What is money, and what is not?

In a definition derived from its natural evolution, money is just a type of goods that a certain community considers as a convenient way of settling credit claims, solving coincidence of wants problems. Every time you make a trade, you actually barter one thing for another: one side gets a product or service while the other, a credit claim that can be paid in anything, but this particular society chooses one type of goods that suits everyone. History has known money as gold, shells, nails, and even cigarettes. There is no special authority that can tell a community what money to use as people just tend to choose what helps them satisfy their needs best. “Moneyness” is really defined by the common will of everybody to trade their stuff for this very type of money, believing that they will use it in the future deals with other members.

If you look at the best economies—and the rules that hold for them apply to anything we innovate in the crypto space—you’ll see that there is no money with a constant number of units. Money is a living thing if you like, and it adapts to the needs of the community: it can be mined (gold coins) or printed (gold-backed paper money), switched to new standards (current USD) or even abandoned if not needed anymore (e.g., Soviet Ruble). But money is never limited in its number as this would immediately ruin the whole concept of self-adjustable market trades. If you pay someone with Bitcoin—the king in promoting the message of “strictly limited supply, hurry up to own one”—you get a feeling that you overpay as you tend to think that the price may rise. You don’t really spend shares of collectible baseball cards, cars, wine, or artworks to cover everyday needs like a morning coffee and bagel. That’s clearly an absurd thing to do unless you think that somehow you will recoup the amount spent. Every time you stop and think for a second, “Do I really want to spend my BTC or should I HODL?” you create a traffic jam in the economy just like people on the road who can’t choose where to make a turn. And the economy of the modern world is more likely to be somewhat of a highway, asking for tens of transactions per day from an average developed economy citizen.

Bitcoin is clearly an investment, in many ways pumped by the idea of HODL, and it appeals to those who dream about getting super-rich just because they are early adopters. There is no mass adoption, and there will never be one. The liquidity BTC has today all across the globe can’t move the needle through as people don’t spend their investments and hedges against unstable banking systems on everyday needs.

At this point, you may be thinking, “OK, Bitcoin is my safe bet on the future, and what about stable coins, unleashing all the DLT cons, can we think about USDT in terms of money?”

Let’s assume that unlike collectibles, USDT can be printed and burned in any amounts to keep the exchange rate close to USD. That’s why it’s called a stable coin, right? No. USDT, USDC, DAI, and others do just one thing: they are stabilizing against USD to serve the needs of those who a. For some reason, consume USD-priced goods and services or b. Need to hedge against their local currencies. Are there really many people in the world outside the U.S. who think of prices in USD? Here in the E.U., where I reside, a dollar is something people hear and see in movies and TV series. Nobody really cares here about #1 crurrency of the world. So it leads me to the conclusion that there is no such thing as a global stable coin. And use cases are just way too different: to troubled Venezuela USDT is again an investment or hedge, and to 90% of people on the planet it’s just a unit of account that they will convert to their local money. Once again it’s slowing the pace of the trades: "Should I pay in the euro or USDT? What’s the exchange rate? Why is it not fixed? Maybe it is time to swap everything for fiat?" As you can see, there is not so much stability for the most of us, but stable coins clearly help everyone in USD-denominated economies.