Yesterday I watched some actors on a national media broadcast / stream who were interviewing some public attention-seekers about about the future of bitcoin. I consider it a woefully inadequate source of useful information, but there are clearly some people who utilize it. These attention seekers were quick to elevate themselves from simple experts in any field they study for a few hours to the position of divine oracles who can predict the future with absolute certainty. History has always provided a forum for such charlatans, and we continue to provide them today. If nothing else, it can provide some brief entertainment.

I make no claim to expertise, for no matter the degrees and certificates on a wall, a senile professor is no longer an expert on anything. Such is how fleeting the value of our opinions are. But having owned and been involved with cryptocurrencies for over 11 years, I think it is possible that some may benefit from my experience and insight.

I consider the most important question being asked today to be the one of what the future of cryptocurrencies will look like. The only real answer is that we do not know. We can't possibly know, and anyone who says they do is being either dishonest with you, or dishonest with themselves. But here I will provide my best guess.

When one considers gold, it has a tremendous number of uses, we can all easily identify several. It is used for jewelry, electronics, aerospace, dentistry, and many others. Of course, gold has historically been used as a store of value or a currency. To suggest that gold has only one use would be contrary to the truth. So it is with cryptocurrencies.

Cryptocurrencies provide a wider and wider range of uses each day. To argue whether or not it is a currency or a store of value ignores these other important uses, and in the end no different that trying to use shades of grey to define a rainbow. However, one must recognize that some things have a single use or purpose that completely overwhelm the other. The purpose of a cannon is to be fired. While it can be used as decorative lawn art, or as a museum exhibition, it was not intended for that purpose when created. Sometimes, the use that it finds is not the use for which it was created. So too do I expect bitcoin and other cryptocurrencies to evolve these uses.

I consider the evidence overwhelming that bitcoin was created as an alternate currency, a role that quickly shifted to a store of value, and is now shifting again to become a settlement instrument and an investment. Etherium provides a framework for smart contracts and much more, yet also is evolving into an investment instrument, especially with the staking paradigm being advanced. I would posit that these many uses we see in cryptocurrencies are like the uses in jewelry or electronic that gold fulfills. While important and valuable, they are not the final use these instruments will fulfill. I believe that the end-use that cryptocurrencies will attain is a use that few have yet considered.

Cryptocurrencies have been designed as almost the perfect collateral. I joking call this possible future the "Cryptocurrency Pawn" model. Banks may eventually realize that bitcoin is the best collateral identified to date. here is a simple example:

Joe wants to buy a new car. He has bitcoin, but of course, he does not want to give up his $50,000 bitcoins expecting them to be worth $100,000 next year. Spending deflationary currency comes with it's own expensive repercussions, as anyone who as ever spent cryptocurrencies can attest. So Joe gets a pawns (gets a loan) on some bitcoins. The bitcoins are locked into a smart contract. The bank advances Joe $50,000 on two $50,000 bitcoins. Joe pays back $1000 a month worth of stablecoins, and when he pays back the $50,000 his bitcoins come back to him, probably worth $250,000 by then. If he fails to make a payment, the bank gets his coins. There is a great incentive for Joe to pay, and essentially no risk to the bank. The bank can charge some nominal interest for an easy profit that in the end costs them essentially nothing.

There are some experiments along this line being used in Defi, but I tend to think that this is the major future use case. Not as a currency, not as a store of value, but as deflationary collateral. In this manner, cryptocurrencies do not replace fiat currencies. They do not even compete with them. They each coexist in an environment where they each perform those functions for which they are best suited. The banks won't go away, they will just evolve to become more like pawnshops, a a role they often try to fulfill with houses or cars as collateral. But cryptocurrencies can fulfill that role far more effectively and efficiently.

This is the future I see, a million problems solved and a million applications created by cryptocurrencies and blockchain technology. But one with a single major use case: The cryptocurrency Pawn model. A world where selling cryptocurrency would be a last resort, like selling grandma's gold watch.

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