When Will Crypto Go Mainstream? When You Use it to Pay the Babysitter

News, Opinion | March 28, 2019 By:

We talk a lot about when crypto will go mainstream and what needs to happen for mass adoption to occur—but what is the standard for “going mainstream”? For me, crypto becoming the preferred means of payment for regular tasks, like paying the babysitter, is a pretty good indicator. Before this can happen though, a few major developments need to come to fruition; first and foremost, payment processing needs to be significantly faster. For perspective, Visa processes 24,000 transactions per second while Ethereum can process 20 transactions per second and bitcoin remains at a sluggish 7 transactions per second. Though there are other cryptocurrencies attempting to address the speed issue, many sacrifice privacy, security, or decentralization in order to do so. Accepting such tradeoffs undermines the truly revolutionary aspects of crypto—private transactions that do not depend on government backing or banks for validation. When cryptocurrencies sacrifice these core elements of the decentralized ethos to increase efficiency, they become clumsier versions of PayPal, Apple Pay, and Venmo.

Speaking of Venmo, this peer-to-peer application might be the best example of what crypto can achieve once the latency issue is resolved. Venmo is a mobile app that allows people to make quick and easy payments to friends, family, and businesses. The app basically solves the gap between cash and credit cards. Rather than providing the waiter with a stack of credit cards and directions scrawled on the bill as to how he should divvy up payments, a group of friends can instantly send money to a designated buyer via Venmo, thereby paying for his/her share of the meal and saving the waiter a huge hassle. In a testament to consumer demand for this type of use case, Venmo adoption is exploding among young people with 25% of millennials now using the app.

The bottom line is mobile payments is the way of the future whether we’re ready for it or not. The invention of credit cards allowed people to stop carrying cash; mobile payments will eliminate the need for carrying a physical wallet altogether. Developing countries where many residents lack bank accounts and credit cards are prime territories for mobile payments to take off. Due to the affordability of mobile phones, 5 billion people possess mobile devices around the world—that’s many more than own laptops or desktop computers.

In light of the mobile revolution, cryptocurrency payments make a whole lot of sense. And if crypto can achieve payment processing speeds comparable to Visa, in all likelihood crypto payment applications will replace Venmo. The reality is, as easy as Venmo is to use, there are significant drawbacks. Though Venmo claims bank-grade security, it is still intended for use between trusted parties, which dramatically constrains its ability to scale, as the majority of payments are made between trustless entities. Additionally, Venmo is only currently available in the US and no transactions can be made beyond the nation’s borders, even by US residents. What’s more, Venmo does not eliminate or even significantly reduce fees. There is a 3% fee for credit card payments and, though payments made from a debit or bank account are free for the consumer, the merchant must pay a 2.9% fee. Perhaps most concerningly, payments are public by default. Though users can adjust their privacy settings, many people are not even aware of the repercussions should they decline to do so. One privacy advocate reveals her findings of unsuspecting Venmo users on her site, Public By Default, in which she warns people that in addition to finding out where they had dinner and when they made their last loan payments, she can also view any conversation they had in Venmo’s transaction comments section.

Venmo’s limitations contrast with the promise of cryptocurrencies as encrypted, low-cost, borderless, and occurring between trustless entities. The reason crypto isn’t there yet is because the underlying decentralized networks need to achieve consensus faster. There are a multitude of projects attempting to develop solutions, including Polkadot, Ethereum’s Serenity, Algorand, and Cardono (in full disclosure, the team I lead at Pyrofex is developing a solution, called CDelta, which will use Casanova’s optimistic consensus protocol to achieve 50,000 transactions per second).

Regardless of the avenue to faster payments processing, the important thing is that crypto doesn’t stoop to the Venmo level and lose the privacy and security made possible by decentralization. How long will it take before our babysitters are paid in Crypto? Current generations are growing up with smartphones, and so once the networks and applications are ready, adoption will be natural. Mass adoption is only a matter of time.