BTC and Pizza: The 14-Year Journey of Crypto Assets

Spring goes and autumn comes for fourteen years, and Crypto Punks welcome the fourteenth Pizza Day globally. This festival commemorates the legendary event where pioneer Laszlo Hanyecz purchased two pizzas for 10,000 BTC. This is not only the first transaction in the history of Crypto Assets but also represents that BTC has fulfilled all functions of money, marking the official entry of digital encryption currencies onto the global monetary stage. A brand new market has opened its doors to adventurers.

Fourteen years have passed, and although the price of BTC has skyrocketed by hundreds of millions of times, buying pizza with BTC still requires fiat currency ( except for a few countries ). BTC has made significant progress in value consensus, but has stagnated at the application level. The "peer-to-peer electronic cash system" envisioned by Satoshi Nakamoto is still at the technically feasible stage and has not yet been truly implemented.

It is precisely due to the slow adoption of BTC that the current situation has arisen: BTC is surrounded by stablecoins and other Crypto Assets. In traditional markets such as global convenient and cheap remittances and anonymous coins, BTC's share is continuously being eroded. In order to gain monetary hegemony, the US government, in collaboration with Wall Street, is trying to leverage the digital encryption payment market pioneered by Bitcoin to further expand the dominance of the US dollar.

It is worth pondering when the practice of paying salaries in BTC by crypto organizations will come to an end. When will various airdrop activities shift from BTC to USD stablecoins and other tokens? As faith in encryption wavers, the liquidity logic of the coin circle market undergoes a qualitative change. After 2021, how many new entrants still adhere to BTC and ETH standards? When the trading medium status of BTC and ETH is shaken and their pricing power falls into the hands of Wall Street, the entire valuation of Crypto Assets is further constrained by the United States.

US dollar stablecoins have encroached on the trading medium functions that originally belonged to BTC and ETH, undermining their value capture capabilities. In decentralized exchanges, BTC and ETH can still maintain a major market presence. However, in centralized exchanges, a large number of trading pairs are denominated in US dollar stablecoins, and the number of stablecoin trading pairs far exceeds that of BTC and ETH. The pricing power of Crypto Assets began to be eroded before BTC and ETH were locked in ETFs.

As a result, the market originally supported by BTC and ETH prices has become a vassal of the dollar hegemony. The identity of digital crypto asset holders and traders has transformed from liberal crypto punks to short-sighted sources of dollar liquidity and supporters of dollar hegemony. The current situation is inevitably lamentable.

The blockchain system is a systematic technological revolution of a new era. Decentralized payment is not just replicating the functions of Alipay, but transforming cross-border payments from days to seconds. The birth of blockchain has created a low-cost, multi-party trust trading environment. This trust can lower costs for transactions and give rise to entirely new organizational structures within organizations. Despite the futile resistance from entrenched interests of the old world, the world's elite have never given up on integrating blockchain technology into traditional financial systems. The Bank for International Settlements and the World Bank continuously provide policy guidance for Crypto Assets and even central bank digital currencies.

In this grand trend, sovereign countries around the world are considering how their national currencies can establish themselves in the new currency environment. The blockchain accounting method solves the trust issues between financial entities and represents the latest form of currency with productivity advantages. Issuing digital fiat currency based on blockchain technology has become the only choice for major countries. China and Europe are following a similar path by introducing blockchain technology to rebuild their payment and settlement systems. In comparison, China is relatively advanced: it is issuing digital RMB on its self-built alliance chain. The European Central Bank found through two years of research that its digital asset system can achieve 40,000 concurrent transactions per second, 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 there is a historical precedent for private banks issuing currency in the United States, the government does not completely reject the issuance of digital dollars by private companies. Currently, the scale of centralized and decentralized stablecoins has exceeded $160 billion, shouldering the liquidity responsibility of major global digital crypto assets. Although the digital dollar is not issued by the Federal Reserve, its market acceptance undoubtedly far exceeds that of other competitors.

Issuing fiat for Crypto Assets is the most effective and direct way to combat native Crypto Assets tokens, a point that is not avoided by the Bank for International Settlements and the World Bank. Not only will currencies become encrypted, but assets will also be encrypted. The massive encryption of assets will form an integrated global financial market, commodity market, and service market. Those who can keep up with the fast pace of crypto development and capture the largest market share will gain the greatest benefits.

For the issuing countries of global currencies, this is a huge opportunity. During the pandemic, the United States significantly oversupplied its base currency, and the Federal Reserve's balance sheet expanded by more than double. To address the issue of oversupplied credit currency, balance sheet reduction is an inevitable choice. In addition, if a new market can be provided for the oversupplied base credit currency, it can also support the issuance of credit from the demand side and maintain the valuation of the US dollar.

The crypto dollar is eroding the liquidity market for crypto assets. In contrast, the crypto world is not only a free land without ownership, but also allows any currency to compete freely. The dollar stablecoins deployed by Tether and Circle rank third and sixth in terms of market capitalization among crypto assets, and they serve as important general equivalents in the crypto world, possessing the highest liquidity. Due to the significant volatility of native crypto assets like BTC and ETH, using dollar stablecoins to hedge against risks has become a consensus among crypto natives. This undoubtedly lays the foundation for the conquest of the crypto world by American finance.

Crypto dollars not only erode the liquidity market of BTC and ETH in the crypto world but also deeply penetrate traditional financial markets of various countries. The decentralized nature makes it difficult for traditional powers to regulate. Therefore, crypto finance not only interfaces with national markets but also deeply integrates with sovereign markets. A World Bank report shows that crypto assets pose higher regulatory demands. Influenced by regulation and demand, crypto assets are more prevalent in emerging countries and impoverished areas. In regions like Turkey and Zimbabwe, where currency credibility has collapsed, digital currencies, including USD stablecoins, have entered the circulation space. Crypto asset over-the-counter trading booths are ubiquitous on the streets of Turkey.

"Erosion" represents huge profits. Behind every centralized stablecoin, there are nearly 90% U.S. Treasury bonds. Over 90% of USDC is managed by BlackRock's money market fund, which only holds U.S. Treasury repurchase agreements and the bonds themselves. Every dollar of centralized stablecoin is backed by 0.9 dollars of U.S. Treasury bonds. Dollar stablecoins provide a better measure of value and medium of exchange for the digital encryption world. The liquidity demand in the digital encryption world also provides the backing of U.S. Treasury bonds with the value capture or support that any token economist dreams of.

For Wall Street, this is a lucrative meal ticket. The Federal Reserve was originally a commercial bank cartel. In the early days of the Federal Reserve, the power to issue currency swung between core commercial banks and the government. Most financial institutions went bankrupt due to insufficient liquidity, and having their own pipelines ensured their land would always be profitable. This is also why Wall Street in the United States has always harvested the global market. However, handing over credit power to the government, who wouldn't want to have it in their own hands? Today, mainstream centralized stablecoins use commercial paper and money market funds to transform into dollars. Taking USDC as an example, only 10% is cash reserves, while the rest are money market assets managed by Blackstone.

The ability to directly convert assets into cash can be described as turning stone into gold. Previously, only the Federal Reserve had this capability, but now, as long as one can become a stablecoin issuer, they can share in the seigniorage provided to emerging markets. Additionally, mastering the faucet allows for unlimited ammunition to buy at the bottom.

The tokenization of the financial industry is a vast painting that unfolds gradually, representing a revolution in the financial sector. Currently, RWA brings real assets onto the blockchain, enabling low-cost global sales of USD assets and expanding the buyer market, while also promoting American financial services worldwide. So far, global investors have needed intermediary brokers to enter the US capital market. After completing KYC account opening, they must also exchange their currency into USD and transfer it to a designated account. Personal cash accounts and investment accounts are fragmented and cannot be interconnected. Brokers must obtain operational qualifications in each country. This cumbersome structure of the international financial market will be replaced by a simple wallet + frontend and token + blockchain. As long as funds are on-chain, combined with decentralized KYC, all eligible financial transactions can be participated in. RWA can even use American financial services to finance projects in developing countries.

The industrialization and standardization of token finance inevitably introduces more services. When Silicon Valley leads industrial innovation in the United States, we use dollar stablecoins to participate in the liquidity provided by Wall Street and token financial instruments regulated by the SEC. Where should we find lawyers? Where should we find tax and accounting services? Whose policy guidance should we follow? Whose face should we watch? It's self-evident.

The expansion of the industry, accompanied by financial leverage, securities, and token issuance, will bring direct credit asset wealth to Wall Street in the United States. The industrial influence seized by the United States through industry erosion will enable American capital to gain the ability to continuously fleece in the future.

Due to the demands of anti-money laundering and counter-terrorism, even payments face compliance pressure. The current situation is: fiat currency firmly occupies the payment track, while stablecoins compete for the position of BTC trading medium.

In the payment field, if the advantage of Crypto Assets is on-chain constraints, then the advantage of the US dollar is off-chain payments. The Crypto Assets US dollar stablecoin has both on-chain constraints and off-chain payments. Through crypto accounts and signatures, centralized US dollar stablecoins have endorsers' encryption signatures. In terms of practical payments, American financial institutions are already well-prepared.

Currently, the most common digital asset storage cards mostly use Mastercard or Visa to complete the last mile. Mastercard and Visa act like community gatekeepers, allowing certain food delivery services in, thereby granting them access to the global real-world payment market.

Even without stablecoins competing for the position of on-chain transaction mediums, all off-chain payments cannot avoid the coercion of licensed payment institutions. Companies like Mastercard and Visa, which have the most extensive payment interfaces globally, force digital encryption prepaid card issuers to operate according to their rules: settling in USD. As long as the issuing institutions can meet standard KYC and AML, and convert various crypto assets compliantly into USD, they can facilitate global payments for holders through U.S. financial institutions. Binance Pay and Dupay both adopt this model. In this process, digital encryption assets exist merely as financial assets or a means of value storage, playing an insignificant role in the payment phase.

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

Utilizing a globalized decentralized network, financial services in various countries will face zero-distance competition. The BTC peer-to-peer cash system is also a financial service. Among these assets more closely related to fiat currency, stablecoins serve as a cornerstone, acting as the underlying currency more conveniently.

One of the biggest characteristics of digital crypto assets is their penetrability to financial regulation. They are both decentralized and anonymous, leaving regulatory agencies in various countries helpless. Unlike financial institutions that must comply with local regulations and obtain business licenses upon entering a country, Web3 is a stateless land promised by Satoshi Nakamoto to crypto enthusiasts. The issuers of digital crypto assets can conduct business on-chain without needing to establish physical offices or branches. USD-pegged stablecoins have higher predictability in the payment sector and are more easily accepted by the public. However, having only payment functionality is not enough; they also need to have financial management features like Alipay. Wall Street can provide clients with a ready-made set of compliant financial products that meet the diverse needs of various demographics. This allows the public to still engage with Wall Street after the U.S. government takes over.

Compared to decentralized exchanges, centralized exchanges have much better liquidity. Binance and OKX are high-quality exchanges, are the New York Stock Exchange, Nasdaq, and London Stock Exchange not high-quality exchanges? The powder above