In the local grocer in a small town, my small town, there is a coin machine that allows you to buy Bitcoin BTC . It’s collecting dust. I’ve never once seen anyone use it.
Yet, of the hundreds of cryptocurrencies out there that populate your Gemini account, Bitcoin is the one with the best use case. You used to be able to buy Tesla’s TSLA with it. Now you can’t. In Florida, you can buy real estate with it. Cipriani Residences Miami, a new luxury condo project, has a partnership with FTX, a cryptocurrency exchange company, to start accepting all major cryptocurrencies to buy property there.
“Bitcoin is the main cryptocurrency because of its brand recognition, market cap, and daily volume,” says Jose Arnaiz, CEO of Realverse in Valencia, Spain, an augmented reality solutions company making maps used by boaters. “The problem with Bitcoin for use case is that it is not meant to support small, fast payments,” he says, adding that the Bitcoin Lightning Network might fix some of this problem. This has been in the works since 2016.
Other coins, like Lumens for the Stellar ( XLM ) open-source fintech network, is supposedly used for remittances, though I have not seen any data on how this is really used or if this is on the rise.
“Where Ripple XRP is probably the future of institutional and financial money transaction — potentially replacing SWIFT —Stellar fulfills the peer-to-peer gap allowing fast and extremely affordable (below one cent cost) transaction fee to send money from person to person,” says Rodolphe Seynat, co-founder and strategic investor in a company called Serenity Shield in Belgium. They are developing a secured decentralized solution to protect access to lost digital assets.
Ethereum (ETH) is used to pay for transactions and other fees on the Ethereum blockchain. Investors buy ETH believing they are investing in the future of the Ethereum blockchain – more users, more fees, and more demand for ETH.
Other than blockchain-based tokens used on specific networks, what are the use cases for these coins as they struggle in a world where central bank digital currencies threaten to blow them all out of the water, including by making them illegal, as China has done, within varying degrees of success?
The recent blowout of the Terra blockchain coin Luna LUNA , which is now worth $0.0001 after trading at $118 in mid-April, serves as a reminder that many of these coins have no real value. Startups in the space are still trying to change that, but so far that mostly means adding value to their own ecosystem. When most of us think of a use case for a currency, we think – can I bit a souvenir at my hotel with it? Can I buy groceries with it? For crypto, it’s mainly all about the ecosystem the token inhabits – think tokens earned in a game that can be spent on items purchased in a game, or some virtual world.
For example, Arnaiz’s token, called Coast, is for use on the SeaCoast mapping platform. The only way coast token holders can buy a boat with it, is if they exchanged Coast for fiat.
Nevertheless, Arnaiz says the token can be used to guarantee reservations for berths, restaurants, hotels, and boats.
It is unclear how much of these tokens are being used to make those transactions. The company said that they were working on agreements for direct payments with companies that will allow the use of their token outside of the Seacoast ecosystem. These agreements would expand the range of services that their investment partners Bitnovo and OK Mobility have already been offering in different coastal countries. In terms of ports, they told me that their goal is for some 180 ports in Spain and Portugal, managed by one of their partners, will allow for docking fees in their cryptocurrency. They said they will then expand to the rest of the Mediterranean and the Caribbean.
The platform is everything. The ecosystem is everything. That’s the only use case, outside of Bitcoin and the few, rare examples like Dubai and Miami real estate.
Take Avalanche AVAX for example. This has replaced Polkadot DOT and Solana SOL as everyone’s new favorite not-Ethereum blockchain. Investors love AVAX because of the growth in Avalanche, but no one can use AVAX to buy a sandwich. (Except for maybe a make-believe one in the metaverse.) Its value has plummeted from around $138 in November to around $27 currently.
Why would anyone want AVAX if they’re not using Avalanche? Because it is an investment, and that is all.
“The reality in today’s emergent blockchain technology is that data monetization through services against fiat has gone one step further and turned to tokenization,” says Seynat. “You buy the governance token within a specific project or ecosystem because that blockchain is growing and users want or need the token to do business there, whatever that may be.”
Chung Dao, co-founder and CEO at Oraichain, a Web3, scalable DApps solution located in Vietnam said that many of the current blockchain tokens offer “little outside their ecosystem.”
The rise of decentralized finance has given some of these newer coins extra utility and value over the last couple of years by allowing users to stake and earn rewards (or yield payments) for holding the coins.
“The rise of blockchain scaling solutions are becoming a pivotal aspect of the DeFi ecosystem,” he said of one use case for blockchain project-related tokens. “Several blockchain teams and communities are creating technological solutions that give users extra value and additional utility outside their platform. Some platforms are becoming more interoperable, forming one network that multiple blockchains can communicate on,” he said, naming one called Cosmos ATOM .
Other uses cases, of course, are the metaverse platforms.
MANA is the native token on the Decentraland ( MANA ) platform and I own it, but Decentraland crashes my computer and the one time I used it, I spent hours creating my avatar and then another boring 10 minutes walking alone into walls. Why do I own this money loser? Because as an investor I believe in the metaverse. I’m being patient.
“It is not surprising that MANA’s main function is to power in-game purchases, but I can come up with a few other uses for it, too,” says Rafaeul Zeitunian, co-founder & CSO of Grand Time out of London. They bill Grand Time as a “Gig economy marketplace” where you can get paid in their cryptocurrency (GRAND), which can be exchanged for the more liquid Polygon ( MATIC ). Zeitunian says you own MANA for the investment, really. “You buy and hold it for long-term profit as the project evolves. It’s very popular right now, so there is a chance it can become a very successful metaverse. And you own it for staking.”
It seems, for now, that the only real use case for cryptocurrency is as a new investment vehicle. These coins have become a way to invest in tech start-ups that few investors understand, or even use. But if exchanges like market leader Coinbase serve as an example, treating these tokens as “securities” — a new type of stock – is the only real use case, so far.
“In the future, I see Bitcoin becoming more of a store of value rather than a means of payment,” says Dao. “I think companies and corporations will add Bitcoin to its balance sheets rather than spend it on their expenses. The rise of dollar tether could be the ideal replacement for Bitcoin as a means of payment given its stability, dollar-like structure, and speed of transaction, too,” he says. “Across the world, many crypto employees are slowly accepting USDT for payment. This could spill over to more traditional industries.”
Tether USDT has also been used for transactions among smaller businesses interacting between Russia and China. USDT has come under some well-publicized scrutiny with regards to its reputation as a mode of payment, as a means to avoid sanctions, and especially with regards to the transparency of its reserves. While the people behind Tether insist it’s fine, it has seen its risks augmented with the recent redemption of more than $17 billion since the Luna death spiral, notes Ahmed Ismail, president and CEO of FLUID, an artificial intelligence-based smart order routing protocol and cross-blockchain liquidity aggregator.
“Traditional finance took decades to evolve to where it is today,” Ismail says. From the high octane, high risk/reward era of the equity and debt capital markets in the 1980s, 1990s and early 2000s to the dot-com bust, the Enron scandal, and the 2008 financial crisis, regulators have moved to protect investors by placing new standards for issuers and market participants such as investment banks and brokers to follow. These standards and rules protect the traditional financial ecosystem.
“The crypto industry won’t take decades to mature, but I think it will get there faster than traditional finance did,” Ismail says.
Regulators have already begun to lay out frameworks and rules of engagement for firms and projects. It is clear much more is needed, particularly in DeFi. In the Luna debacle, there were promises of returns that no regulatory body in the traditional securities realm would have allowed.
“Proper regulation which safeguards the interests of token users and investors…