, central bank, digital currency, or the U S USBC, which is the, it’s not as CBDC, but it is a, it’s a U S a P stable coin. And then you’ll have other ones like, you know, dash, which is a, not, it’s a floating, it’s not a stable coin. It’s a, it’s a Bitcoin style coin, which has these really great cash features like instant pay and really low transaction fees and, uh, changing block sizes. Um, those are gonna end up being, because the fees are going to remain so low on those, those types of coins are probably going to end up being inflationary. I could be wrong about it, but the idea is that like, cash has never deflationary. You want cash to be inflationary. So if you are trying to go after the use case of like a cash style use case, then you really should end up doing a diff a inflationary coin. 

Amy    00:03:00    And honestly, like the, the design of Bitcoin is such that a hundred years from now, there will be almost no new Bitcoin minted. It will be very, very low, but the fees will be high enough that miners are still making money. The problem is if you optimize for high transaction through, but the fees will be so small that minors are not making money so that you have to just keep on minting coins. That’s what, like, that’s one of like the fundamental tensions with like Bitcoin cash and dash. Um, and so that’s sort of the second use case is like, is, is cash, cash substitutes, things that I will use instead of, instead of a credit card, 10 years from now, um, the third and fourth are there’s two other use cases. One is cryptocurrency is a smart contracts and the other one is privacy focused coins. 

Amy    00:03:44    Those are the ones that I sort of like, and then smart contracts cover pretty much everything. Like in some ways like a smart contract coin can be a super set of almost every other coin that’s out there. Like you can build packs gold is a token built on the built on Ethereum as a, as a smart contract that does store value kind of operations. And so that’s why the theme is really in a class of its own where it’s, it’s a platform level for a, for coding up other things. Um, and that’s why I love tokens that, that operate like that. I love these platforms because it’s such a different way of think about the world. It’s a, it’s building something that is a universal computer. That’s running continuously around the world at all times. And is, uh, ed is, is consistently is making decisions that are consistent across the entire world. 

Amy    00:04:31    Like, there’s something so powerful about that. So you look at like all the different use cases for that, um, you know, including up through like, you know, the betting markets and all these different things like that. And they’re even our privacy coins on Ethereum. Like there’s this thing called tornado, which is essentially uses very similar mechanisms to what a Z a Z cash does, but on the Ethereum network, they’re just, it’s just really expensive to run because Ethereum is so expensive to run right now. And so I love smart contracts because essentially the smart everything else we talk about is a, is a coin smart contracts are a protocol that you can build any other coins out of. Um, now necessary necessarily. They are always like almost always if designed is inflationary, like they are not designed. Ethereum is not designed to be deflationary asset, like store of value, like Bitcoin they’re, two of them are getting printed every 13 seconds. 

Amy    00:05:21    And that’s the plan for the foreseeable future. And there’s no, there’s no hard cap on that. Like there is with Bitcoin. So that’s why I, I like Ethereum as a, I like Ethereum as an asset. I like a theory as a technology platform. It isn’t necessarily my favorite investment from a, uh, what I think is going to go to a million dollars kind of perspective. Like, I always think that if they’re going to be worth less than everything else, now, the price of Ethereum will be directly correlated to the amount of transactions on the Ethereum network. So as the number of transactions goes up and it scales with Ethereum 2.0 and things like that, then you should see more demand for theory, because you need to spend it to spend gas, to use the blockchain. So that’s like there is a built in mechanism for demand, but that’s different than like the demand that required, you know, Bitcoin, the number everyone always say is like, there’s, there are, there are going to be fewer Bitcoin in existence than there are millionaires in the world. 

Amy    00:06:18    So if every millionaire wants seven a Bitcoin, then the price has to go dramatically up, like it has to change. Um, and so I like it theory, I talk so much about theory because it’s, it’s a foundational platform, as opposed to all the other protocols that are out there. There really are not really quite like that. And they’re kind of sneaking around like Bitcoin cash is trying to add, you know, tokens and some smart contract features, but they’ll never be as good as a theory, at least not in the next few years. Um, and then that’s, that thing goes with like Z cash, Z cash is, is awesome, but still is fundamentally just a single protocol coin. That really is just doing one very specific thing, but that’s also why it’s so nice like that that is both a deterrent or a diss on the, on the protocol itself. 

Amy    00:06:57    But it’s also what is so awesome about Z cash as a coin is because they’re just trying to solve one really small problem, which is, which is secure, private, non traceable transactions. They can do that super well. And so like, that’s why, like, you know, 20 years from now Z cash will still be an anonymous protocol and there will still be people using it to exfiltrate money from country, from like bad governments and countries that are in and things like that. So that’s, that’s all super powerful, but it’s not like Ethereum where there’s something going to be, you know, a 10,000 different use cases on top of Ethereum. 

Speaker 2    00:07:29    That makes sense, man. Yeah. Yeah. That makes a lot of sense. Thanks. Thanks for answering pet. Awesome.

Leave a Reply

Your email address will not be published. Required fields are marked *