Month: June 2021

Apple Pay and Coinbase Bring Crypto Payments To Retail

As of June 2021, users who have Apple Pay can now pay for items with cryptocurrency by way of the Coinbase debit card. The card also supports Google Pay with the option to pay with cryptocurrency like Bitcoin and Ethereum. In a press release statement (From the Coinbase blog):

“You can now use your Coinbase Card with Apple Pay and Google Pay to make it even easier to spend crypto at home and on the go.”

It is Coinbase that has integrated cryptocurrency payment options, and is not directly from Apple Pay. This means that users will need a Coinbase card first, which can then be added as a payment option on Apple Pay.

Coinbase provides a debit card from which users can attach their cryptocurrency wallet to use funds. One of the perks it offers is a cash-back spending feature (up to 4% according to Coinbase). This rewards heavy users back to their iPhone.

Before a user can pay with cryptocurrency, it is clear that it is not a direct exchange of value. It must first be converted to fiat at the point-of-sale. The merchant must also support payments in cryptocurrency, so this means that users cannot just use their card to make any payment in cryptocurrency. Merchants who accept the card can offer designated cryptocurrency payment methods (e.g. ETH, XLM, BTC).

Cryptocurrency debit cards are providing users not just a new payment method, but a way to actually use digital assets as a medium for exchange. They can be used to pay for goods and services where it is accepted, and that allows more utility for cryptocurrency. There are other types of cards offered by Crypto.com and BitPay, with their own reward system for users.

With crypto payments going toward mainstream adoption, the question is whether the volatility will have any negative effect. An example of this is sudden change in price of a cryptocurrency in the middle of a transaction. How will payment processors handle the variations, which can suddenly increase or decrease without warning? The idea is making the payment at the point-of-sale, but users may delay in paying from the time of quote. In the real world, prices are fixed with fiat currency and users pay for an item as listed. Prices don’t suddenly change after a few minutes. With crypto, prices can suddenly change while a user is waiting to make a payment. This is certainly something that will be tested.

Certain crypto, like Bitcoin, may be considered too valuable to spend. However, that would probably be the digital asset merchants would like to accept for cryptocurrency payments. Users will have to consider whether they want to spend fractions of their BTC for a pair of sneakers or just HODL it. There are other crypto options of course, which is why this can still work out for both users and merchants. Another thing to take note of are the transaction fees. Users would probably want to use a blockchain where transaction fees are cheapest to spend their crypto.

Stablecoins may provide a better solution to go around the volatility. This might be a good option since it is pegged to more stable assets. Users can set their Coinbase card to use a stablecoin like USDC as their payment option method. All users will need to do is convert a certain amount of their base crypto like Bitcoin to a stablecoin. From there they can fund their debit card with less worries about volatility.

Both Apple Pay and Google Pay come from large tech platforms that serve millions of users. Integration with cryptocurrency payments is further simplified through the use of smartphones. Apple Pay users have iOS (iPhone) while Google Pay users have Android (Samsung, OnePlus, Huawei, etc.). This finally takes the world of retail digital payments to the blockchain.

Meme Coins – Opportunity Or Stupidity?

I am convinced that the rise of Meme Coins in the cryptospace is nothing innovative like DeFi (Decentralized Finance), but more a distraction. If the pumps going into these coins were instead going to legitimate projects, perhaps the market would be better off. Perhaps I am wrong, but when you think about it, why do coins like Dogecoin (DOGE) have a market cap of $40+ Billion (as of June 15, 2021)? I feel the same way about hard forks that could have injected more liquidity into the original coin, but instead are diverting funds away to an offshoot. There is plenty of hype behind it, and it can be fueled by public figures who have influence (e.g. Elon Musk for Dogecoin).

After the Dogecoin hype, the Meme coin mania continues with Shiba Inu (SHIB), Safemoon (SAFEMOON), Cumrocket (CUMMIES) and more dog themed coins. At first glance many would think there is no particular utility for these coins. SHIB actually wants to help protect the Shiba Inu dog breed, so it has a specific cause. Other than that it seems like a pump and dump scheme. CUMMIES offers a crypto for adult themed entertainment. SAFEMOON claims to be a DeFi token despite its classification by some exchanges like Coinmarketcap as a Meme Coin.

Critics say that these coins lack fundamentals when it comes to money supply. If you look at Dogecoin, it has no supply limit which means that it is highly inflated. Others implement a sort of burn mechanism to deflate the supply, but the total circulating supply is already very high (in the billions). It doesn’t seem to make much sense that the circulating supply is so high, but you can buy them cheaply because they are barely 1 cent in value. Buying at such low prices appears to be a bargain but with no limit to money supply, prices just don’t really increase unless there is some scarcity or deflation.

Meme Coins do not really have any ground breaking purpose other than transfer value on a blockchain. The coins target specific use cases like causes and communities for the purpose of the coin. That already gives it a use case, but it is not like other projects that have a more serious purpose. Instead, developers of Meme Coins are doing it more for fun. They were meant to be a joke for good humor. It surely does not seem like a wise long term investment or even for storing value. It can all be lost when a big bag holder dumps the market. Then you have to wait for more people to come in with their money, but there are no guarantees that will happen.

For starters, most of these coins were copied from existing projects. Since many of the top crypto are based on open source code, it is easy to copy them and create a new crypto. Dogecoin was copied from both Bitcoin and Litecoin. Another path for Meme Coin developers is the issuance of a token using a standard like ERC-20 on the Ethereum blockchain (e.g. SHIB) or a BEP-20 token issued on Binance Smart Chain (BSC). The reason they are called a meme is because they don’t offer any specific purpose other than “going to the moon”, which is the term for making money in the cryptospace. Some Meme Coin developers offer their rationale behind their coin, but many of these talking points do not have solid proof or evidence behind the theory.

The main concern is that when these coins pump, they can as easily dump. That would leave the newcomers as the bag holders until new money pumps. It is a sort of Ponzi scheme since liquidity is determined not by utility, but from hype. Those who came late give their money to those who came early during a dump, leaving newcomers rekt (i.e. losers). The system will not be sustainable unless you have new people who put money in the coins. So far, it seems to be working and there is a reason why.

First there is a community driven market that is keeping these coins alive. Without the network effect, there would be no further liquidity in these markets. There are evangelists and shillers of each coin who propagate the benefits of putting money. These groups are all over the Internet on social media sites like Instagram, messaging apps like Telegram and video streamers on YouTube. The power of the network is exponential, and this is what has led to market caps that are in the billions. There is a belief system around most crypto, including Bitcoin, and this also helps to drive Meme Coins. A lot of the enthusiasm with DOGE was led in part by tweets from Elon Musk. Entrepreneur Mark Cuban also added to the hype by accepting DOGE as payment for his Dallas Maverick’s sports merchandise.

Second motivation is the money. Obviously, there is plenty of money to be made just by looking at the market cap of the top Meme Coins. It gives many the belief that there is a chance to become rich, and that has already happened to some people. There are reports that a Goldman Sachs executive quit their job after striking it rich with Dogecoin. There are people who will get rich, but others will lose a lot of money. Those who are mortgaging their homes or selling their cars just to get into Meme Coins should be aware of the risks from price volatility in the cryptospace. There are no guarantees with Meme Coins. It is like gambling when you place your life savings in a coin with the hopes that it will increase in future value. Always put no more than what you are willing to lose, as the saying goes.

Meme coins add a new dimension to the cryptospace. I call it distraction because of the amount of capital it has taken away from the rest of the market. There is approximately $48+ Billion (based on Coinmarketcap data in June 2021) total value in Meme Coins. Some would say that money would have been better off going into Bitcoin or Ethereum. It can be an opportunity for the wise when used as a way to earn quick money from a small amount invested. You can have a million of some of these Meme Coins for less than $20 initial investment. It does become stupidity when you decide to invest all your money into one Meme Coin. There are other coins where that money could have been yielding higher profits and earning from DeFi protocols.

In seems you cannot stop people who are motivated by community and money. Greed backed by a strong support system will keep the belief in Meme Coins alive. Some jurisdictions are taking a harsh stance on Meme Coins. Regulators may determine the momentum moving forward. The SEC in the US has the power to restrict trading in Meme Coins if they deem it to be more harm than good for investors. What could be good news is if some of these Meme Coins actually do succeed not just from new users, but in accomplishing a purpose. Dogecoin is seeing some form of development in the works. In any case, be very careful with Meme Coins. Anything is possible, but it can go either way. Do plenty of research and understand the risks involved. There is just no way of knowing what will happen.

Disclaimer: This is not financial or investment advice. The information is an opinion piece for reference purposes only. Always do your own research.