Fast, Fluid, Frictionless Payments Are the Future

But what does it take for a technology to really break through? This article is part of CoinDesk's Payments Week.

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Updated Sep 19, 2023 at 4:03 p.m. UTC
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How does it go from something only a few people use to something everyone uses without even thinking about it? For over a decade people have wondered whether crypto was on the brink of a major breakout into the mainstream. Crypto pundits predicted it would soon be everywhere and easy to use. But we haven't gotten there yet. Time and again, the pundits and prognosticators told us this was crypto's defining moment but it never really materialized. We're still just trading currencies in an endless loop and flipping some JPEGs.

So what will it take to really rocket crypto to the next level?

Time and evolution.

This piece is part of CoinDesk's Payments Week. Dan Jeffries is an author, futurist, systems architect and thinker.

For a technology to really hit the big time, it has got to evolve. Right now, we're still in the early adopter phase of crypto. It's hard to acquire, hard to use for most non-tech folks and it's lacking a whole bunch of features.

To get to the next level a technology has to offer all the features of the old version of the tech, in this case analog-fiat money, and then surge forward to offer new features the old tech simply can't match.

Take something like the shift of film from analog to digital. In the early days of digital cameras, analog film still had massive advantages. It was higher resolution with much better color fidelity. Analog cameras took pictures instantly, while early digital cameras had a slight delay. You pushed the button and waited, hoping your subject didn't move and leave you with a blurry mess. Forget about photographing sports or dancing in the early days. It just wouldn't work.

But, over time, digital technology got better and better. The chips got smaller and faster. The resolution got higher and higher. Digital cameras took pictures instantly. Suddenly digital tech had all the power of analog tech. But that wasn't good enough. Digital film matched the old technology's features but didn't offer a truly compelling reason to switch for most people.

The inflection point in a new technology's evolution comes when it delivers brand new features that the old tech can never match. That happened when digital cameras got so good that you didn't even need a big bulky, special purpose camera anymore. Miniaturization took hold and companies could suddenly put a lightning fast camera into another new technology: a smart phone.

Suddenly, people had a high definition picture taker in their pocket. The software bundled with it let them edit photos on the fly and zip them around the world on a global information network. They could take tens of thousands of photos and send them to friends and family and post them online. You couldn't do any of that with your bulky old film camera. And in short order analog film was consigned to the scrap heap of history and Kodak was bankrupt after 100 years of total dominance. Kodak even invented digital photography in the 1970s but failed to see the significance of the invention.

Fast forward to our Instagram- and TikTok-saturated world of today and it feels like the age of analog film was a million years ago, not a few decades ago. That's how fast a new technology can trounce an old technology once it hits that magical inflection point of cutting edge new features.

For crypto payments to really take off, we'll need a similar evolution that mirrors the evolution of digital film.

What Will It Take for Crypto to Really Boom?

First we have to match the old features of fiat. Global scale. Ubiquity. Speed. Easy exchange. Stability.

We've made good progress with new wave crypto projects like Solana that can scale to 65,000 transactions per second. That matches Visa's (V) scale and blows it away when it comes to pricing. The fees on the Solana network are tiny, averaging just $0.00025 per transaction. Because Visa scalps 2%-3% of the top of every transaction, eventually they won't be able to compete with a fast, fluid payment system where the transaction fees are utterly miniscule.

But it's not good enough. We've started to match the old technology but we haven't given people a compelling reason to switch. There's nothing new here just yet. So what will it take to get us to the next level?

The catalyst for digital currencies might be something totally unexpected that's nearly impossible to see now. Maybe it will take a mashup with another developing technology like artificial intelligence (AI), in a way we won't see until it hits us right in the face. But there are some candidates that may make fast and fluid future payment systems a reality.

One potential trend to watch is the decline of the advertising empire and the surveillance economy that powers it. Everywhere people are getting fed up with ads that stalk them wherever they go. Governments are threatening to ban targeted advertising. Apple (AAPL) recently crushed advertisers’ ability to track people on iPhones and Facebook's (FB) revenue crumbled in the quarter that followed. Facebook (now Meta), Google (GOOG) and other digital behemoths own their power to highly targeted ads and, if that power gets ripped away, their revenue collapses along with it.

If advertising revenue falls apart tech firms will need another way to make money. One powerful possibility for replacing that revenue is microtransactions.

Think of it as "subscription everything."

You used to buy software and now you just rent it. The same goes for movies and music. Most people don't buy DVDs anymore and own a movie. They rent it for $3 or watch it as part of their subscription bundle on Netflix, Disney+ or Hulu or 1000 other streaming services.

Tomorrow we might have a subscription for everything from our car, to our bike, to our PlayStation to the content we lap up on the web. The web is the key. A pay-as-you-go model could swiftly replace the ad model. We saw that as IT shifted from personal data centers to the cloud. Suddenly, leasing beat out ownership. It's one of the reasons Facebook and PayPal (PYPL) and others tried to make libra before the U.S. government crushed them. They saw the end of their ad revenue coming. They figured if they had a universal currency they could control, with payments zipping around over Whatsapp and streaming to Instagram influencers hawking beauty products and energy drinks, they'd have an alternative river of revenue. It's the same reason Facebook changed its name to Meta and why it's trying to carve out a foothold in the mythical metaverse.

Facebook may have failed at launching libra but someone else will create the same system. They'll figure out how to slip it under the radar of raging industry critics like Sen. Elizabeth Warren (D-Mass.). They'll slip it in the back door without calling attention. We won't even realize they've built a fast and fluid payment system until we're all using it. Maybe we already have it with the Lightning network and it just needs to evolve? Or maybe it’s something else entirely, still on the drawing board or incubated in a lab somewhere, but it’s coming. And suddenly we'll have a fast and flexible digital currency that's easy to send and receive for virtually any product on Earth. In turn, it will open brand new avenues of commerce. Instead of having the ugly subscription models, we have today it will get much simpler.

Take something like Spotify. You won't even have to sign up to a service like that. You'll just have a digital ID and a wallet. Your ID will exchange with a site transparently and invisibly and you'll start listening to music instantly. No more paywall and setting up another password you'll forget. It won't be a flat fee either. It will vary based on how much you use. Maybe one month you barely listen to Spotify and you end up paying the equivalent of $3 in crypto but the next month you go on a road trip and throw a raging house party and you wrack up $15 in payments.

As the advertising empire falls, we'll likely have this frictionless kind of pay-as-we-go model for websites and apps. Instead of joining a website and giving them your information, you'll just go to a website, read a few articles over the course of the month and your digital wallet will stream payments for those articles. Sometimes a site won't need any information at all and you can just stream cash and read away without any ID exchange.

Some services will almost certainly demand a know-your-customer (KYC)-style mandate from the government, but ID exchange will still be automated. You'll already have done your KYC and it will record in your wallet and disappear into the background. The protocol will exchange your info and you won't have a thousand passwords for a thousand different sites anymore.

Lightning strike (Felix Mittermeier/Unsplash)
Lightning strike (Felix Mittermeier/Unsplash)

You won't have to authorize the payment either because you'll have set a monthly entertainment threshold right in your wallet heuristics and as long as the payments don't go over you'll just start reading. If you get close to your limit it will warn you to increase it or you'll run out of entertainment budget until next month. That will make reading and listening to music and watching TV and movies frictionless, unlike now, where you have to bust out a credit card, fill in a bunch of information and join each site with a fresh username and password.

Today's paywalls mean you usually won't bother reading when you hit a paywall. It's just too much hassle. Unless a site delivers incredibly good content, why wouldn't you just move on and read something else? Usually the only sites that get a subscription today are sites you really, really like. It took me a few years of missing The Economist in print to get a subscription and that was after I'd clicked on about 30 different social media shared stories from The Economist that I wanted to read and just never bothered because the barrier to subscription was too high.

But tomorrow paying for things invisibly with little to no friction may just be the catalyst that vaults crypto into the mainstream.

There's only one big problem.

There are powerful forces that don't want it to happen at all.

Not Everyone Hates the Middleman

Crypto is unique and it inspires fear and rage in its opponents. It faces fierce headwinds from forces that want to crush and cripple its evolution by any means necessary.

When it comes to a technology like digital cameras, there aren't a lot of people trying to strangle the development of the technology in its crib. It developed smoothly along its natural evolutionary curve. Crypto is different. It's a threat to a lot of powerful entities, most notably many governments and that could cripple the frictionless payment dream if we're not careful. Frictionless payments are all about cutting out the middleman and making the movement of money easy.

Of course, you may want to cut out the middleman but governments love a middleman.

One person's biggest benefit is another person's darkest fear. Governments love an intermediary because intermediaries are choke points. Put pressure on that choke point and you control the entire system without having to control each node individually. That's the primary function of government. Control. It makes the rules and makes sure everyone is playing by the rules.

Controlling the payment network is a powerful weapon, as we've seen with Russia's violent assault on Ukraine. Within days of the start of the war, the entire world had cut Russia off from the SWIFT network, and seized and froze Russia assets worldwide. The sanctions had a devastating impact almost immediately.

The sanctions went into effect over the weekend and by Monday, when the markets opened, the ruble had collapsed. The Russian central bank could do nothing to stop it. Usually a central bank steps in to buy up a currency that's falling, stabilizing it but with the central bank's gold, silver and foreign currency assets but with all those secondary assets frozen in banks outside of their control they could do nothing but watch the ruble burn.

It's new-wave economic warfare for a hyper-connected world.

As news of sanctions broke, crypto enthusiasts joyfully jumped into the fray saying "this is what crypto is built for, nobody can cut off crypto payments." It was exactly the wrong message at the wrong time. When the whole world unites against a hideous crime and even historically neutral Switzerland joined the sanction efforts, the last message you want to be shouting to the rafters is that your new technology can make sanctions impossible.

Like clockwork, Sen. Warren sent a letter to the Treasury department warning that Russia may use crypto to avoid sanctions.

At the heart of that message is fear of a loss of control. The more payments become frictionless and the more choke points disappear the more powerful forces want to ram payments back through those choke points. A truly distributed system is incredibly hard to control because you have to attack each individual node rather than simply blockading the choke points like an army controlling the Khyber Pass.

Decentralized crypto faces existential pressure that most technologies just don't face. That pressure will continue to shape crypto as it continues to develop over the coming years.

The question is whose dream will win?

Will we have fast, fluid, frictionless payments flying around the world at the speed of light? Or will we have rigid choke points controlling the money at every step, forcing us to authenticate at every step, while it tracks from cradle to grave?

The vision of simple, easy payments everywhere is no pipe dream. It would level up commerce exponentially, making money surge faster than a trillion bullet trains around the world. Ditching plastic cards and doing away with dedicated terminals will make doing business much, much easier. Take away the middleman and you've got a system anyone can opt into with ease, even the unbanked and those who can’t access the system now. No card. No dumb black box to swipe it in. Just a silent exchange between your wallet and the app or site, giving you exactly what you want, when you want it.

But to do that it has got to overcome the people who want to keep the middle man at all costs and who will keep trying to crush crypto’s neck under dark black boots.

Time will tell who will win. In the long run, we'll have digital currencies no matter what. The real question is will they be central bank digital currencies (CBDC), controlled by nation-states, panopticons that peer into every aspect of our lives. Or will they be decentralized currencies controlled by heuristics and consensus building and a distributed network of zero trust serve us tirelessly every single second of every single day?

Then again, maybe it won't be one or the other.

As Forrest Gump once said: "I think maybe it's both. Maybe both is happening at the same time."

More from Payments Week:

Blockchains offer unique advantages, but these must be combined with a user experience that feels similar to the one consumers know today, writes Senior Vice President Jose Fernandez da Ponte.

Financial censorship has gone from an abstract idea to a harsh reality for Russians who suddenly found themselves unbanked by the West and their own government.

Down The Silk Road: Where Crypto Has Always Been Used for Payments


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CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Dan  Jeffries

Daniel Jeffries is an author, engineer, blogger, podcaster, public speaker and Managing Director of the rapidly growing AI Infrastructure Alliance.

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