Crypto as a Technology

The frenzied public narrative around cryptocurrencies is dominated by wild price speculation, rollercoaster volatility, inflationary central bank policies, ransomware attacks and a lack of beneficial real-world use cases. That overshadows the much more interesting conversation on the technologies under the hood of cryptocurrencies, stablecoins, NFTs (non-fungible tokens) and blockchain projects that have nothing to do with asset prices—and everything to do with rewiring commerce and creating a whole new layer of the global economy.

We’re likely to hear a lot more about crypto as a technology in the coming year—and once you look for it you start to see it everywhere.

“Programmable money” uses smart contracts to follow predetermined steps like executing and verifying payouts automatically through trustless systems that do not rely on intermediaries, and makes these interoperate seamlessly with internet services built on open blockchain networks. This has widespread applications for everything from solving major issues for supply chains, smart cities and autonomous vehicles; mobilizing consumers into communities and harnessing their buying power around a shared cause; or giving artists more control over their work and a share of its future value.

Smart supply chain innovation is accelerating across the globe. This is due not only to the headline-grabbing disruptions caused by COVID-19 but also as a long-term solution to the many risks and inefficiencies for multinationals, suppliers, shippers and terminal operators along every step of extended global supply chains. Think of every time a truck takes delivery or a supplier takes payment, when a merchant wants proof of the product’s provenance, authenticity and ethical sourcing, or a manufacturer who needs real-time transparency on inventory and raw materials availability. The uncertainties and trust issues between counterparties can cause system failure and reputational risk.

Major corporations are advancing supply chain solutions using smart contracts and blockchain to address the need for visibility, traceability, sustainability and to power automated operations and the industrial Internet of Things. At the consumer level, a number of IoT applications are popping up for devices to seamlessly communicate with each other to deliver services and verify payment through crypto wallets. The last step for revolutionizing supply chains is payments through stablecoins tied to the dollar and other major currencies or a payment system using Bitcoin as a global monetary network.

Twitter is doing just that by making the social media platform’s Tips function interoperable with the Bitcoin Lightning Network to facilitate instant payments at virtually no cost from anywhere in the world. Tips allows Twitter users to “send some love to an emerging comedy creator… help a small business owner through a difficult time or give to an important cause” using Strike* and other Bitcoin Lightning wallets that leverage Bitcoin’s underlying technology as a global open monetary network that is as scalable as the internet with significant advantages over traditional financial rails.

The art world offers fascinating use-cases that go well beyond the digital artist Beeple’s record $69 million NFT sale. Art in America points out that “artists are always looking for ways to make financial and legal systems that usually favor collectors and dealers work better for them. This attitude has led some to experiment with [NFTs that stipulate] the ownership and resale rights for a specific digital artwork… to ensure royalties for themselves when an artwork is resold by a gallery or at auction. They might also use the smart contract to distribute percentages of sales to lower-paid workers at their gallery.” NFTs reshaped this year’s Art Basel Miami Beach and Miami Art Week with exhibits and new expressions at the intersection of digital and physical art and commerce, and partnerships between artists and brands.

Consumers are gravitating toward new digital ecosystems and communities. The video game industry is leading the way with games where players spend and earn cryptocurrencies on digital characters and building blocks for virtual worlds and economies. The NBA Top Shot craze has popularized licensed digital collectibles for basketball fans and players who can buy and trade ownership of video clips of their favorite sports moments using cryptocurrencies. NFTs released as digital packs draw thousands of people—like the 400,000 who piled onto Top Shot for LeBron James’ “Tribute Dunk.”

Another crypto community that recently made headlines is Constitution DAO’s attempt to buy one of the last original copies of the United States Constitution being auctioned at Sotheby’s. A group of “internet friends” crowdfunded $46 million using Ethereum through an innovative governance structure known as a DAO, a decentralized autonomous organization with ownership tokens, voting rights and community rules operated via code. While the bid was not successful, it highlighted the potential for consumers to mobilize in decentralized communities to drive collective action.

As we head into 2022, it’s worth reflecting on the economy we want to build, while being clear-eyed in examining the negative social risks of emergent crypto technologies and Web3 visions. That is a conversation worth having and it’s important for industry and policy leaders to listen to new voices, understand new communities and engage generations of consumers that are growing up in this more decentralized layer of our economies and societies.

*Strike is a client of APCO Worldwide.