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Hidden in Plain Sight: Tim Heath on how the New Digital Economy Goes Mainstream

December 5, 2024

As an investor, I like simple solutions for complex problems. If you can make someone’s life easier and remove some of the friction between them and what they want, then you can probably charge a dollar or two. If you can do that at scale and charge more than you spend, you’ve got a business.

For that reason, I sympathise with people who look at crypto and blockchain and see only more friction. Wallets, passphrases, chains and bridges – it all sounds a bit complicated.

Those of us who are deep on the inside recognise the transformative potential of the technology, but that means it’s our job to make it simple for others. If you fancy yourself a crypto evangelist, an ambassador or whatnot, then the task at hand is to make crypto as simple for others as it is for you. Instead of explaining and persuading people about the merits of blockchain, though, wouldn’t it be better if we actually made crypto simpler, by removing some of that friction?

We are seeing this in action already. Look at Revolut. An intuitive app that successfully integrates blockchain and fintech into its operating system, and provides all the services you’d expect from a high street bank, only faster.

The most impressive thing about Revolut is that it operates just like a traditional banking app; with the powerful capabilities of crypto and blockchain all working in the background. As a customer, you don’t have to know you are using crypto to reap the benefits of its ingenuity.

Some of the confusion people have about crypto is down to the number of speculative projects built on short-term thinking with no real economic substance. The rise and fall of the NFT markets was a classic gimmick-investment bubble. The initial interest in digital ownership of art was quickly followed by market oversaturation and inevitable market collapse. The loss of money, value, and time certainly contributed to a feeling of distrust in crypto investment and confusion among consumers who may not have been aware of or interested in technology that sits behind NFTs.

Contrast that with using crypto to transfer money across national borders. Cryptocurrency increases transaction speed, accessibility of funds, and lowers transaction fees. All things people want. Stablecoins provide a robust anchoring to traditional currencies and international transactions, and have shown resilience against the volatility that has plagued the market in the past. This is genuine real-world utility. Once getting on and off the blockchain becomes a less complex task, and the processes retreat into the background, I believe blockchain and cryptocurrency will become the default method for international payments.

Simple interfaces that deliver clear customer benefits are what will help crypto and blockchain go mainstream. We’ve already realised the ‘quick wins’ offered by crypto – we know how to move money quickly and securely across borders, we understand the value of an immutable ledger. They are here to stay. What we need now is to deliver the second order benefits of crypto to a wide public, without them even realising they’re using the blockchain.

Another advantage of the blockchain is that it doesn’t discriminate. Access to reliable, effective, and safe financial services could be expanded globally. Providing communities access to conventional financial services that traditional banks are not able to do. This is what excites me about this sector, and as an experienced investor in this field, this is what I look forward to.

Imagine what these changes could mean for a small business, say a family-owned coffee shop. No one is going to fiddle around with different crypto wallets in a morning coffee queue, and no barista is going to spend their time looking for bridges and offramps for whatever currency or crypto a given customer wants to use to pay for their latte. But if a Point-of-Sale system did the work in the background, the system could manage all conversions and transactions seamlessly for a small fee.

It could become as reliable, as fast, and as trusted as a contactless payment. It would revolutionise travel money, reduce costs for point of sale systems and speed up payments for small businesses. Not only would the customer experience improve, but the system could facilitate sending money across borders to small suppliers who otherwise wouldn’t be able to access such efficient financial services.

It’s exciting to be building a new digital economy, but we’ll only succeed if the digital infrastructure we’re setting up fits seamlessly into the world we live in and interact with every day. As an investor, I’ll know the crypto and blockchain economy has really arrived the moment we stop noticing that we’re using it.