Brian Armstrong, Coinbase CEO (Source: Bloomberg)

How do we get one billion people using crypto and make it a “substantial portion of GDP”?

The answer lies in onboarding the world to crypto without them ever knowing. By integrating crypto products into current channels, and abstracting away complexity, people can realize the benefits of crypto without realizing they are using it.

This is similar to how Apple Card works. You don’t really have an Apple Card—there’s no such thing as an Apple bank account—you have a Goldman Sachs account. People can realize the benefits of banking with Goldman Sachs without knowing it.

Here are five ways more and more people are using crypto without realizing it, and how we’re already on the path to that one billion.

As more and more fintechs, begin integrating crypto into their product offering, they will realize that crypto can be a good method of transferring value.

Currently, people must wait for 1-3 days to send a Fedwire or ACH transaction. It is easy to see a scenario where instead of using these traditional payment rails, fintech may choose to use blockchains to transfer money. The introduction of stablecoins ensures that the money will retain its value in transit, and new scaling solutions like L2s or subnets ensure costs are kept low.

However, to the end user initiating the payment, it will look like they are sending a payment like they always do. Unbeknownst to them, their payment was sent to the payee using a blockchain. Or maybe a combination of blockchain and traditional payment rails.

On both ends, the payor and payee will not know crypto is used; all they’ll see is their regular currency. But the process is streamlined by using crypto payments. These payments can be instant and cheap, meaning that people remitting money back home will see more of their money reach their families and reach them much quicker.

More to come on this in the future.

The other opportunity for crypto investments is asset tokenization.

Tokenization is the process of representing digital or real-world assets, as a token that lives on a blockchain. Tokenization is used to increase the transferability of assets; increasing speed, reducing cost and unlocking liquidity.

These tokenized assets can be anything. They can be tokenized versions of traditional financial investments. For instance, private equity group KKR tokenized their Health Care Strategic Growth Fund on Avalanche. A primary benefit of this is that it lowers investment minimums. Whereas before, you would need millions of dollars to invest in such a fund, tokenization pulls that minimum to $100,000.

Tokenization is growing incredibly fast. Finoa predicts the tokenized market volume could be as high as $24 trillion by 2027. Boston Consulting Group puts the opportunity at $16.1 trillion by 2030. Asset markets like IntainMARKETS, are being created to manage and trade tokenized assets, such as securities, at up to 100bps fewer transaction costs.

Big banks are also getting involved:

• Goldman Sachs has recently released its own digital assets platform to make investing easier for a more significant percentage of people.
• J.P. Morgan released Onyx in 2020 as a digital asset exchange.
• HSBC is hiring a global product manager for digital assets to build its own platform.

With these technologies, more people can invest and take advantage of growth only previously available to the highest-level investors.

(source: finoa.io)

Then there are the more interesting tokenized assets: houses, cars, art, watches. You can buy a token in all of them and take advantage of their value growth. Of course, you can’t hang the Picasso on your wall but you will own a part of it and can take advantage of its upside.

This is not investment advice.

Reward points are, for the most part, pointless. You might get a free basic coffee once in a while, but the schemes are a marketing ploy.

Starbucks Odyssey is a bit different. Instead of points, Starbucks uses ‘Stamps’ to reward customers’ loyalty. People can earn stamps by buying coffee or by ‘playing interactive games or taking on fun challenges to deepen their knowledge of coffee’. The more Stamps you collect, the more cool things you can do; go to Starbucks events, buy merchandise, get access to collaborations, and even take a trip to a coffee farm.

The unique angle is that these ‘Stamps’ are NFTs on the Polygon blockchain. Like all NFTs, Stamps can be bought, sold, and transferred with others in the Polygon ecosystem. If one member is one Stamp shy of that Costa Rican coffee farm trip, they don’t have to jump through Starbucks’ ‘challenges of coffee’ hoops, instead, they can just buy their missing Stamp on an NFT marketplace.

NFTs can be used as gift cards or vouchers. The transferability of NFTs means that if you receive an NFT gift card for a brand you don’t like, you can sell it. Again, they can be sold on an NFT marketplace without the user needing to understand the technical underpinnings. You won’t need to go to OpenSea to sell your Starbucks Stamps—you can do that from your app. Many users won’t even have to know they own NFTs—they just have Stamps.

Likewise, ERC-20 tokens can become a new version of reward points or store credit. Tradable with others on decentralized exchanges. What value will these reward points command? The market will decide that but if you can buy $100 worth of product for 100 tokens you can infer that these points definitely have a tangible value. They can be issued by the company giving the reward, so the value stays within their ecosystem but can be exchanged more easily by users.

The NFT subreddit is one of the worst places on the internet. Full of scams and hate for NFTs. So Reddit being the launch platform for one of the most successful NFT projects to date is interesting.

That’s what’s happened with Reddit’s Collectible Avatars. Every Reddit user has a regular avatar, a version of Snoo, the Reddit alien mascot. Collectible Avatars are NFT-versions of Snoo available to Reddit users either through airdrops, having high ‘Karma’ on the platform, or by buying them in the Collectible Avatars Shop.

(Meme Regime #464389 on polygon)

As of January 2023, there are over 6 million Collectible Avatar holders, according to Dune:

The main reason for the growth is the ease of adoption.

Reddit users did not know they were getting an NFT. Reddit users did not know a wallet was set up on their behalf. Reddit users did not know that all of the complexities of crypto like gas, passphrase management, were abstracted away from them by Reddit.

For the millions of users on Reddit, they were simply getting a cool new digital avatar to show off to friends, unknowingly becoming first-time NFT owners overnight.

The reason why Starbucks and Reddit succeeded is they focused on creating great experiences first, crypto tokens second. Both brands successfully onboarded millions of new crypto users without them ever knowing.

If you have a run-of-the-mill savings account, your yield is at the mercy of the interest rates set by central banks. The best savings rate currently is about 4%.

Thanks to Defi (decentralized finance), there are many new ways to generate yield. In some places, you can double the yield that banks provide.

You can earn yield from digital assets in a number of ways:

1. Yield from lending protocols such as Aave, where you lend digital assets (stable and non-stable) to borrowers. The yield is determined by the demand for the lent assets.
2. Yield from validating blockchains certain erc20 tokens (Ethereum, Avalanche) can be ‘staked’ to earn rewards in return for validating the blockchain.
3. Yield from providing liquidity to protocols like Uniswap. LPs (liquidity providers) deposit assets in pools to facilitate trading. In return, LPs receive trade fees based on the amount of liquidity they have deposited. Uniswap pays LPs 0.3% on each trade and has paid out over $40 million to LPs in the last 30 days.

By July 2022, these yield options had almost $50 billion combined in total value locked (TVL):

(source: coinchange.io)

In the future, it is likely that a portion (or all) of the yield provided from a ‘savings account’ will have been generated using digital assets. To the end user, however, it just looks like a high APR.

People don’t care about whether something is crypto or not. They care about good experiences. If the experience is cheaper, faster, more engaging, a person is more likely to use it.

If we can get 1 billion people involved with crypto, then 1 billion people’s lives will be better. Either they’ll be able to do something cheaper, like transfer money or invest, or they get more value from what they are already doing, like investing, drinking coffee, or arguing in r/politics.

Either way, users won’t have to actively seek out the better crypto solution. As financial institutions and companies come to understand the benefits of digital assets and crypto for themselves, they are wrapping these into their traditional offerings. Stop focusing on crypto and start focusing on creating great products.

Layer2 Financial is a Crypto as a Service infrastructure that makes it easy for fintechs, banks, and neobanks to launch fully compliant crypto products, in a matter of days. Layer2 provides seamless access to compliant custody, trading, payments, fiat ramps, and yield; all through one user-friendly API. Click here to learn more.