This article is dedicated to the fourteenth Pizza Day, a reminder that BTC still can’t buy pizza, and to the crypto community, which remains outside the mainstream culture.

Fourteen years have passed, and in the blink of an eye, crypto enthusiasts are celebrating the fourteenth global Pizza Day. This holiday commemorates the legendary transaction in which crypto pioneer Laszlo Hanyecz bought two pizzas with 10,000 BTC. This was not only the first transaction in cryptocurrency history but also represented BTC fulfilling all the functions of a currency. It marked the official entry of digital cryptocurrencies onto the global monetary stage, opening a new market for adventurers worldwide.

Fourteen years later, even though the price of BTC has multiplied billions of times, pizza still tastes the same. To buy pizza with BTC, one still has to convert it into fiat currency (except in El Salvador and the Central African Republic). BTC has made significant progress in terms of value consensus, but in terms of application consensus, we’ve been hesitant since Satoshi left. The “peer-to-peer electronic cash system” envisioned by Satoshi remains technically feasible but has yet to be practically implemented.

The slow adoption of BTC applications has led to the current situation: BTC is surrounded by stablecoins and other cryptocurrencies like XRP. In global remittance systems, black market currencies, and other traditional markets, BTC’s share is continually being eroded. The global currency market represents a significant interest: to secure it, the U.S. government, in collaboration with Wall Street, aims to use the digital crypto payment market created by Bitcoin to further expand the dominance of the dollar.

At the beginning of the article, let’s pose a question:

When did the habit of paying salaries in BTC within crypto organizations come to an abrupt halt? When did various promotional activities stop giving away BTC and start giving away dollar stablecoins and altcoins instead?

As faith in cryptocurrencies weakens, the market liquidity logic in the crypto space has undergone a qualitative change. Since 2021, how many new entrants to the space have stuck to the BTC or ETH standard? As the role of BTC and ETH as transaction intermediaries is shaken and their pricing is controlled by Wall Street, the valuation of the entire cryptocurrency market falls deeper into the hands of the United States.

Dollar stablecoins have taken over the intermediary role originally held by BTC and ETH in transactions, weakening the value capture of BTC and ETH.

In decentralized exchanges, BTC and ETH can still hold the main market:

After arriving at centralized exchanges, a large number of trading pairs are calculated in dollar stablecoins, with the number of dollar stablecoin trading pairs far exceeding those of BTC and ETH. The pricing power of cryptocurrencies has begun to be eroded even before Wall Street could confine BTC and ETH into ETFs.

As a result, the market that was originally supported by BTC and ETH prices has now become a vassal of dollar hegemony. The identities of digital cryptocurrency holders and traders have shifted from freedom-loving crypto punks to short-sighted sources of dollar liquidity and supporters of dollar dominance.

The current situation is inevitably somewhat bleak.

01

Desire: America Devours Global Finance

This is the call of the grand era of cryptocurrency

Blockchain technology represents a revolutionary systemic technological advancement. Decentralized payment systems do more than replicate the functions of Alipay by reducing cross-border payment times from days to seconds. The birth of blockchain has created a low-cost, multi-party trust environment. When applied to transactions, this trust reduces transaction costs; when used within organizations, it can give rise to entirely new organizational structures. Despite futile resistance from the vested interests of the old world, global elites have never abandoned the integration of blockchain technology into traditional financial systems. Institutions like the BIS and the World Bank continuously provide policy guidance on crypto assets and even DCEP in their documents.

Amid this grand trend, every sovereign nation capable of issuing fiat currency is contemplating how its currency should stand in this new monetary environment. Blockchain’s method of record-keeping solves the trust issues between financial entities and represents the latest form of currency with a productivity advantage. Issuing digital fiat currencies by leveraging blockchain technology has become the only choice for major nations. China and Europe are on a similar path, introducing blockchain technology to rebuild their payment and settlement systems. Comparatively, China is relatively ahead: it issues its own digital RMB within self-constructed consortium blockchains. The European Central Bank, after two years of research, found that their digital asset system could handle TPS (transactions per second) of 40,000, laying a technical foundation for the further development of the digital euro.

In contrast, the United States has adopted a more open attitude. Given that historically, American currency has been issued by private banks, the U.S. government does not entirely reject the issuance of digital dollars by private companies. Consequently, the scale of centralized and decentralized stablecoins has now exceeded $160 billion, bearing the primary responsibility for global digital cryptocurrency liquidity. Although digital dollars are not issued by the Federal Reserve, their market acceptance far surpasses that of other competitors.

Issuing crypto asset fiat currencies is the most effective and direct way to counter native crypto asset tokens. This is openly acknowledged by both the BIS and the World Bank.

Not only will currencies become encrypted, but assets will also undergo encryption. The massive encryption of assets will form an integrated global financial market, including commodity and service markets. Whoever can keep up with the rapid development of encryption and occupy the largest market share will reap the greatest benefits.

This Is the Blessing of the World’s Currency Issuer

During the pandemic, the United States saw a significant over-issuance of its base money. The Federal Reserve’s balance sheet more than doubled after the pandemic. To address this surplus of credit currency, balance sheet reduction is an inevitable choice. Additionally, if new markets can be created for the surplus base credit currency, it can support the excess issuance of credit from the demand side, thereby sustaining the valuation of the dollar.

Crypto Dollars Erode the Crypto Liquidity Market

In contrast, the crypto world is not just an ownerless free land where any currency can freely compete. The dollar stablecoins deployed by companies like Tether and Circle not only rank third and sixth in terms of cryptocurrency market capitalization but are also important general equivalents in the crypto world, possessing the highest level of liquidity. Due to the high volatility of native crypto assets like BTC and ETH, using dollar stablecoins as a risk-averse asset has become a consensus among crypto world inhabitants. This undoubtedly lays a solid foundation for the U.S. financial conquest of the crypto world.

Crypto dollars erode the liquidity market of BTC and ETH within the crypto world. The crypto world spans traditional financial markets across the globe. Its decentralized nature makes it difficult for traditional authorities to regulate. Therefore, crypto finance not only borders the markets of various countries but has also deeply integrated and penetrated these sovereign markets. The World Bank report reflects this: cryptocurrencies pose higher regulatory demands. Due to regulatory and demand factors, cryptocurrencies are more popular in emerging countries and impoverished regions. In areas where monetary credibility has collapsed, such as Turkey and Zimbabwe, digital currencies, including dollar stablecoins, have entered the circulation field. OTC crypto transaction kiosks can be seen everywhere on the streets of Turkey.

“Erosion” represents huge benefits. Nearly 90% of U.S. Treasury bonds back every centralized stablecoin.

In USDC, over 90% are currency funds managed by BlackRock, and these funds hold only the repo clauses of U.S. Treasuries and the Treasuries themselves. Each centralized dollar stablecoin is backed by 0.9 dollars worth of U.S. Treasury bonds. Dollar stablecoins provide a better measure of value and medium of exchange for the digital crypto world. The liquidity demand of the digital crypto world also offers the U.S. Treasuries behind these stablecoins a value capture or support that any token economist dreams of.

This Is Wall Street’s Meal Ticket

It’s important to understand that the Federal Reserve’s predecessor was a cartel of commercial banks. In the early days of the Federal Reserve, the power to issue currency oscillated between core commercial banks and the government. Most financial institutions perish due to a lack of liquidity, but having their own pipeline ensures stability in any condition. This is why Wall Street has always been able to harvest global markets. However, it’s much more gratifying to hold the power of credit issuance oneself than to place it in the hands of the government. Today’s mainstream centralized stablecoins are essentially commercial paper and money market funds converted into dollars. Take USDC, for instance: only 10% is cash reserves, with the remainder being assets in the money market managed by BlackRock.

This ability to directly monetize assets is akin to turning stone into gold. Previously, only the Federal Reserve had this capability, but now, anyone who can become a stablecoin issuer can share in the seigniorage of providing credit to emerging markets. Additionally, having control of the faucet means having infinite ammunition to buy up assets during downturns.

The tokenization of the financial industry is a broad, gradually unfolding picture—it is a revolution in the financial sector. Currently, Real-World Assets (RWA) are being brought onto the blockchain. This not only allows for the low-cost sale of dollar assets worldwide, expanding the buyer market but also promotes America’s superior financial services globally. Until now, global investors entering the U.S. capital market have needed intermediary brokers. After completing KYC and opening accounts, they still need to convert their currency to dollars and deposit it into the broker’s designated account. Personal cash and investment accounts are fragmented and cannot be unified. Brokers’ operational qualifications need to be obtained in every country. This cumbersome structure of the cross-border financial market will be replaced by a simple wallet + frontend and token + blockchain. As long as the money is on-chain, combined with decentralized KYC, one can participate in all qualifying financial transactions. RWA can even enable financing for projects in developing countries using American financial services.

The financialization and standardization of tokens will inevitably introduce more service industries. As Silicon Valley leads industrial innovation, we use dollar stablecoins to participate in liquidity provided by Wall Street and regulated by the SEC. Whose lawyers should you hire? Whose tax accountants should you consult? Whose policy guidance should you follow? Whose favor should you seek? The answers are obvious.

The expansion of the industry, accompanied by financial leverage and the issuance of securities and tokens, will bring direct wealth in the form of credit assets to Wall Street. The industrial influence that the United States gains through this encroachment will allow American capital to continue reaping profits in the future.

02

BTC: Besieged on All Sides

Due to anti-money laundering (AML) and counter-terrorism financing (CTF) requirements, even payments face compliance pressures. Therefore, the current situation is: fiat currency steadfastly defends the payment track, while stablecoins vie for the medium of exchange role in BTC transactions.

The Payment Track

If the advantage of crypto assets is their on-chain constraints, then the advantage of the dollar is its off-chain payment capabilities. Crypto asset dollar stablecoins combine on-chain constraints with off-chain payments. Through crypto accounts and signatures, centralized dollar stablecoins have the cryptographic signatures of their backers. In terms of actual payments, American financial institutions are well-prepared.

Currently, the most common digital asset stored value cards typically use MasterCard or Visa to cover the last mile of payment. MasterCard and Visa act like gatekeepers; whichever service they allow through gets access to the global real-world payment market.

Even without stablecoins vying for the on-chain medium of exchange position, all off-chain payments cannot bypass the coercion of licensed payment institutions. MasterCard and Visa, with their extensive global payment interfaces, compel digital crypto stored value card issuers to follow their rules: settling in dollars. As long as issuing institutions can perform standard KYC and AML, converting various global crypto assets into dollars in compliance, American financial institutions can facilitate global payments for the holders. Payment systems like Binance Pay and DuPay operate in this manner. In this process, digital crypto assets merely exist as financial assets or stored value means and play an insignificant role in the payment phase.

For most people outside the cryptocurrency community, using stablecoins for payments is more intuitive and convenient.

The RWA Track

Using a globalized decentralized network, financial services from various countries will face direct, zero-distance competition. BTC’s peer-to-peer cash system is also a form of financial service. Under these assets that are more related to fiat currency, stablecoins serve as a more convenient foundation currency.

One of the most significant characteristics of digital crypto assets is their penetration of financial regulation. Because they are decentralized and anonymous, regulatory authorities in different countries find it difficult to control them. Unlike financial institutions that must comply and obtain business licenses in the localities where they operate, Web3, the promised land envisioned by Satoshi Nakamoto for crypto enthusiasts, allows issuers of digital crypto assets to conduct business on-chain without needing to establish physical offices or branches. In the payment realm, dollar stablecoins offer higher predictability and are more easily accepted by the general public. However, payment functionality alone is insufficient; they also need to provide wealth management functions, similar to Alipay. Wall Street can offer a ready-made suite of compliant financial products to meet the diverse needs of various groups, allowing the public to invest in Wall Street after already investing in the U.S. government.

Compared to decentralized exchanges, centralized exchanges have much better liquidity. Binance and OKX are high-quality exchanges, but so are the NYSE, NASDAQ, and the London Stock Exchange. Why can’t the penny stocks and small-cap stocks on these exchanges serve as meme shell resources? Many small-cap penny stocks can rebrand, adopt new stories, and be mirrored on the blockchain, capturing immense wealth. SBF attempted this, but unfortunately, missed the current meme era’s prime time.

Compared to BTC, most of Wall Street’s financial assets are denominated in dollars, including securities, commodities, stocks, and fixed assets. Establishing trading pairs pegged to dollar stablecoins and providing leverage for dollar stablecoins not only aligns better with user habits but also reduces risk. We can even observe that due to USDC’s stronger compliance compared to USDT, many RWA projects prefer USDC.

RWA not only exports American financial services globally but also builds a more suitable application scenario for dollar stablecoins. Holders of stablecoins can both consume and enjoy consumer finance simultaneously.

The Blockchain Track

Blockchain technology is a decentralized ledger system that fiat currency systems cannot replace. Additionally, most digital cryptocurrencies adhere to strict token issuance disciplines that no country’s central bank can replicate. Therefore, blockchain technology is irreplaceable in the future. On the blockchain, chain-level sovereignty exists: BTC is the accounting currency on the Bitcoin network, and ETH is the accounting currency on the Ethereum network.

To prevent BTC from becoming too dominant, cultivating competitors is one strategy. Besides BTC, new contenders like ETH, Solana, Cosmos, Polkadot, and various Layer 2 solutions have emerged: they can do everything BTC can, and things BTC cannot. This diversifies BTC’s focus and reduces its monopolistic power.

Breaking BTC’s monopoly and increasing competition within the blockchain track is fundamentally positive. However, in the competition between fiat currencies and native digital cryptocurrencies, fragmenting the digital crypto market and dispersing BTC’s value consensus benefits Wall Street in controlling the pricing of BTC and other native crypto assets. This fosters an industry landscape favorable to Wall Street and aids in establishing a digital crypto asset pricing system based on the dollar and dollar stablecoins. This further enhances the position and weight of dollar stablecoins as a medium of exchange in the crypto world.

Ideological Branding

Attacking the spirit is precisely what the United States aims to do and is currently doing. In both primary and secondary markets, everything ingrained in our minds is priced in dollars or dollar equivalents. This project raised how many millions of dollars; that project is valued at how many millions of dollars. Once upon a time, we remembered that ETH financing was conducted in BTC. Early projects like EOS, DAO, Near, 1inch, DANT, and BNB raised funds using BTC and ETH. We’ve forgotten the years when we valued projects in BTC and ETH. This ideological control is what truly causes the crypto world to lose its liquidity.

Throughout human history, a nation’s cohesive core is cultural identity. The current efforts aim to destroy the culture and ideals of crypto-ism. How many newcomers who entered the space after 2020 have read the Bitcoin white paper, seen Satoshi Nakamoto’s writings, or understood and reflected on Austrian economics and its values? Some claim that NFTs and memes represent massive adoption. I raise a middle finger to that notion—this is the crypto community’s massive adoption, not the legacy passed down from Satoshi Nakamoto. After several bull markets, the crypto pioneers have either been arrested or have left. Crypto ideology is no longer mainstream in the crypto world. As the United States wishes, a cultural disconnect has already formed.

When an organization’s beliefs collapse, all order fails, and every individual scrambles to secure benefits for themselves. Isn’t this the most accurate reflection of the current market and industry?

03

Postscript

Another Form of Progress - De-Intermediation and De-Monopolization of American Credit

The dollar, as the world currency, has spread globally through the pervasive digital crypto network, wielding the power of Wall Street. For many countries, this is alarming news. However, for humanity as a whole, it represents progress. The Eurozone was formed over many years of coordinated fiscal and monetary policy among European countries, based on the Mundell theory. This process took decades and left severe residual issues.

In contrast, the dollar’s infiltration of global finance through digital cryptocurrencies has been silent yet profound. Many countries have weaker monetary discipline and credit compared to the U.S. Nevertheless, due to payment requirements and the financial environment, many people are compelled to hold their local currency. Countries often back their currencies by holding U.S. dollars and Treasury bonds.

The credit transfer mechanism involves the U.S. government’s credit passing through U.S. Treasury bonds and assets to other governments, which then use this credit to back their own currencies. In this chain, the local government acts as an intermediary. Recognizing the value of de-intermediation and breaking the intermediary interest structure is crucial.

Moreover, this move makes the global capital market more integrated, breaking the local monopolies over financial resources. Although the globalization of crypto dollars does not achieve decentralization, it does achieve de-intermediation of credit, accelerating the integration of global finance. Objectively, this is also a significant advance in financial history.

The Best Is Yet to Come: Crypto’s Metamorphosis and Rebirth

I once believed I was a native of the crypto world. In truth, I am not. I merely resonated with the libertarian ideals championed by BTC due to my past experiences and chose to align my aspirations and efforts with the ideals of crypto-ism. Our generation cannot claim to be natives; we have not had enough time to be fully immersed in and inspired by crypto-ism and crypto culture. It is the Gen Z that marks the first true internet generation.

In twenty or thirty years, those truly born and raised in the environment of crypto technology and culture will emerge. They will have grown up reading the BTC white paper, studying crypto algorithms, engaging with NFTs, and enjoying the conveniences of DePIN (Decentralized Physical Infrastructure Networks). For them, distinctions such as China, America, East, and West will fade away. By then, decentralized technology will be even more advanced, the costs of decentralization will have decreased exponentially following Moore’s Law, and the drawbacks of centralization will be glaringly apparent in a culture that values and understands decentralization.

By that time, a small spark can ignite a prairie fire. Perhaps a free and harmonious world will be born from the chrysalis of dollar hegemony.

Note: The content and perspectives of this article have been inspired by Rebecca, the founder of Deschool, and Brian Seong from Polygon Developer Relations. Many thanks to them.

references:

Bitcoin White Paper:

https://bitcoin.org/bitcoin.pdf

Financial Geography of Payments: Crypto Adoption from a Global Perspective:

https://s.foresightnews.pro/article/detail/48294

Eurosystem launches digital euro project：

https://www.ecb.europa.eu/press/pr/date/2021/html/ecb.pr210714~d99198ea23.en.html

White paper on the research and development progress of China’s digital renminbi

http://www.pbc.gov.cn/goutongjiaoliu/113456/113469/4293590/2021071614200022055.pdf

The crypto ecosystem: key elements and risks

https://www.bis.org/publ/othp72.pdf

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