Welcome to Yaka Stuff, our weekly newsletter that covers news, industry perspectives, and updates from the Hard Yaka ecosystem. Check out last week’s report here.
This week:
Real-time payments will be the default
This week in digital identity
Web3 v. the original decentralized web movement
Stuff happens
1. Real-time payments will be the default
This week we’re back with Simon Taylor, who’s published another monster fintech newsletter (via Jun).
Real-time payments will be the default, and the answer might be stablecoins:
Real-time is as inevitable as death and taxes. It might not happen tomorrow, but it will happen, and the consequences are massive.
The velocity of money is (as it sounds) a measure of how fast money is exchanged in a given economy. As a measure, it is also typically higher in growing economies and lowers in contracting economies. It can't be spent when money gets "stuck" in a 2-day delay.
Consumers, businesses, and the entire economy benefit when money is in real-time.
But real-time payments often mean real-time fraud losses.
When a consumer swipes, the payment feels real-time, but in reality, the money doesn't actually move until days later. The swipe fee (interchange) covers the risk of something going wrong.
Real-time payments like Zelle, Cash-app, and Faster Payments (U.K., Australia, Singapore, etc.) are push payments. When you press send, the money is gone, and there are currently little to no consumer protections.
Countless real-time rails are emerging (e.g., Pix in Brazil, FedNow, and even Canada's Interac are going real-time).
But support is still patchy, and consumer protection varies wildly by jurisdiction, limiting adoption (and economic potential).
This has to change, and Fintech infrastructure providers could be key in making that happen. Payments specialists, core banking providers, card issuer processors, account aggregators, compliance, risk, and regtech providers can lower risk for consumers and businesses in real time.
Why can't payments just work?
Not just domestically but anywhere.
This is the challenge and opportunity for Fintech infrastructure providers.
It will require a ton of integration, compliance work, and hard yards, but the demand is there.
(I also think Stablecoins as a global real-time rail could be very interesting if regulators don't nuke it first).
Greg found this snippet on point:
Moving down the stack (from a BaaS provider directly to an issuer-processor) may yield better unit economics if you have enough scale.
“I’ll say!”
Jun also highlighted Simon’s observation on BTC:
Speaking of looking cheap, is Bitcoin a risk asset or an inflation hedge? It’s happily trading sideways in USD terms but look at it vs. any other major currency or asset. It’s doing better than gold. It’s not crazy to say it is a better store of value than everything except the dollar right now.
Relevant:
FTX and Visa Partner to Permit Crypto Payments in 40 Countries
Stablecoins Add 'Novel Vulnerabilities' to Crypto, Financial Stability: NY Fed
Crypto Overhaul Fizzles in Congress, Leaving Industry and Investors in Limbo
Treasury’s Financial Stability Watchdog Warns Cryptocurrencies Could Threaten Safety of U.S. Economy
U.S. Treasury Bills Now Make Up More Than Half of Tether's Reserves
Rhode Island Wants To Make It Easier To Do Business Using Blockchain Technology
2. This week in digital identity
Ethiopia’s National Digital ID Prepares Foundation Ahead of Scale-Up
Government considers centralising digital ID verification on myGov in wake of Optus breach
Digital ID credentials come to the Apple Wallet, inform apps, but EU may cause friction
Stablecoin USDC Issuer Circle Launches Verit-based Institutional Digital Identity System
3. Web3 v. the original decentralized web movement
By now, everyone’s heard the term web3—even if they aren’t sure what it really means. For some, its most visible iteration are some really expensive NFTs, a less compelling proposition deep into crypto winter. On YouTube, creators are lambasted for hawking their latest crypto sponsor. Kim Kardashian was just ordered by the SEC to pay a $1.26 million fine for a pump and dump scam. People are tired of being exploited.
And earlier this year, Jack Dorsey and Marc Andreessen had a very public spat over web3’s promises. For Jack, the people who owned web2 now own web3. (Admittedly, some of those arguments ring true for Hard Yaka as well.)
Jack would later reveal his own approach to the decentralized internet: Web5.
But the original movement for a decentralized web started from more humble roots, started by Brewster Kahle. He’s the 61 year-old founder of the Internet Archive.
Here’s the Atlantic (via Greg):
In 2015, Kahle put out a call for a “decentralized web,” or a web that looked more like the one that early visionaries such as Tim Berners-Lee had imagined. “The way we code the web will determine the way we live online,” Kahle wrote at the time. “So we need to bake our values into our code. Freedom of expression needs to be baked into our code. Privacy should be baked into our code. Universal access to all knowledge.” Pivoting to a decentralized version of the web—evading massive platforms, sharing peer-to-peer—could enable much of this by giving ordinary people control of their own data and a broad range of options for publishing or accessing information. His manifesto instigated a movement called “DWeb,” which began with a star-studded summit, and has continued with annual retreats in California, which are referred to as “DWeb camp.”
…
The DWeb movement is interested in subverting this status quo through tools that would give individuals greater control over their online identities and information. “I’m trying to channel the confusion that you’re looking at me with right now,” Kahle told me, when I asked him to explain it. “How do I help other people understand what the heck is going on here?”
Some things would be really different for the average web user—she might no longer rely on Facebook or Google to verify her identity when logging in to various sites or be followed around by advertisements that know all about her. Other changes would ideally be unnoticeable to her. For instance, a decentralized version of The Atlantic’s website might look the same, but the underlying machinery would be quite different—it might be hosted on any number of independent servers owned by users around the world, rather than through a major provider controlled by a big tech company.
Web3, according to the Internet Archive’s series, has a narrower technical definition: It’s “the ‘blockchain-ification’ of the web, using blockchain technologies and cryptocurrencies to verify transactions, pay for services, and certify content such as NFTs.”
…
These decentralized technologies, it could be said, are focused on empowering individuals; “pump and dump” cryptocurrencies and NFT projects, perhaps less so. Sutton has been saddened by the conflation of the two ideas. “When I say I’m working on a crypto project or I’m working on the decentralized web, it sounds like I’m part of this movement to build a series of exploitative pyramid schemes,” they told me.
The common ground here is self determination. Like the first dotcom boom, there’s been a lot of overpomising and underdeliverying when it comes to web3. In a FOMO-induced frenzy, plenty of regular people came out worse than they started.
But the underlying principles behind the true original movement remain. It’s only the beginning.
Here’s Greg:
“Let’s go Brewster!”
Relevant
Via Greg—The Battle for the Soul of the Web
Coinbase 'Very Supportive' of Giving CFTC Exclusive Jurisdiction Over Bitcoin, Ethereum
Tech Companies are Gaming out Responses to the Texas Social Media Law