The Breakdown - 20 Predictions About the Future of Money

Starting point is 00:00:00 Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. The breakdown is sponsored by Nidig and produced and distributed by CoinDesk. What's going on, guys? It is Friday, December 3rd, and today we are doing a little something different. This past week has been the Future of Money Week on CoinDesk, and one of the articles that they put together was 20 predictions about the of money from a number of interesting folks in the crypto space. What I'm going to do is go through each of these 20 predictions, and if they're short, I'll read them in their entirety, if they're long, I might summarize. But either way, I'll give you the perspective of the special

Starting point is 00:00:52 guest, and then I'll give my take, whether I agree, disagree, or I'm not sure. Number one comes from Hoseeb Qureshi, a managing partner at Dragonfly Capital. His prediction is stable coins replace dollarization. Quote, in the old days, countries whose currency collapsed would dollarize, they'd import dollar bills and start using them as money. Ten years from now, that will be a relic. Countries will dollarize using permissionless stable coins, and central banks around the world will ultimately fear crypto dollarization as a check against runaway inflation. I think this process has already started, and I don't think it's just going to be a dollarization. I think stable coins, whether they be CBDCs that are issued by specific central banks,

Starting point is 00:01:33 or non-state alternatives will be in a mass global competition for the affiliation of jurisdictions that don't feel like they have the power to actually issue their own currency in a way that's particularly effective. Number two comes from Hasu and is that crypto and fiat will coexist. Crypto and top fiat currencies continue to coexist. We might see a consolidation in smaller national currencies as people find it easier to access USD versus public blockchains. Yes, I agree, there will be, again, as I said, competition between non-state and state currencies, and I do believe that smaller national currencies will be in the long run, potentially a relic of the past. Number three, everyone becomes a programmer, and this one comes from Lex Sokolin, the head

Starting point is 00:02:19 economist and co-head of defy and fintech at consensus. Digital objects are becoming as commonplace as emails and programming literacy is akin to reading literacy. I expect in the coming years people will be creating hundreds of tokens a year, all of which have price discovery, be tradable and have multiple financial attributes. I am not sure on this one. I understand and agree with what Lex is saying in the sense of this being a new type of literacy, but I think that people will evolve interfaces such that it remains more accessible for a wider set of people. Number four and five come from Bologi Shrinivasa, who needs no introduction.

Starting point is 00:02:56 These, I think, although a little long, are probably pretty important to read in their entirety, given that it's Bologi. Number four, the world adopts the Defy Matrix. The Defy Matrix may be to the 2020s what the social graph was to the 2010s. Once every asset can be represented in a digital wallet, Bitcoin and Ethereum, yes, but also CBDCs, stocks, loans, bonds, etc. All these billions of assets will trade against each other every second of every day around the world. This table of pairwise trades is what I call the DeFi Matrix. Some of the cells in the DeFi Matrix like BTC, USD, have tremendous liquidity across many order books. Others like a recent NFT versus a new token may only have what an automated marketmaker can give them, but all financial markets can be reduced to sub-matrices of the

Starting point is 00:03:39 DeFi matrix. The traditional stock market will be CBDCs versus crypto equities. The Forex market will be CBDCs versus CBDCs, and the fiat to crypto markets will be BTC, USDC, and the like. I think on this one agreeing with it has nothing to do with buying into what DeFi is described at right now. What Bologi is talking about is just a natural process by which markets evolve to more opportunities and more liquidity. Bologi's follow-up, number five, the D-Fi matrix spurs competition and becomes a check on central banks. The D-Fi matrix will be a check on the power of central bank digital currencies. Just as Google News made every local newspaper compete against every other local newspaper, digital wallets will make every national digital currency compete against every other

Starting point is 00:04:22 national digital currency and every other asset public and private. Nations will only be able to mandate adoption within their borders, and even then people may only retain the minimum balance of a surveillance currency. They'll use digital wallets to select assets with programmability, privacy, possibility of upside, and predictable monetary policy over locked down assets that promised none of these features. As such, we are entering an age of global monetary competition. I agree entirely that we're entering an age of global monetary competition. In fact, we're already here. I don't discount the power that governments will be able to exert to have a say in how that happens, but I think this fundamental idea that all of a sudden monies will have to actually

Starting point is 00:05:00 compete on features is a likely feature of our future. Number six from Eric Vorhees at ShapeShift Fiat Crumbles. Within a decade, fiat currencies will be in severe decline brought on by their own self-immolation and hastened by the existence of sound market-based alternatives. Call me a heretic, but I don't agree exactly. I think that fiat currencies have a different purpose than the sound money currencies that people are interested in who are interested in sound monies. Now, to the extent that we're saying that fiat crumbles as the default thing that everyone uses no matter what and stores their wealth in, I think that's much more likely. Number seven, cash survives. This one comes from Brett Scott, author of The Heretics Guide to

Starting point is 00:05:41 Global Finance. Now, for some reason, they decided to give Brett the next three, but here we are. Cash survives. It's fashionable for futurists to predict the demise of physical cash, but digital infrastructures are insecure in a world in which climate change is bringing ever more extreme weather events. The fact that cash doesn't crash means that it is far more resilient than digital money and will be around for a long time into the future. Digital is massively overrated. Sorry to be a jerk to the coin desk editors, but I have to say this one kind of feels a little bit like they really wanted to have a contrarian in the mix. I don't see anyone in the crypto space arguing for the death of cash. In fact, some of the strongest advocates for cash and cash-like

Starting point is 00:06:20 principles built into the currencies that will come in the future, are Bitcoiners. So yes, I agree that cash survives. But it won't be because digital currencies didn't out-compete it. It'll be because advocates fight for what it offers. Number eight, crypto fails to challenge the monetary system. Quote, crypto tokens like Bitcoin do not fundamentally challenge the monetary system, given that they depend on the monetary system to give them a price, but that price does enable them to be counter-traded, the process of swapping one thing for another via their monetary price. There is a new age of counter-trade emerging, but crypto enthusiasts keep mistaking it for a new age of money. I think crypto is quite clearly already challenging the monetary system. This one is also bunk.

Starting point is 00:06:59 Nine, New Wave IOUs take off. Again, Brett Scott. New Wave IOU and rippling credit systems begin to take off. The crypto mainstream has perpetuated some pretty regressive ideas about money for the last 10 years by fixating on a commodity paradigm. But by far, the most interesting new experiments in money involve finding new ways to create horizontal networks of promissory IOUs between people. I am all for this. I think that it also doesn't require you to diminish what's interesting about things like Bitcoin that offer an alternative, a challenge, if you will, to the monetary system, to also be interested in this sort of new wave IOUs. In fact, part of why I find so much frustration in the state of the discourse in this crypto space is that people can't seem to understand

Starting point is 00:07:39 that things that seem to resemble one another and are built on similar technological infrastructure don't actually have to have any of the same goals at all. NIDIG sponsors this podcast and they are helping banks, corporate treasuries, and fintechs integrate Bitcoin into their products and balance sheets. See why Bitcoin means business at nidig.com slash NLW. That's nydig.com slash NLW. Luckily, we are moving out of the Brett Scott section into number 10. The Future of Money is Bitcoin from Alex Gladstein.

Starting point is 00:08:18 Not really sure why there's no additional section here, but I think Bitcoin is a big part of the future of money. Let's put it this way. Even if the future of money isn't exclusively Bitcoin, Bitcoin's presence on the scene will change. Inevitably, the future of money. It will change how other monies have to compete. Number 11 comes from Sandra Rowe, the CEO of the Global Blockchain Business Council, and she is predicting that everything becomes tokenized. The tokenization of everything is rapidly changing how we perceive money and wealth, spurring the creation of digital microeconomies. NFTs are the first killer app. The battle for the future of money is on, and my money is on Web3 innovations, creating opportunities

Starting point is 00:08:54 for many, not just a few. I don't think this really goes too much into what it means for everything to become tokenized, but I think the idea of adding a liquidity layer to any sort of asset that allows it to trade in fundamentally different and programmable ways feels just from a purely market perspective, completely inevitable. Paul Brody, the global blockchain leader at Ernst & Young, number 12, programmable money puts the planet's resources to work, quote, Money is just a representation of the world's assets, our energy and our vision. The future of money is the future of how we put this planet's immense resources to work. Putting money on the blockchain, making it programmable, and enabling it to work with other services and assets

Starting point is 00:09:32 are the keys to giving us choice and power to put our money to work. Whether it's investing in solar farms or paying for education, there are so many great projects that are not being done for lack of investment. With programmable blockchain-based money, we can take our own assets and put them to work for everyone's benefit. I agree in the sense that it is an enormously healthy dialogue and discussion for a society to have about what it values using societies and the planet's resources for. The state of the Bitcoin energy conversation may often be extraordinarily frustrating,

Starting point is 00:10:01 but the fact that that conversation exists and the fact that it is perhaps the first time that many are actually wondering, what is worth it, what is worth using energy for, is a good thing. Number 13 comes from Jeff Dorman, the chief investment officer at ARCA, and his prediction is that companies ape into tokens. I believe every company in the world will have a token in its capital structure in the next five to ten years. These tokens will be hybrid securities, part loyalty, member rewards program, and part quasi-equity, in that the token will have a utility within a company's ecosystem rewards, and will also have financial value as the company grows revenues, pass through dividends. All consumer-facing businesses will benefit from engaging their customers

Starting point is 00:10:39 with a token from Starbucks, Delta, Airlines, Netflix, and Disney, to small local companies like your barber, Jim, and Corner Bodega. Verdict's still out on this one for me. I think all the reasons why they might will be clear, and I wouldn't be surprised if every company tries to have a token in its capital structure. I'm all for those experiments. I think in particular I'm interested in the ones that have quasi-equity-type properties that allow more participation in the upside of businesses that we frequent, that we use,

Starting point is 00:11:06 that we contribute to, even if only through our patronage. But I don't think we yet have enough examples that give me assurance that this will actually be brought to bear. And certainly there are many good reasons from pure human complexity that everyone might not want a loyalty or member rewards program for everything they interact with. Number 14 comes from Marcelo Prattes, a central bank lawyer and coin desk columnist, and it is that big tech reign supreme. It's 2031, they write, and over 6 billion people use BTAs in their daily transactions, a digital currency issued by a group of six big tech firms known as the six sisters. BTAs are unbacked and circulate globally on a network developed in 2024 by the then

Starting point is 00:11:44 three most powerful central banks. With the massive adoption of BTAs, only 21 of almost 200 sovereign currencies that exist a decade earlier survive. And these few national currencies still exist, not because they were too big to be replaced, but because they were too small. This one basically says Libra beats out the digital yuan. And I'm not sure. I think that it's going to be a competition, but I do think, as we've seen from Libra, governments are going to fight like hell to have an unfair advantage when it comes to that. You will hear the phrase monetary sovereignty a lot more next year, I think, than you did this year. Still, as I've said before, this idea that many sovereign currencies will not be able to continue to exist, I think is correct. Number 15 comes from Beryl Lee,

Starting point is 00:12:23 the co-founder of Yield Games, and their prediction is more barter through tokens. One, there will be a proliferation of new economies that will have their own form of barter. For example, tokens as a medium of exchange, such as in-game tokens like SLP and ETH, they will be accepted as a medium of exchange directly. Two, blockchain enabled easy-to-use applications to facilitate custody and trade for tokenized forms of money, and three, medium of exchange will fix itself over a basket of other currencies, could be ETH, BTC, USD, the euro, sliding away from the single USD currency around that point in time. I don't know, maybe I'd take this one and modify it a little bit, that networks that grow to sufficient size, be they games or other types of new economies,

Starting point is 00:13:00 will have their own sets of rules and they will have more economic power than these type of private communities have in the past. 16 and 17 both come from Dovi-Wan, the founder of primitive crypto. 16 is that programmable fiat leads to confiscations. Programmable fiat monetary policy and CBDCs will make arbitrary seizure and irrevocable confiscation within a few lines of code. Her next prediction is number 17, Crypto Spurs Wealth Redistribution. Mordor's central banking system does not create wealth only the perception of wealth.

Starting point is 00:13:30 The great concentration of fiat wealth and the great redistribution from fiat to crypto wealth are happening in parallel this decade. I think both of these are true, and both of them are incredibly important sociological forces. The only thing I'll say is that the rules of CBDCs, at least in places outside of China, are not yet written. And to the extent that you are in a country or a region that's looking at a CBDC, I do believe right now is the best chance you're ever going to have to influence the shape of the direction. That's why, again, so many bitcoinsers, if you go back to that point about cash from a few predictions ago, are actually advocating for cash-like properties in central bank digital.

Starting point is 00:14:05 currencies. Number 18 comes from Taylor Monahan, the founder and CEO of My Crypto. She writes, money no longer reflects human value. Today, it's often said that money has three primary functions, a store of value, a medium of exchange, and a unit of account. But more than that, money is often seen as a reflection of how much you are worth to this world and how much that coffee is worth to you. Money is value, but as I look around, I see the concepts of money and value becoming less and less intertwined. I don't disagree, but I would wonder and I'd be interested in Taylor's thoughts on how much the concepts of money and value actually are supposed to be the same thing. Money is ultimately a utility, whereas value is an objective, a goal, a determination, a subjective

Starting point is 00:14:46 sense of what's right and what's supposed to be and what you're trying to achieve. A bit more separation between the idea of money as a tool and money as intrinsically valuable could be good, maybe. But that's probably a lot deeper than Taylor had space for in the context of this particular essay. Number 19 comes from Sam Bankman-Fried, CEO of FTX, who I of course work with. Centralized services are connected by decentralized rails. Let me paint a picture that might or might not come to pass. You have a bunch of centralized services and islands connected by decentralized blockchain rails. I think a lot of services are going to need to still be isolated and centralized

Starting point is 00:15:23 because that's what's most computationally efficient. But the network as a whole could be largely decentralized. You can move between any service easily on standardized blockchain rails, which would be extremely valuable. If there's an easy standardized way in 30 seconds to move assets from one platform to another, that doesn't exist outside of crypto right now, and it's a huge hindrance. Payments could be effectively instant on blockchain rails. That is true of money and that's true of assets as well. Assets get tokenized. Payment apps and in-store objects support that, and that's probably happening largely over mobile. I think that is something which would be in many ways more efficient and easy

Starting point is 00:15:54 to scale and grow than the system we have today. I'd be pretty excited to see something like that. Point here, I think, is something that many have pointed out over the years that I've been in this crypto space is that we have to distinguish between what needs to be decentralized and what doesn't. There are efficiencies from centralization and many applications will benefit from those efficiencies, but an underlying system that is built on more decentralized rails that come with the benefits that decentralization offers could be a paradigm-shifting idea. Number 20, finally from Laura Shin, host of the Unchained Podcast, is that money gets weirder. She writes, my prediction for the future of money is that it's going to get a lot weirder.

Starting point is 00:16:32 It will be more closely tied to or allow a greater expression of our identities and our individuality. It will reflect our relationships in both the physical and digital worlds. It's going to accelerate globalization and bringing together people with similar values across borders and tying them together with financial incentives and an identity that is intensified and deepened with financial value involved. And all that is going to shape up the traditional world of governments, different legal jurisdictions and different local currencies. I would say to that one, amen and bring it on.

Starting point is 00:16:59 To quote Hunter S. Thompson, when the going gets weird, the weird turn pro. Thanks to everyone who contributed to that piece. And thanks to you guys for listening. I'm sure there's lots that you agreed with and lots that you didn't. That's what it's all about. Until tomorrow, guys, be safe and take care of each other. Peace.

The Breakdown - 20 Predictions About the Future of Money

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