Cryptocurrencies Are IOT Businesses, Not Sham Currencies

Thesis

Cryptocurrencies have been particularly controversial amongst investors. Many believe cryptocurrencies will replace modern day fiat, while others think they’re completely worthless. I don’t believe cryptocurrencies will replace fiat currencies, but I certainly don’t think they’re worthless. In fact, most crypto projects aren’t designed to act as currencies at all; they’re fundamentally internet of things (“IOT”) companies. I think one of the biggest things holding cryptocurrencies back is the popular notion that cryptos are a form of currency. Many people have a hard time wrapping their mind around the idea that they could use Bitcoin, Ethereum, or dollars to buy groceries. The reality is, that will likely never be the case because cryptocurrencies act as units of value backed by a project designed to sell a service. I will use VeChain (VET-USD) and Stellar (XLM-USD) as two clear examples in this article.

Why cryptocurrencies shouldn’t be viewed as currency, and why they will likely never act as currency

Cryptocurrencies are infamous for being viewed as a potential form of currency. This ideology has done far more harm to crypto projects and activists than good. Cryptocurrencies act nearly identically to that of publicly traded companies. Crypto projects are started by a team or individual with the purpose of solving a problem, selling said solution as a service, and selling coins to investors so the project can raise capital. Public companies do the exact same thing, but instead of selling coins they sell shares of stock. While there are concerns regarding the lack of regulation involved in cryptocurrencies, I address this in my last article. In short, the Biden administration has passed an executive order on crypto for financial regulators to find a way to implement responsible regulations on crypto assets to create stability in the market, and ultimately, integrate crypto assets into the broader financial system. Once crypto assets are regulated the market will essentially be a miniature stock market with a more democratic approach to governing. I say this because voting protocols for crypto projects and its investors make it far easier for everyday investors to cast a vote on the direction a given project takes. People need to stop viewing cryptocurrencies as scam projects attempting to take over the dollar and view them for what they are, which is IOT company startups.

I don’t have a crystal ball, but if I did, I would bet it doesn’t show a future where people are paying for goods and services with thousands of various cryptocurrencies. Volatility wouldn’t allow for crypto assets to be used as a form of fiat currency. It makes no sense for businesses and would muddy up an already efficient system. While some would argue the U.S. dollar experiences volatility, it’s nothing compared to that of the price fluctuations seen in coins/shares in the crypto or stock market. Inflation may increase the cost of goods and weaken the power of a dollar, but at the end of the day a dollar is a dollar. Businesses and the government would be exposed to great risk if everything could be bought with anything. Imagine if 10% of U.S. tax bills were paid with Enron stock in 2001… you get the picture. Yes, there are ‘stable coins,’ but at the end of the day there’s no need for 10 different ‘stable coins’ all reflecting the value of a dollar, euro, pound, or any other fiat for the matter. Additionally, digital currency is already here. When you check your Chase checking you simply see a number that tells you how much money you have. When you swipe your debit card at Kroger, you’re paying with digital cash. I would argue over 95% of transactions are conducted digitally in the U.S. We already have digital U.S. dollars; the government just hasn’t put an official label on it yet.

VeChain is a supply chain business, not a currency

VeChain is a cryptocurrency project designed to enhance supply chain management and processes for businesses. VeChain was created by Sunny Lu, the former CIO of Louis Vuitton in China. VeChain’s platform was used to verify data from the ReSea project; a project to remove plastic oceans and Indonesian rivers. VeChain was able to track waste removal from the point of extraction, sorting, and when it was delivered to the waste bank. The technology secures all this data in real-time. The ReSea project is certified by the DNV’s chain of custody standard for plastics retrieved in the Hydrosphere. Results must be extremely accurate to be certified by DNV, and the ReSea project is only the second project in the world to have its results certified by DNV’s chain of custody standard. Considering the accuracy of the ReSea project were a result of VeChain’s supply tracking technology, this is a testament to VeChain’s use-case potential. For example, VeChain’s technology could track high-end luxury goods from inception to end-user, verifying your wife’s Jimmy Choos aren’t knock-offs. VeChain could be used to verify the history of the food you buy at the store, from when it was harvested, shipped, delivered, and purchased. The business use-case potential for VeChain is huge. In fact, VeChain has partnerships with H&M, Walmart China, LVMH, and BMW to name some household brands; here’s a link to a list of all the companies VeChain has partnerships with. This is a clear example of why cryptocurrencies shouldn’t be viewed as a currency. VeChain is a business that already has partnerships with massive publicly traded companies. If it walks like a duck, quacks like a duck, it’s probably a duck, and VeChain walks like a business as far as I’m concerned.

Stellar is a transaction business, not a currency

Stellar is a digital transactions company that processes transactions impressively fast. Stellar’s network is capable of processing up to 5,000 transactions per second. To give you insight into how quick that is, Mastercard has the same processing power. The difference is Stellar’s blockchain ledger is far simpler and took far less resources to create. The difference between Stellar and the likes of traditional processing companies like Mastercard is that Stellar’s blockchain can validate transactions instantaneously. Typical transactions with banks take anywhere from 1-5 business days. Stellar’s blockchain integration into the financial services industry would make transactions significantly faster and cheaper. The current cost for a transaction on the Stellar blockchain is $0.000038. Compare that to the 1% – 3% fees that can be charged using credit cards and I think it’s clear the use-case potential for Stellar is through the roof. Over 1 billion card transactions occur every day across the globe. Stellar is another example of why cryptocurrencies shouldn’t be viewed as currency. These are companies that have a ton of value to offer the world, especially considering how the internet is aggressively changing the way the world works. Obviously not every cryptocurrency is going to offer groundbreaking technology, but the ones that are shouldn’t be viewed as some sham currency.

Conclusion

In conclusion, I think it’s time to stop writing off cryptocurrencies as something they’re not. Pretty much every crypto project on the major U.S. crypto exchanges is building internet of things businesses. These projects have no intent on becoming a replacement for fiat currency. Both VeChain and Stellar are clear examples of cryptocurrencies that have the potential to make a lot of money and be great investments. If you’ve been on the fence about investing in crypto because of the misconceptions addressed in this article, I hope some clarity was provided. Cryptocurrencies are extremely volatile, and any prospective investors need to be very cautious. However, many of these projects offer real world solutions to massive businesses and shouldn’t be viewed as sham currencies.