Money Is Morphing: 7 Crypto Facts Your Credit Union Needs to Know
Author: Jon Ungerland, Daland CUSO
Published in: CUInsight
In 2010, a resident of Jacksonville (FL) completed the first real-world purchase of consumable/material goods using Bitcoin. Laszlo Hanyecz, a pioneering spirit, paid 10,000 Bitcoin for a couple of Papa John’s pizzas. To complete his purchase Hanyecz had to recruit co-conspirators via a Bitcoin chat room/forum, where he solicited support from another Jacksonville resident who agreed to purchase his pizzas with US Dollars (as the local Papa John’s didn’t yet accept Bitcoin) and deliver them to Hanyecz’s house. Thus began what we’ll most likely (eventually) understand as the currency and commerce wars of the 21st Century; and this event, “Bitcoin Pizza Day,” is now recorded as one of the pivotal moments in the history of Bitcoin and cryptocurrency.
If “Bitcoin Pizza Day” marked the first shot fired in a revolutionary war against the empires of banks and traditional financial institutions (and the associated fiat currencies), then who is winning the war; who has the momentum in the battle for the future of money?
Let’s take a look at some stats, data, and current events (or reports from the frontlines of this often mistakenly belittled battle):
On “Bitcoin Pizza Day,” the value of Hanyecz’s 10,000 Bitcoin was approximately $41; today (at the time of authoring this piece) those same 10,000 Bitcoins have a market value (for exchange or purchase of goods) of approximately $87,280,000.00 (no, that’s not a typo). By contrast, the $41 Pap John’s received that same day are worth approximately $48.25 today (factoring in inflation).
Compared to the creative internet campaigning Hanyecz had to employ in 2010 to purchase a pizza from Papa John’s, in 2019 the list of merchants who now conveniently accept Bitcoin includes such behemoths as: Starbucks, Whole Foods, Nordstrom, Microsoft, Overstock.Com, AT&T, Expedia.Com, and a host of other online/local retailers. In fact, mobile wallets like “BitPay” make it extremely easy for consumers to store cryptocurrency and locate local merchants accepting cryptocurrency for payments … all without the services of a financial institution!
Global market cap (total dollar capital value) of Bitcoin by the end of 2010 was approximately $1.25m. As of 5/29/2019, the total market cap for Bitcoin was $154b (yes, billion, with a “b”).
By the end of 2010, there were approximately 1000 active Bitcoin wallet addresses globally. Today, as of 5/29/2019, the number of active wallets has grown to 818,000 wallets (unique active Bitcoin addresses). That’s an 80,000% increase in active unique addresses in 8 years. By contrast, in 2010 there were an estimated 90.5 million credit union ‘members.’ As of year-end 2018, credit union membership was approximately 115 million members; or an increase of 27% in 8 years.
In February of 2019, JP Morgan announced they intend to roll out their own proprietary cryptocurrency, JP Morgan Coin. This announcement followed multiple years of the same institution berating and bashing cryptocurrency (Bitcoin especially) as a “Ponzi scheme” and “worthless;” but now the technology appears to be a profitable path for the mega-bank to continue on into the future providing new value to customers and merchants (by establishing new transaction networks and proprietarily controlled settlement instruments)!
In April, 2019, Coinbase launched a VISA Debit Card which allows users to spend cryptocurrency at any retailer accepting VISA (eliminating the need for money to be stored at or transactions to be processed by issuing financial institutions).
In May 2019, Facebook announced its intent to launch “GlobalCoin” in 2020. Upon its launch, Facebook will become one of the largest global financial institution networks (by user base) with an immediate ability to send money and support transactions around the world without reliance on traditional financial institutions (and will, presumably, position the tech and advertising giant to establish preferred exchange rates for purchases/transactions completed between consumers and merchants using its currency on its network).
It’s worth noting all of the above statistics and trends take into consideration ONLY Bitcoin (BTC) growth and current events; and in addition to the exponential and existentially terrifying growth of BTC, there are at least 5 other major coins/cryptocurrencies which have realized similar stellar growth and market acquisition trajectories (XRP, LTC, ETH, BCH to name a few) – each with their own use case intended to disrupt a specific function of traditional financial institutions! The total market cap for ALL cryptocurrencies as of the publication of this piece was approximately $275b.
What does all this mean for your credit union (local financial institution)?
It means money is morphing; and your business (and technology) strategy needs to modernize if you want to stay in the money business.
Put simply, if you want to remain relevant, you’re going to need core technology (and partners who can help you use that core technology) capable of keeping you plugged into new networks and emerging eras of digital currency.
As we approach mainstream adoption of cryptocurrency in the (near) future, members and consumers are going to grapple with security and service risks inherent in this infantile space and industry. However, as with the emergence and evolution of the internet and the trend towards streaming media and online commerce (in the early 2000s), momentary inconveniences will not ultimately dissuade your members from better value and increased convenience of digital assets and currency!
Looking at a historical analogue and exemplary data point, I think we can all (retrospectively) agree Blockbuster was dead as an institution as soon as Netflix mailed its first DVD to a customer (before we, as consumers, ever knew their designs for total disruption and transformation of our consumption via streaming services!). The community financial institution industry stands at the precipice of an analogous event in our own history. Cryptocurrency and digital assets are the equivalent of the first transactions completed outside the traditional banking network – like the first movies rented outside video stores.
Like other industries before ours, we must make a crucial decision. Do we invest time/money/resources into temporary temptations and momentary fixations (like alt-chains, CU-owned block chain ledgers, or perhaps even CU-owned digital currencies), or do we anticipate the likely endgame of global, mainstream adoption of digital/crypto-currency and position our institutions to be participants in the era of streaming money movement over the internet? Candidly, it’s our opinion the credit union industry can’t afford expensive and time consuming experiments with alt-chains and credit union ledgers. While we’re fiddling with alt-chains and pretending to have an influence on the trajectory of block chain technology, consumers and major commercial players are clearly establishing cryptocurrency as the valuable and pertinent use case for blockchain when it comes to our industry. Considering these trends, institutions wishing to remain relevant should be investing into their core technologies – and extension of their core technologies – as catalysts for their renewed core business models. We should be doing this in anticipation of our members and consumers needing a safe, secure, and trusted institution as a depository, transactor, and local member service ally in the era of cryptocurrency and digital assets (such as real-estate ownership represented by Ethereum tokens or stock shares recorded as other crypto tokens).
Your credit union doesn’t have to go extinct as money morphs into a variety of digital assets. Moreover, as we mentioned in 2016, your credit union can become a hub for local merchants, members, and consumers, looking to purchase pizza without cash, check, or credit/debit cards! The decline of traditional deposits and transactions doesn’t have to be the demise of your institution. With the right technological and business strategy, today’s digital transformations of money movement can become renewed opportunity for your credit union to reclaim its position as a trusted epicenter of local (digital) commerce.
We have the tools… you have the trust (of your membership and community) … let’s tackle the challenge of keeping you plugged into the future of money as part of your core business and technology strategy!
Jon Ungerland | COO/Founder
Jon Ungerland believes the core philosophy underlying credit unions is the plausible and sustainable model for preserving healthy financial institutions and promoting financially dignified and strong communities in the 21st Century. Mr. Ungerland is committed to vigorously exploring philosophical principles and technological concepts surrounding the privileged position credit unions occupy as centralized, trusted, community financial institutions in an era of disruptive ‘innovation’ and rapid technological transformation. As an avid technologist he has worked to immerse himself in the technologies that impact credit unions and their members. Jon is an Ivy League intellect devoted to developing methodical, data-driven solutions to address any situation and has cultivated a team that specializes in journeying with credit unions to actualize their technological, operational, and strategic goals.