All I Wanted Was a Stablecoin

My view of the early days of crypto versus the present day

This is not financial advice. I am not a financial professional. Do your own research. I may hold some of the assets mentioned.


Before 2017, everyone I know who was aware of cryptocurrency was excited about two aspects of its existence: freedom from financial institutions, and the ability to anonymously buy drugs on the internet. (Let’s ignore the latter camp here as (1) crypto has evolved far beyond its original use cases surrounding anonymity, and for that matter (2) tracing crypto is generally pretty easy now, so it’s not anonymous anymore).

The biggest problem was volatility. Throughout these years, my peers and I were excited that BTC caught on enough to have real value, but nobody I knew cared much about the possible speculative upside. We probably didn’t know much about it—Gwern made a good case that BTC had a good chance of capturing a meaningful percentage of the then-current market share for gold, but none of us wanted to own gold. For my part, I was vaguely interested in autonomy from frustrating banking institutions; I bounced between banks, forever unsatisfied with each one’s poor customer experience. But I’d be crazy1 to convert all my cash into cryptocurrency, right? And so I didn’t. On-ramps were tedious back then, too—beware trivial inconveniences.

Later, Ethereum changed this, but this was before my friends and I discovered it. For all I knew, BTC was a wildly unstable pseudo-currency that wasn’t really accepted anywhere and, thus, didn’t really matter. There were no viable alternatives. Nobody had experienced stablecoins yet—these are crypto assets which are generally designed to be worth exactly US$1 at all times.

We’re now probably nearing the end of the second of two major cultural firestorms surrounding crypto. Both are motivated by stories of speculators getting fabulously wealthy thanks to this weird new asset (BTC) which triples in value every year, and sometimes goes up 10x in two months or whatever. During each of these cycles, some minority of speculators also find Ethereum and myriad other assets but fail to understand them, and so the price of everything correlates with the BTC price. This has introduced a very different energy into the crypto space: the get-rich-quick energy.

According to my peer group who had been aware of crypto for years, what the space needed most was a viable way to hold wealth that was not speculative in nature. According to the newcomers, what mattered was the speculation. Borderless financial autonomy doesn’t matter, and has been partially defeated by tax laws that make it harder for crypto, even stablecoins, to operate as currency.2

To me, the more frustrating part of the current speculative culture is that, in the past, all I wanted was a stablecoin. I didn’t know it was feasible to create one—I had no idea what to expect—but I always felt that if there was a cryptocurrency with a stable value, which could be converted to and from fiat currency without much friction, I’d be very interested. It would open up a whole new world of possibilities.

Now, that exists. You can, and some people do, get paid in USDC or DAI or another stablecoin pegged to the US Dollar. You can, and some people do, use companies like Bitwage to make this happen, at which time Compound or Aave becomes your savings account, Yearn becomes your brokerage, projects like The Graph or Chainlink become your value investments, and Tornado becomes your privacy mechanism.3 As far as I can tell, except for the fact I can’t get a debit card issued against my ETH wallet address, the crypto space is surpassing my wildest expectations. So cool!

But that’s not enough. It’s much more important that BTC keep going up at 300% annually; if this doesn’t happen, people get sad. It’s important that ETH continue to grow exponentially (which it probably will), or people will get bored and sad and call for its death at the hands of Cardano or whatever. There’s a vast amount of money entering the space all the time that wants to double their money within a week, and that energy creates deep instability within the system.

Crypto has made people rich, but there is no such thing as a free lunch, and the broader crypto world is much more interesting and important as a revolution in financial technology than it is as a means to get rich.

Don’t get me wrong: I love that some contrarian nerds who everyone criticized for ten years are now rich because they bet correctly on Bitcoin, Ethereum &c. That’s awesome. But as the space becomes more mature, these outsize gains become harder to come by, and that’s okay. We want crypto to become a mature ecosystem with a lot of money locked in it. We want crypto to be a legitimate economy with consensus among the general population that it is universal and stable. We want to obsolete outdated aspects of the consumer banking industry that get in the way of people living their best financial lives.

Or, at least, we should want those things. Some people only care about crypto insofar as it can get them rich. This is a fun byproduct of the way the space currently operates, and is probably still possible as long as most people ignore the crypto world, but on the long term it’s the wrong philosophy.

We have stablecoins now! We can do real financial things with them! That’s so cool! Try to keep that in mind. That’s my message for today.

1

Crazy rich, in hindsight.

2

The IRS cares about what crypto you hold and consider every type of crypto an asset rather than a currency. Even the ones that are designed to be currencies like US Dollar Coin (USDC), which Coinbase guarantees is worth exactly $1 at all times, is not a currency according to the IRS. Even Compound receipt tokens like cUSDC, which has no purpose other than to signify the amount of USDC you hold in Compound, is a distinct asset from regular USDC, and therefore the conversion from one to the other is a taxable event. Nobody who wants to fairly pay taxes is asking for total anonymity in the crypto space. That’s understandably troubling for governments. But rational policy would be a good start.

3

Your checking account must remain your checking account because you can’t really issue a debit or credit card against a crypto balance, and you realistically need a bank account in most countries anyway. But you can viably replace everything else, often at structurally higher interest rates than banks can give you.