This morning I read a post on X from a crypto-maxi who tried making the argument that USD payments on crypto rails are undesirable and against the ethos of crypto. Crypto, this person contends, was created to unshackle us from fiat and we shouldn't be succumbing to the temptation of allowing centralized chokepoints into our ecosystems.

I'm sympathetic to this viewpoint. I've made several posts on X outlining this viewpoint in a fair bit of detail.

I like to think that my approach on this issue is more pragmatic than idealistic. I view payments on crypto rails as revolutionary, desirable and one with perfect PMF, with a simple caveat that the unit of account be fiat and not pure cryptocurrencies.

To see why, let's contrast two possible paths towards mass adoption of payments on crypto rails.

Path 1 - On pure crypto rails (e.g. KIN/Code, Lightning, Superfluid, Sphere and their pure-crypto kin): In a bull market, prices of the underlying protocols rise dramatically. This tends to bring disproportionate attention to individual protocols. People (non-native crypto users) buy tokens corresponding to these protocols in the hope of riding the wave and dabble with these protocols for payments. When prices decline, as they surely do, these people either leave more disillusioned than they previously were, or at best, are indifferent to the protocol. What's worse, people realize that those small payments that they were making when the price was rising, are now capital gains tax reportable events OR that they can't claim capital losses beyond a $3000 limit.

I have a few posts that are worth going through in detail if you don't believe me.

Now let's consider the alternate path towards adoption.

Path 2 - On crypto rails, but with stablecoins as the unit of account: Unbothered by volatility (or tax reporting requirements) and supported by regulations, people begin using it as a genuine replacement for USD/fiat payments, begin saving and earning interest in their wallets, occasionally move over some money into BTC/ETH/SOL/other protocol as an investment or for speculation. The UX is far superior to their existing banking UX and they can actually spend their stables without worrying about price depreciation. Corporate spending doesn't need special approval since this is a 1-1 replacement for USD payments.

Which path do you think results in a long term adoption that genuinely grows users and keeps them in the system? My contention is that it will be path 2. It is far less disruptive to peoples ideas on how money should function as a medium of exchange and a unit of account. It also has the advantage of being a Trojan Horse for widespread crypto adoption and increasing the amount of fiat liquidity in the system.

Stablecoin adoption for payments and commerce will be crypto's gateway drug. It will result in crypto intertwining itself with the existing financial system and bringing crypto mainstream. I've also made the case that the bots will be banked using stablecoins-on-crypto-rails.

Before ending this post, I'd like you to linger a bit more on the motivations of a person insisting on pure crypto rails as being desirable for payments. Such a person could have genuinely altruistic motivations and may be in crypto for the revolution. It's possible. Such people desire to replace the system root and stem. I'd like to believe in the purity of their motivations, but history has never had an instance of a revolution with benign side effects.

Alternately, people with crypto 'bags' invested in particular protocols will tend to benefit disproportionately in the short term if "adoption" in the hot phases indeed takes off.

I don't want to make the case that the quoted person belongs in one camp versus the other. But hopefully, this post has gone a bit further in convincing you that stablecoin adoption is a less disruptive way to introduce crypto to the masses.

Thanks for reading, and here's wishing you a Happy New Year to come!