#Better tech isn't better for adoption (in the short run)
Bitcoiners are technical people. We focus on making Bitcoin itself work better:
- More nodes, like 100.000 is not enough?
- Better and more private node data propagation,see Dandelion
- Fixing transactional bugs, like malleability which was fixed in the SegWit update
- Scaling for the masses by building out Lightning, check the wonderful blog posts of the Breez team.
This is all nice and dandy, but it's of little benefit to the average user today. I know Product Managers will always reference to "the average user" whom we all know, does not in fact exist. But still, let me tell you the number one problem that I run into, every time that I (a white guy living in Europe) try to "orange pill" someone into Bitcoin:
- But the price fluctuates too much.
That's it. That is the number one complaint.
Of course anyone who has been in Bitcoin will know that over time bitcoin's price will indeed move compared to fiat currencies, but only upwards. But still, this is what a lot of people focus on. For daily use they don't want their currency of choice to fluctuate at all. What they do want however, is to receive a little interest on money in their account.
Now, knowing that people want to receive interest, and do not want to see the price of their coins fluctuate, we can ask ourselves "what is a proper solution?"
I think the answer is deceptively simple: We need a fully-bitcoin-backed-decentralized-anonymous-private-cash-like-stable-coin. Yes, you heard it here first: we need a better stable coin.
In my mind the MakerDAO project with their DAI/SAI stable coin got a lot of things right, but not all:
- To run the smart contract they built on Ethereum. Running a smart contract on Layer 1 is a bad idea because it makes you vulnerable to price hikes ("gas price" in ETH parlour) to execute the smart contract.
- Being built on Ethereum meant that "addresses" can be blocked from receiving or sending coins. This goes against the "digital cash" idea. After all: in cash there is no "account" or "address" that can be blocked.
- To give value to the stable coins certain assets need to be "stacked". In version 1 of DAI this asset was Ethereum. In version 2 (called Multi Collateral DAI) other ERC-20 token assets can be added into the mix. Both Ethereum and other ERC-20 tokens in general have one big problem, though: they depend on Ethereum to work at all. (One could argue that the price of most ERC-20 tokens keeps falling and therefore they are a terrible asset to stake, but I'm not getting into that now...)
- By following the United States Dollar the stable coin is not really stable at all, but suffers from 1-15% inflation per year.
How do we overcome all these weaknesses?
- Make a stable coin that only runs only on a 2nd/3rd layer of bitcoin. Projects like these come to mind:
- Smart contracts have necessarily "addresses" which means that an address can be blocked. To overcome this weakness one would like to have a legacy bitcoin address fallback, preferably to a P2EP (pay-to-end-point) privacy preserving address.
- By locking up more and more Bitcoins in an contract like outlined above, the BTC price itself will become more and more stable over time.
- Following a real world asset like the US Dollar or the Euro has a drawback: it is subject to inflation. But having an "account" on the 2nd/3rd layer stable coin platform has advantages too:
- You can earn/receive more and more of those stable coins as the underlying asset (bitcoin) keeps rising in value.
- So even if the USD is subject to inflation, and real world prices are rising, this is offset by your account showing you received more and more stable coins as "interest"
Please, peeps, discuss...