eCash and Mass Adoption

Oras ng Pagbasa: 4 minuto

Many have asked how eCash will achieve mass adoption. While it’s impossible to provide a definitive answer, what follows are a few scenarios that I can imagine.

Scenario One

The first is what I would consider the most optimistic, and I will call it the Hayek scenario after the famed economist Friedrich Hayek, who said:

“I don’t believe we shall ever have a good money again before we take the thing out of the hands of government, that is, we can’t take them violently out of the hands of government, all we can do is by some sly roundabout way introduce something that they can’t stop.”

– Friedrich Hayek

This was the path that Bitcoin took in its early days. Little by little, BTC increased its network effect as more people learned about this new technology and started running their own mining nodes, or buying up Bitcoins any way they could. As the value of each Bitcoin grew, it acted as a positive feedback loop leading to even more people being onboarded. Eventually, there were millions of people who had exposure to Bitcoin, including some who were now very wealthy and looking to spend their coins to pay for goods and services. Forward thinking businesses like Expedia, Steam, and Microsoft wanted to capitalize on this and gave people an option to pay in Bitcoin. This was because there was an incentive for them to do so. It was an opportunity to increase revenues by attracting new customers, not to mention the Bitcoin they received could go up in value if they continued holding it rather than converting it to fiat.

The only problem was, Bitcoin wasn’t prepared for the wave of adoption that was to come. Despite having had years to prepare, due to the overall incompetence of the Bitcoin core developers, the network itself had yet to scale beyond ~7 transactions per second. The number of transactions inevitably exceeded the network’s capacity, causing it to become all but unusable for commerce. The aforementioned companies soon announced they would no longer be accepting BTC payments, and Bitcoiners were left with no choice but to change the narrative saying BTC was never meant to be peer-to-peer electronic cash, it was meant to be digital gold.

But what if things had been different? What if the Bitcoin core developers had managed to solve all the problems holding Bitcoin back? What if sending and receiving Bitcoin was far easier, faster, and cheaper than using credit cards or physical cash? Perhaps those companies would have not only continued accepting it as payment, but even more companies might have jumped on the bandwagon, paving the way for Bitcoin mass adoption.

We all know that’s not what happened, unfortunately. But luckily, while BTC may have fumbled the ball, the game isn’t over, yet. I see in eCash a second chance. Bitcoin, but better. A version of the network that fixes the problems that ruined BTC in order to give us yet another opportunity.

Right now, XEC is still in its infancy, but the team is building the infrastructure so that when the masses finally arrive, the chain will be ready. But how will we get the masses to come in the first place? By letting them follow the incentives. I believe that just as people bought Bitcoin in the early days as a way to store their wealth, it’s no different for people buying eCash today. Except with eCash, we can be confident that even if network usage skyrockets, nothing will break, the fees will remain low, and the network will remain reliable. This means that unlike the way Bitcoin’s early adoption phase stalled out due to the technology not matching the hype, eCash will have a chance to go reach new heights that even BTC has never reached before.

To recap, the Hayek scenario would be one where eCash follows the original Bitcoin playbook by slowly increasing the number of people running their own nodes, mining the chain, and holding XEC as an investment. Then as the number of holders increases, we can expect merchants to start accepting it as payment because they are profit seeking. This will lead to more users, leading to more merchants, leading to more users, until eventually everyone is a user, and we finally have a form of money that can’t be stopped.

Scenario Two

I don’t have an easy to remember name for scenario two, but that’s probably just as well since I don’t want scenario two. In this scenario, the fiat economies of the world collapse due to money printing and hyperinflation. Ultimately, this leaves people with no choice but to use cryptocurrencies like eCash as money. We’ve seen this happen in places like Venezuela and Argentina where their local currency has all but failed, and the citizens of those countries choose to hold dollars instead. We could have a similar situation where people choose to hold crypto over their dollars, euros and yuan, and a new global economy is created around the usage of cryptocurrencies as the primary medium of exchange.

While some see this as the most likely outcome, I’m hoping that isn’t the case, because it could mean years, or decades, of chaos. A sudden failure of the state will lead to the failure of the public services provided by the governments around the world. This will likely result in increased crime, an absence of a properly functioning healthcare system, and much more. Who knows when, or even if, we’re able to rebuild society to one that doesn’t resemble a dystopian movie.

But as I said, there’s no way of knowing how things will turn out. Maybe we get some combination of scenario one and two. Or maybe we end up with a scenario that no one’s even thought of.

Scenario Three

This scenario is what could happen if we never achieve mass adoption and the world adopts central bank digital currencies, or CBDC’s, instead. In this scenario, the states have won. They’ve managed to sniff out every blockchain miner, node runner, wallet provider, and infrastructure developer. The networks no longer function, no blocks are found, every distributed ledger has been wiped from the face of the earth, and with it, the dream of a permissionless peer-to-peer electronic cash system has died.

The states have perfected their CBDC’s and everyone is forced to use them. This means that you can be unpersoned with the click of a button for saying the wrong thing, or associating with the wrong person. People have no freedom, or at best only the illusion of freedom. A world not of abundance, but of squalor. Imagine the state of North Korea spreading to the entire world. A world run by a handful of bureaucrats who siphon what little value remains for themselves while the rest of the populace withers and struggles to survive.

This is the scenario we want to avoid at all costs, and this is why the eCash project exists.

If any of this sounds interesting to you, I will be hosting a Twitter space tomorrow to further discuss and expand on what I’ve written here. I hope you tune in and join the conversation.