Imagine a society where any time you wanted to change the law, you had to invent some new technology in order to change it. Like, let's say the society has a law on the books that says people who wear green shorts are not allowed to go swimming in a public pool, and everyone more or less agrees that this is kind of annoying but the law can't be changed. And then someone creates something that works exactly like a swimming pool but they call it something else, let's say a beeblebrox. Now people who wear green shorts can go swimming in the beeblebrox, and the law about swimming pools is still on the books. And, you know, if anyone ever points out that a beeblebrox is the same thing as a swimming pool, the guys who use the beeblebrox will point out that in fact it is a very different thing. After all, just look at the name! Beeblebrox sounds nothing like swimming pool.
This is more or less how Islamic societies get around the Quran's strict limitations on charging interest for loans. In Iran, or Saudi, you can't charge interest because that will get you stoned or something. So instead, you give your not-banker some trinket for $X, and you agree to later buy said trinket back for > $X. If anyone asks, the not-banker will adamantly swear that It's not interest aka riba. Rather it's a completely different financial technology that they invented (hiyal, literally "legal strategems). Yea, it works exactly like interest-generating loans, but there's a key difference — now everyone involved still gets to go to heaven.
Of course, if you're an enlightened person, you'd immediately see why beeblebrox or hiyal is a bit silly. A smarter society would just get together and agree that we should get rid of the restrictions for <green people swimming in pools / not allowing anyone to give out interest generating loans> and be done with it. No additional fancy "technology" required.
Anyway, in completely unrelated news, Stripe is starting an L1 blockchain. Supposedly this is because crypto is a fast way of doing business transactions. On hackernews, Stripe CEO Patrick Collison argues:
We started to notice a lot of real-world businesses finding utility in stablecoins. For example, Bridge is used by SpaceX for managing money in long-tail markets. Another big customer, DolarApp, is providing banking services to customers in Latin America. We're currently adding stablecoin functionality to the Stripe dashboard, and the first user is an Argentinian bike importer that finds transacting with their suppliers to be challenging. Importantly, none of these businesses are using crypto because it's crypto or for any speculative benefit. They're performing real-world financial activity, and they've found that crypto (via stablecoins) is easier/faster/better than the status quo ante.
What is crypto? Well, it depends on who you ask. Some people will say that crypto is a complicated new technology that allows trustless interactions in a decentralized 'blockchain'. If you ask what you can do with crypto, they may say something like 'now you can do wireless transfers anywhere in the world' or 'now you can store value without relying on a particular currency.' If you point out that these things are easily enabled by technologies like venmo or gold etfs, they will look at you with confusion on their face and say something like "no, you do not understand, this is a blockchain."
I'm being a bit snarky. For what it's worth, Collison is totally right that people are finding crypto easier to use to do real business. When he says that, like, some bike shop in Argentina is using crypto to do transactions, I believe him, and I believe the bike shop owner is finding real value too. But that isn’t because crypto as a technology is doing anything interesting or useful. All of the big stablecoins that people use operate almost exactly like sketchy banks. They aren't even decentralized! You still have to trust that the folks at Tether aren't using the money you give them for drugs and fancy cars or whatever. It's like what Collison says — the bike shop owner is not using crypto because it's crypto. The reason the bike shop owner is finding real value is because crypto is behaving like beeblebrox or hiyal.
More specifically:
We have a society where, for a lot of reasons, there is a lot of regulation on how people can transact;
Much of that regulation may do more harm than good, but our legislative system moves slowly and favors doing nothing over doing something;
Crypto is just complicated enough that everyone's eyes glaze over when people describe it, and so you can sneak it in by pretending it's not doing the thing that everyone uses it for and therefore avoid regulation.
I think that last point is really critical. You don't need the complicated blockchain to solve these tasks. If anything, blockchain is really bad at solving a lot of these tasks. And digital economies are a fairly old technology — Team Fortress Two figured it out back in 2007! We could be trading hats instead of bitcoin!
But actually you really do still need the complicated blockchain tech, the complicated blockchain tech is the most important part, because that is the only way to convince everyone that this is beeblebrox and therefore the previous rules don't apply. This is, essentially, the same playbook used by Uber ('we aren't taxis, we're rideshare!') and AirBnB ('we aren't hotels / sublets, we're just hosting guests!').
Is this…good? Maybe! Clearly there's precedent. On the one hand, you could make the very reasonable argument that all that regulation is there for good reason, and we should ensure we are not tearing down Chesterton's fence. On the other hand, you could make the very reasonable argument that that regulation is definitely not there for good reason, and "Mr. Chesterton, tear down this fence!" Even if you think of crypto as a mechanism to get around 'the law', that is not always a bad thing, because 'the law' is not always implemented by a western liberal democracy. It's good that people in poorer countries without real banking infrastructure now have a way to store and accrue capital, instead of having it be stolen by local warlords or whatever.
My most sober take on all of this is that crypto and its increasing adoption is a symptom of the calcification of the rest of our regulatory system. It is very easy to say no, and very hard to say yes, and so everyone says no to everything and you have to trick people in order to get anything done. This is a malaise that seems to be hitting everywhere all at once, whether it's building housing or accessing energy or developing high speed rail or approving drugs or whatever else. In that sense, it makes perfect sense that Stripe, the company run by the guy who has been complaining about things being too slow for ~as long as I've been alive, is jumping on the bandwagon.
The last thing I'll say here is that the adoption of crypto is essentially a side effect of the Trump regime. I don't think Trump actually cares about crypto or understands what it is at all, but his…let's say, investors, care a lot about crypto, and so the regime as a whole has become very accepting of crypto companies. I do not think Stripe would have made this move without that air cover. Perhaps unsurprisingly, the folks who really like crypto mostly already like Trump, and the folks who really don't like crypto mostly already don't like Trump, so this is yet another reason to like/hate him. My personal read is that the folks in the former camp are mostly scam artists and conmen who want free reign to rugpull everyone. There are some few crypto folks who like crypto but don't really like Trump; these are the people who seem to actually be building interesting and useful applications of the technology.
The fundamental problem is that money is trust. The whole point is to separate a transaction today from a transaction tomorrow, or to split or combine them, while trusting the value will be kept and not stolen. That is often misunderstood as being equivalent to holding a commodity like gold, but hoarding is not trading, and gold was a primitive experiment for money which failed often and had to be abandoned as real money nearly a century ago. The money we use today, like dollar, is compared to history a miracle of stability and trust forged by trial and error on banking and issuance. Most money (for good currencies) is issued in asset-backed loans which scale the money supply in balance with economic activity, so your future value is remarkably close to a constant amount of goods or services. It is this innovation in money that powers the modern world.
if you think money is not reliably stable then go back in history and find any era anywhere that a form of money existed with comparable stability to the last 50 years.
So what does crypto bring? A blockchain is effectively a notary public, tracking contracts for exchange. This is a great invention, although you are not totally decentralized. The backbone of the chain is not storing your contract and in some cases there maybe multiple intermediary documents between you and the chain itself (look at how Merkle trees work). If any intermediary layer disappears (the holder of a document which records your contract goes out of business, for example) then your contract may not be traceably linked to the blockchain. You could try to ensure you have a copy of any intermediate documents. Be prepared to use a lot of storage for every transaction you care about. Distributed trust means you keep your own records.
What the blockchain does not do is create currency in the sense of stable value. A BitCoin is a hyper-speculative phantom, wildly varying in value, appealing to the human hoarder instinct. It is more like the digital equivalent of a garage full of prized antiques than it is of money.
Stablecoins are like a quiet step away, linking something called a coin to some amount of real money. Imagine you take a $100 bill and you put it in an envelope, seal the envelope, and write "cryptocoin" on the front while you will find "break seal to use" in fine print. That is a stablecoin.
The history of money is about trust, and trust is a societal thing. From individuals to banks to government, behavior to justify trust took humans millennia to learn. Maybe the system needs to improve - sure - but if the first part of the pitch is "zero trust" then maybe you should be looking very, very carefully at the proposal. A charlatan is in hog-heaven if they do not need to begin their pitch with "Trust me...".