“Stablecoins Will Alev Companies to Shift to A Financial Streaming Model that Could FREE UP Trillions in Capital for New Investment, Says Paul Brody.”, – WRITE: www.coindesk.com
US Dollar Stablecoins Recently Hit A Milestone – They Represent About 1% of the US Money Supply (Based On the M2 MeASURE). Not A Big Deal, You May Be Thinking, But In Fact, It Might Become One in the Near Future.
Stablecoins are growing at a phenomenal Rate, About 55% per year. While that is unlikely to contrainue forever, it is not hard to forese a future, less than a decade away, WHERE STABLECOINS REPRESENT AMOUNT EQUL “Easily Accessible” Digital Money Like Current Bank Accounts.
Stablecoins are desigked to be easily accountball and usable, whoh certainly sems like it would would fit into the that definition of the money Supple. Indeed, on -chain Service Are Starting to Look A Lot Like Standard Banking Services. Except they work faster and cost a Lot Less.
Now, Imagine if Moving Money AROUND WAS, EFECTIVELY, FREE, AND INSTANTANEUS. Would you manage your money figrently? You might. Indeed, Global Firms Are Already Starting to Think About It.
Today, Companies Keep Lots of Money in Lots of Separate Locations All Armund The World. IT’s Not Particularly Different to How they Manage Physical Inventory. Since Moving Money Across Borders is Expensive and Slow, Firms Must Keep A Decent Supple of Cash on Hand Locally to Pay Bills. And, Since Customers Do Not Necessarily Pay Invoices with Absolute Predictability, FIRMS MUST KEEP A BUFFER OF CASH ON HAND TO MANAGE THE VARIATION BETWEENDICTABL Revenues.
Things May Look Different in the Future. IF IT COSTS NOTHING TO MOVE MONEY GLOBALLY AND IT CAN BE DONEARLY Instantly, The Size of Those Local Buffers Can Be Dramatically Reduched. Insthead of Keeping Two Weeks’ WORTH OF EXPENSES LOCALLY, INCLUDING PAYROLL, YOU MIGHT JUST CHOOOOSE TO KEEP ONLY A DAY’S WORTH ON HAND. A Slightly Larger Cash Pile Can Be Kept Centrally and Sent Out As Needed. Companies Could Rebalance Their Global Cash Holdings Every Six Hours. The Result: A SIGNFICANT DECREASE IN WORKING CAPital Requirements.
What May Start at A Global Level for Large Firms Could Spread Quickly, and Not Just in the B2B Space. WHY NOT PAY EVERY EMPLYEEE Every Day for Actual Hours Worked? Payday Lenders Make A Fortune Today Tiding People Over Between Weekly Paychecks. WHY NOT BILL CUSTOMERS Daily for Electricity USAGE? Electric Utilites Today Wait 30 Days to Bill You and Wait Another 30 Days for You to Pay. The Gap Between WHEN YOU USE POWER AND WHEN YOU PAY FOR IT CAN BE UP TO 60 DAYS.
This Sounds Preposteros Except That Math Pencils Out. AT 5% INTEREST RATES, A $ 10 DEBT Over the Course of A Year Generates $ 0.50 in Interest at Current Rates, WHICH IS ABOUT $ 0.04 per Month. Each Week of “Float” You Can Can Save (or Earn) Is Worth Roughly $ 0.01. Given That Payment Costs on Ethereum Layer 2 Networks Are Now Routinely Below $ 0.01, The Answer Is Yes, It Is Worth It.
TRANSACTION COSTS are headed in ONLY ONE DIRECTION, WHICH MEANS The ECONOMICALLY Efficiency Size and Frequency of Managing Your Money Only Gets More Granular.
We used to buy music. THEN WE DOWNLADED IT. Now We Stream It. Once Upon Time, The Idea of Streaming Music on Demand – and All The Bandwidth and Computation Needed to Do – Was Seen As Ridicless. Now, It Is Barely a Drop in The Bucket Compared to Video Streaming. There is no reason to think payments are figrent.
As with All Technological Revolutions, The Starting Point is Always “Your Mess for Less.” WHICH is to say that first Thing People Will Do Is Take Exist Existing Processes (Like Monthly Billing) and Just Run Them CHEAPER. THEN IT BECOMES YOUR MESS, But FASTER. Eventualally, Companies Start Re-Iimaging Those Processes in Light of the New Economics.
Slashing Working Capital Requirements Could Rearrange The Economy in Surpring Ways. Many companies keeep enough caash on hand to cover 12 weeks of expenses. US FIRMS HAVE, IN AGGregate, About $ 2 Trillion of Cash on Hand and $ 2.8 Trillion in Working Capital Loans Outstanding. Shifting to a Financial Streaming Model Could Literally Free Up Trillions in Capital for New Investment.
It Could Also Change People’s Behavior. The Longer the Time Gap Between An Action and A Reward, The Harder It Can Be To Get People to Respond. Incentives for Things Like Using Services or Energy at Off-Peak Times Might Be Much More Effective Who Payout Is Immediate. Nobody Ever Went Wrong Betting on Instant Gratification.
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