We got into a chat about vending machines and merchants in the chat box and I shared a few thoughts. Posting as a thread to open up the discussion to everyone.
The idea of PPC vending machines points directly to the problem with the PPC theory and a mixed up dual identity.
On the one hand, if PPC is meant to be gold and store value, it is useless in vending machines. We never use gold that way
On the other hand if PPC is a currency then its super useful for vending machines, but then it isn’t like gold
So which is it going to be? We gotta pick one because each requires different strategies.
If PPC is a currency, then getting merchant adoption and stuff like vending is how we win adoption, make it useful to the masses, and maximize our value.
If PPC is gold, then there is a totally different path to adoption and success. This would likely involve getting pension funds to hold it and things like that
Dual identity issues aren’t unique to PPC and have a track record of causing problems. For example, dual identity is part of why namecoin doesn’t have household recognition. If it just tried to be distributed DNS and not a currency, it could spread in the right circles of users and be useful (therefore valuable) to them. But its trying to be both currency and DNS. And failing at both. CLee even noted this in his miami keynote.
In deciding which path to go down, someone mentioned that even though they aren’t really into economics, their gut reaction was that there’s more use as a store of value due to transaction fee and minting. Thus adoption with merchants isn’t that important
For those who aren’t into economics a tiny bit of background info about minting. Minting is an account interest payment. Interest payments don’t really have too much bearing on whether PPC is a currency or not. Every fiat currency pays some sort of interest on deposits ranging from 0-0.25%in the US to 2.5% in Australia to far more in developing nations. Thus we could be, or not be a currency regardless of having a 1% interest payment.
Secondly, it is really important to think through what it means for something to be a store of value. There are two parts to this thought path, figuring out what “value” is and then figuring out how to “store” that value.
At the bottom, value is another word for usefulness. There are two kinds of usefulness (or value) - practical usefulness (what can I do with the thing) and aesthetic usefulness (how does the thing make me feel?). Our cryptos are valuable over the long term only insofar as they are useful in those ways
To really dig into value let’s think through a non crypto scenario. Take postage stamps. Imagine you were tasked with getting a letter from where you are now all the way to alaska. How how much is it “worth” to you to be able to send a letter from where you are to alaska and know it will get there in 3 days? To figure this out you think through the alternative - getting it there on your own. How much time would it take? How difficult would it be to handle the logistics? How mentally tiring would it be? When you imagine you had to transport it yourself you realize that this is super hard. So if someone else builds a system that can move it in three days and charges you $5, you pay it because you get the value of moving your thing (which is very useful) all that distance at far cheaper than if you did it yourself
Same thing with money - how much is it worth to you to know that you can pass a transaction on the internet in a way that cannot be counterfeited to anyone ? eg deposit on btc-e in russia, move to coinbase in the us, withdraw to bank account in canada
For anyone who wants o use money in any of these places, it is very valuable which is why banks can charge fees, just like post offices. The alternative of carrying the money by hand which is totally impractical.
So then, It is the utility of the payment processing that cannot be counterfeited that is the core attribute thing that gives cryptos a practical value. If we can counterfeit it, it stops being useful (hence the fear of 51% attacks) it stops being useful it losses value. Also, there is usefulness (value) to be had in how fast coin can be moves. ALL other things being equal, in most situations a 60 minute confirmation time for a financial transaction time is less useful than 10 minute which is less useful than a 1 minute. Now in real life, all things are usually not equal and there are trade-offs, so it becomes important to think through the value (usefulness) of the trade offs. eg Gold is hard to counterfeit and pretty, but it is also heavy and there isn’t enough of it to go around. Paper money is easier to counterfeit, but it is lighter and there is more of it to go around. Thus we use paper money instead of gold… Or in cryptos 10 minute blocks mitigate attacks and double spending, so taking longer and being more secure can be more useful than being faster and less secure
This brings us to the second issue - How do we “store” this value? That is much simpler to think through. Storing something is simply putting a thing in a position where you can trust it will be available to you in the future. That’s it. This means that storing the value of the payment processing that cannot be counterfeited only require that the system be trustworthy stable and accessible into the future.
So this bring us back to the initial question - how are we going to be useful? We’re not aesthetically useful like gold, or DOGE. So we need to decide how we are practically useful?
Are we a currency and useful to merchants and vending machines and what not? Are we making peoples lives easier the world over because they can send transactions and trust that they’ll be secure and get there? Does PPC provide the masses with value in this way?
If not a currency, then who are we trying to be useful to? What solution do we provide to what problem? Will that target audience have enough of a network effect to be stable over the long term, thus creating a store of value over the long term?