  Exploring the transformation of value in the digital age By Michael J. Casey, Chief Content Officer April 2, 2021
Welcome to Money Reimagined.
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Bitcoin may have hit recent all time highs, but it's not too late to be early.
Crypto as a Payment System? Here We Go Again  Illustration: Rachel Sun/CoinDesk Hey, PayPal: 2013 called, it wants its narrative back.
This week, the global payments giant announced that it had begun letting users in the U.S. pay for things online with cryptocurrency. "We think it is a transitional point where cryptocurrencies move from being predominantly an asset class that you buy, hold and or sell to now becoming a legitimate funding source to make transactions in the real world at millions of merchants," CEO Dan Schulman told Reuters.
Transitional is an apt word to describe the situation, especially for anyone using crypto with PayPal. Since last fall, the company has been allowing customers to buy or sell bitcoin, ether, and a few other coins, but not do much else with them. Not even withdraw them from the platform, or deposit crypto they already owned.
Up to this point, the service was arguably just a way to gamble on the prices of these assets. Which, to be fair, is probably the most popular use case for crypto, at least among those people privileged enough not to need it to get transactions done.
You still can't deposit or withdraw digital assets from PayPal, which undercuts the technology's appeal as a way to put individuals back in control of their money in a world of unchecked asset seizures and involuntary bank bail-ins. But now you can at least use the service to buy stuff.
How many users will take advantage of the new feature? Notwithstanding Crypto Twitter's usual hyperventilating, a modicum of skepticism is warranted, given this technology's long struggle to catch on as a payment mechanism.
And I say this having once believed (in the prehistoric days of 2013) that the payments use case would be a big part of bitcoin's appeal.
The age of innocence
Even then, I had a tinge of doubt:
[The] 20-minute wait for Bitcoin confirmations is awkward for in-store retail purchases. Depending on the size of the purchase, a merchant who accepts Bitcoin may be taking a risk if he lets the customer walk out before the transaction is confirmed. But arguably he's already taking that risk if he accepts credit cards, since from a merchant's point of view the transaction isn't really done until the funds are placed in his account — which could be two or three days later in the card world.
In other ways, Bitcoin can be a compelling alternative (or supplement) to Visa, MasterCard or PayPal for merchants. ... For starters, there are no acceptance fees (Bitcoin has an optional transaction fee for senders, typically the equivalent of a few pennies, to expedite payments). And merchants who are put off by the notoriously volatile exchange rate between bitcoins on dollars don't have to take the currency risk. They can elect to hire a processor ... which will take immediate possession of the bitcoins on a merchant's behalf and remit the equivalent in dollars or euros. The fee for this service is around 1%, which still beats 2% to 3% for credit card payments. So merchants can reap the benefit of Bitcoin without having to worry about the price of bitcoin….
Ah, to be so young again! A few years later, during the bull market of 2017, network traffic became congested, "a few pennies" became a few dollars, settlement could take hours instead of minutes, and I ate my words.
Today, it's another bull market, average confirmation times are again spiking, and fees average in the double digits in dollar terms. This latency has already scuppered at least one would-be Tesla buyer's bitcoin payment:  Other blockchains' developers tout their higher throughput and lower fees, but none of them boasts Bitcoin's level of security, network effects or name recognition. Its closest competitor, Ethereum, faces its own scaling challenges.
None of this augurs well for crypto's use in everyday commerce in the near term, at least from an Average Joe's perspective.
Winds of change?
Then again, I'm talking like a provincial American here. There is some evidence that crypto is starting to catch on as a means of exchange in other parts of the world where payment rails aren't as developed.
Further, on-chain transfers aren't the only way to move small amounts of digital money anymore; "second layer" systems like Bitcoin's Lightning Network can do it fast and cheap like in the old days. One of the sector's most promising entrepreneurs and the scion of a Bitcoin dynasty, Jack Mallers is working with none other than Visa and using Lightning to clear dollar transactions.
And while the stoicism of "HODLing" bitcoin for the long term is admirable, there is a case that it must succeed as "electronic cash" (its creator's words) if it is to succeed as "digital gold" (the current value proposition), at least as much as the reverse. As CoinDesk Research Director Noelle Acheson wrote a few weeks back:
It can also be argued it is essential for the health of the network that bitcoin's use as a medium of exchange be encouraged. As successive halvings reduce the block subsidy (in which miners get new bitcoin as compensation for the work expended in successfully processing blocks of transactions), miner incentives will increasingly rely on transaction fees.
PayPal, to its credit, is greasing the wheels here. It won't charge its usual fee to sell crypto when consumers use the Checkout with Crypto feature (and you have to sell it, since PayPal isn't asking its merchants to accept anything other than fiat). PayPal customers won't have to worry about on-chain fees or confirmation times, either; that fussy business will be handled behind the scenes by the company and its partner Paxos. And PayPal will mitigate the tax-preparation headache for U.S. customers by providing them with a form 1099 documenting their crypto sales and reporting the transactions to the IRS.
Off the Charts Booming NFTs News about non-fungible tokens (NFTs) tends to be a mixture of headlines on multi-million-dollar deals and explainers getting at what non-fungible tokens even are.
Unlike a unit of bitcoin, say, these unique digital assets aren't designed to be exchanged equally, one for another. And trade in them has boomed, fired by the idea that one NFT might climb rapidly in value above the others – much like a work of art, a rare trading card or a limited-edition sneaker.  Shuai Hao/CoinDesk Data from nonfungible.com, a site that aggregates information on specific NFTs and NFT markets, shows that while volume in NFT markets has exploded this year, it remains a sliver of a sliver of the crypto category. A month of NFT trading is only a fraction of the dollar volume transacted across the largest crypto exchanges in a single day. NFTs are fascinating. Remembering that bitcoin was the original provably scarce digital commodity, they represent a novel angle through which to explore that innovation. For all the hype, they have yet to grow to a scale to impact the crypto asset category.
-- Galen Moore
The Conversation Bitcoin's Role in the World  Illustration: Rachel Sun/CoinDesk This week saw Bitcoin climb to almost $60,000 amid new evidence of BTC entering mainstream consciousness.
Exhibit A: Chipotle, which launched a Bitcoin-themed promotion for National Burrito Day.  Some saw this is a hopeful sign for Bitcoin.
Blockworks' Jason Yanowitz said every company now needed a Bitcoin-themed marketing campaign (emulating Elon Musk and Tesla):  Others, including CoinDesk's Zack Seward, wondered if Chipotle's campaign, falling on April Fools' Day, was actually a joke.  Meanwhile, Bitcoin's critics, including the Telegraph's James Titcomb, continued to pour scorn. "We should not take Tesla's new fondness for Bitcoin too seriously," he wrote, describing Bitcoin as a plaything of very rich people, like Elon Musk.  But Bitcoin proponents, including Alex Gladstein, Chief Strategy Officer of the Human Rights Foundation, fought back strongly, laying out the multiple ways BTC is being used outside the U.S.  Depending on where you stand, Bitcoin is the frothiest of all froth, or a world-changing technology just beginning to do its magic. Few inventions have divided people so. -- Ben Schiller
A message from Coindesk  CoinDesk's Research Hub brings together a wide range of insight from the crypto asset industry's top analysts, who look at market developments, asset fundamentals, infrastructure progress, ecosystem trends, company analysis and more. It hosts the richest compilation in the industry of insight from our own research team as well as Fidelity, Bitwise, Grayscale, Kaiko, Coin Metrics, Ark Invest, Dapp Radar, Token Insights and many others. Access this library of information in CoinDesk's Research Hub.
Relevant Reads India Rising  With a population of more than 1.3 billion, India could one day become a key market for the cryptocurrency industry.
But the path of entrepreneurs there has often been blocked by unfavorable government regulation (or the complete lack of it).
In a terrific deep-dive this week, CoinDesk's Anna Baydakova looks at factors driving India's crypto economy and simultaneously what's holding it back.
Millennials and younger are keen to buy and hold bitcoin, seeing it as an alternative to gold. "Bitcoin might become for India's millennials what gold is for their parents, no matter what the government says," Baydakova says.
Nischal Shetty, CEO of WazirX, India's largest exchange, estimates that 1.5 million Indians are actively trading crypto, while around 6 million are just holding it.
"Gold would be the investment of choice for the older generation. The young generation sees the advantage … to buy bitcoin, because gold became more stable and bitcoin is so fast-moving," Shetty said.
On the other: India's government has sent mixed signals as to how it wants to regulate the industry, freezing growth in place. Just recently, it appeared that officials might introduce legislation to ban crypto outright, only for the law to be shelved at the last minute with little explanation.
Baydakova later followed up with another post saying that top Indian crypto companies were lobbying the government for a nuanced stance that balances the needs of industry and government.
-- Ben Schiller
A message from CoinDesk  Podcast: Mapping Out Eth 2.0 CoinDesk's Christine Kim and Consensys' Ben Edgington present a weekly podcast series on the live development of Ethereum 2.0 and its potential impact on the crypto markets.
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