Payments: Still The Killer Crypto App

Permission-less peer to peer exchange. It is the core utility of a decentralized ledger. What PayPal is currently doing to Rippaverse Comics is just the latest example of TradFi's impending doom.

Eric July is a fellow content creator who I’ve enjoyed watching for a while. He goes by YoungRippa59 on YouTube. He’s a musician, a writer, a vlog host; and now a comic book company builder as well. Eric is a passionate individual. He’s very open about his political thought process. He’s had a problem with the injection of identity politics into the established comic book companies; Marvel and DC. As a result of that, he decided to start his own brand called Rippaverse Comics.

ISOM #1 is the first book under the new brand. The company is currently taking pre-orders for that book and for a lot of merch related to the comic. The team’s original goal for the ISOM #1 campaign was $100,000. As of writing, they’re at $3.2 million spread out over 37 thousand buyers. It’s an amazing success story so far and I think Rippaverse Comics is well on it’s way. There’s just one problem… about a third of Rippa’s pre-order sales came through PayPal. And PayPal is blocking him from withdrawing the money.

It’s (probably) not about his politics or that he’s now a competitor to far more established peers; this one seems to be more of a policy related error because of PayPal’s flagging protocols. After all, Rippaverse Comics is a new company that just generated a very large flow of funds. Much of it from international accounts. I get it. It looks a certain way. But, Rippaverse Comics is clearly not a scam. There’s real IP. There is a team involved that is building a new product. Eric July has explained all of this to PayPal and his fans have helped put the pressure on PayPal to release the funds. July shared an update this week; according to Rippa, PayPal has everything they’ve asked for. Yet the funds are still locked and it seems to be getting a bit ugly judging by a recent tweet:

Eric July @EricDJuly

We are pausing @PayPal purchases at @TheRippaverse. This does NOT impact your order if you already paid using paypal. The other processors are still available and we will look into other convenient options for international customers. Lawyers involved.

I have no doubt that this will eventually get sorted out. We can all guess as to why PayPal is still giving him grief even though everything that has been requested on their end has apparently been provided. July previously wondered if it has something to do with PayPal loaning the funds out already and not actually having it. Could be. Ultimately, it probably doesn’t matter. The Rippaverse Comics team needs the money from the ISOM #1 campaign to fulfill the orders for customers and one of the company’s largest payment processors by sales volume won’t give the money to them yet.

To anyone who has been reading this blog for longer than a couple months, you likely know where I personally stand on PayPal. I ended my decade-long relationship with the company because of what it did to the FLCCC. It was insane to me that PayPal would freeze the funds of a non-profit run by genuine doctors during the worst of COVID while also allowing a very obvious scam with a checkered history to continue using the platform. It is what it is. PayPal sucks. The company continues to prove it everyday. If you can avoid it, you shouldn’t give PayPal your business.

The Killer App

This is why so many people fail to understand why cryptocurrency isn’t going anywhere. I obviously believe decentralized blockchain ledgers will ultimately have quite a bit of utility 15-20 years from now. But the biggest, most important TAM (total addressable market) that we have from decentralized blockchain ledgers is still peer to peer payments. It is the killer app. And we can use it right now.

Few understand this.

The people who work typical 9 to 5 jobs for established employers probably have a harder time grasping the importance of payment processing. For them, the money comes from the direct deposit straight to their bank, right on schedule. No problem. But if you run a small business, or if you monetize content, or if run a non-profit, you more than likely understand the importance of payment processing middlemen. You more than likely understand how much value the Visas and PayPals of the world extract from their users simply for facilitating non-cash transactions. That value capture is why there are still small businesses to this day that either don’t accept credit cards or that charge the customer a premium for using plastic.

As society is currently constructed, these payment middlemen are immensely important. They are also completely unnecessary. Both can be true. Almost everyone is still using them, but we already have a better option sitting right in front of us. It’s crypto and it’s obvious at this point. As I see it, there are three main critiques from those who have put in even a slight amount of effort to understand crypto broadly yet still oppose the adoption:

1. The currencies are too volatile to be used in payments

2. The networks can’t scale

3. The mining is bad for the environment

And no, the “only criminals use it” argument does not hold up in reality. Sorry. Do some research if you actually think that.

Rebutting the genuine arguments

Volatility: mostly true for the native assets. However, it’s incredibly easy to send a stablecoin like USDC to another user at almost no cost over a network like Polygon (MATIC-USD). USDC is probably the safest stablecoin. It isn’t algorithmic like the failed Terra stablecoin project. In the last two years, USDC has only ended a day lower than 0.999 one time. It was 0.998 on May 19th, 2021.

And despite all of the wreckage in the crypto market over the last few months, USDC is still right near it’s all time high of $55.9 billion in liquidity. In fact, when things were getting really bad in the crypto market in May, there was a big rush to USDC. Stablecoins like USDC make peer to peer exchange for real goods and services possible over crypto rails with much less volatility concern.

Scaling: mostly true for base layer 1 chains. Though there are some L1s, like Solana (SOL-USD), that claim a TPS capacity that can reach tens of thousands of transactions per second. Visa claims 65k capacity. That disparity isn’t as wide as one might think and the proliferation of layer 2 scaling solutions make Ethereum far more viable as well. And in case you’re curious, USDC lives on Ethereum’s layer 2 chains, on Avalanche (AVAX-USD), on Solana (SOL-USD), and on Stellar (XLM-USD).

The point is, it is incredibly easy at this point to use crypto rails to swap a highly stable currency on a peer to peer basis. The merchants just have to learn this and start accepting it. That’s a process that will take time, but it is one that is inevitable because of the middleman value capture of the current system.

Ask a small business owner using PayPal how the SWIFT system works and they probably won’t be able to tell you. It doesn’t matter to them. Ask that same owner how Ethereum works and they won’t be able to tell you. That also doesn’t matter. What matters is how long it takes the developers working on all of these projects to make the user interface as simple as using Venmo. When that happens, the merchants will be happy to take back that processing fee that they’re currently paying Visa and Mastercard. Book it.

Environment: this is probably going to be the largest hurdle for Proof of Work (PoW) chains like Bitcoin. For Proof of Stake chains (PoS), it is much less of a concern. But even still, in defense of PoW, there is an immense amount of energy that is used to operate all of the bank branches and ATMs in the world. There is an immense amount of energy that used to operate the data centers that power the internet and all of the businesses that operate on top of it. Some of this energy is used productively, a lot of it is not. Quantifying that is likely impossible, but if you’ve been on any social media website in the last 10 years, you know it’s true.

Furthermore, some of the energy that is used to mine Bitcoin is actually from gas that would have been wasted before the crypto mining application was integrated. This is energy that wouldn’t have been usable before that now has been repurposed from pure waste to Bitcoin network security. Sound crazy? It isn’t. ExxonMobil (XOM) is mining Bitcoin through natural gas that would have been previously lost to flaring. Overall, environmental concerns are likely not applicable to PoS chains. For PoW chains, it’s not nearly as straightforward as “Bitcoin = bad.”

Summary

As participants in a society, we have to decide how bad we want to take control back. This assumption that all value transfer must have permission from some sort of governing body or custodial parent is a very new phenomenon in the human experience. It does not need to continue down the path that it is on.

Paradoxically, when you understand the value of cash in hand over cash deposits, you can start to grasp why cryptocurrencies are actually a very good thing. If all of the USD payments that Rippaverse Comics collected through PayPal were instead collected as USDC via Polygon or Solana; Eric July would already have his money and he’d get to keep more of it because his customers would be paying the miniscule transaction fees, not him. This is doable today. How bad do we want it?