People might disagree with me here. Maybe, I don’t know. I want to be conscious that many people out there are already doing this.
I’m going to make some claims in this post. I want you to know that these are observations rather than cold hard facts.
I also want you to know that I am two things: a comms guy and not the smartest. I usually try to present facts, and not really state my opinions. This is because I believe I have no idea what I’m talking about, and I also change my mind on 73 different topics everyday. But, I feel compelled to write this for reasons unknown to me. So, here we go.
My observation: The Zcash ecosystem does not have enough economies for ZEC.
Let’s define an economy via the world’s most trusted resource, Wikipedia:
An economy consists of various markets, which are essentially a gathering of buyers and sellers.
We will use this as our definition. We will also use the Austrian model to define the proposed economy’s currency, ZEC. We all know ZEC can be a medium of exchange (MoE) and/or store of value (SoV), and we believe it has value, thus it is money.
So, an economy with a model for production and consumption, which involves us creating materials and being compensated for said materials in ZEC.
I’m going to do that annoying pivot thing. Before we look at ZEC, let’s look at three other examples briefly.
Ether
In Ethereum, people frequently use ether as a medium of exchange. What do they buy? NFTs.
An NFT is created by a person and someone buys it from that person. Then, they hold the NFT or resell it back into the economy. If they resell it, someone else buys the NFT, and the latest receives ether (hopefully making a profit). This process continues and said NFT circulates through the economy, with ether being the currency that drives its circulation.
But why are people using ether, a currency whose main purpose is to power the ethereum network, to buy stuff? Even when its fees are obnoxiously high at times?
A few things:
Ethereum, for whatever reason, is the most used chain for NFTs. Opensea, which only supported Ethereum during the NFT bull run, is the most popular platform. People in Ethereum also place a premium on ether and its value, making them want to receive Ether above all currencies. So the infrastructure drives people to use ether.
People buy NFTs, sometimes, with flipping them in mind. They bought a good, perceived that its value would go up relative to ether, and wanted to sell it for a higher price to another member of the economy who likely wanted to do the same thing.
This financial incentivization drove people to the economy, enticed them to join in, and obtain and use ether to support their participation. The economy of buying pictures with ether exploded.
So when we look at one of the Ethereum economies, they have the infrastructure, early adopters who drove the economy, and incentivized participants who joined to get their own piece of the pie.
I’m not saying this is good or bad, moral or immoral. It is what it is.
Bitcoin
Bitcoiners believe that bitcoin is the answer to our global economic problems. I am not smart enough to confirm whether it is or isn’t.
I have observed, however, that early Bitcoiners use their wealth to create economies that are driven by BTC. This, independent of what you think of bitcoin, is a relatively good thing.
Let’s focus on one of the Bitcoin cities to demonstrate this example. A few things:
A wealthy Bitcoiner, who believes that Bitcoin could be the financial engine that drives our economy, saw a city whose financial infrastructure was bad. They donated a large amount of bitcoin to this city to spark innovation and financial infrastructure development. This development placed bitcoin at the center of its new economy.
The city, whose population previously had no access to financial infrastructure, welcomed the development and decided that they might as well give bitcoin a shot. They were able to learn, use and jumpstart a local bitcoin economy.
This city, with the support of bitcoin donations, now runs its economy on bitcoin and its associated financial infrastructure. This economy continues to run, largely because the city is incentivized to keep bitcoin at the center of their economy. This incentivization could possibly stem from their desire to continue receiving outside support.
So when we look at this economy, they had early supporters who funded the development of financial infrastructure and a community who needed said infrastructure. The added incentivization drives this community to continue using bitcoin as its currency in said economy.
I’m not saying this is sustainable, simply an experiment, moral or immoral. Just an observation.
Monero
The incentivization model is a bit different here, but there is definitely a use case for Monero. The dark web.
Now, before I get yelled at, I will say that Monero has a lot of mainstream use cases and things like “Cakepay” allow you to use Monero in a lot of regular shoppes and restaurants. But, I digress. The dark web.
Things I’ve noticed about Monero and this specific use case.
People want to buy things that some people don’t want them to, anonymously. The sellers have products they want to distribute to consumers, and they want to sell these products without uncle Sam tracking them. Thus, they use Monero as their currency because they view it as permissionless and private.
This means buyers and sellers, in this economy, are incentivized to use the currency they view as the best option for private transactions. Early adopters of Monero likely introduced this option in said market, providing liquidity and accessibility for Monero.
Buyers and sellers who join the market later on, or who want to pivot away from Bitcoin (due to chain transparency), will now use Monero because it is already circulating in the economy, thus driving adoption, usage and cementing its place as the currency of choice in said economy.
This is more of a guess/observation I’ve had when listening to others talk about Monero and the dark web. It seems that there was a need in a specific market, Monero was introduced to fill that need via early adopters, and its liquidity and accessibility in that market grew, making it the currency of choice. Now, new market participants, at times, have to use Monero to buy products they want.
I’m not saying this is bad or good, moral or immoral. I’m just making an observation.
ZEC
I outline these examples to show three different scenarios where people use an alternative currency, to fiat, to buy things. In every example, users are incentivized to use the currency for some rhyme or reason. It may not be that the currency is easier to use than fiat (or even better), it’s due to the fact that the market (for whatever reason) dictates that people use it. Whether that is a natural progression for the market, or the market is influenced by outsiders, it’s clear to see (in my opinion) that market participants have a good enough reason to transact with a cryptocurrency.
Now, ZEC.
ZEC is accepted in some places. There are places where you can buy ZEC with third party apps. There are people who accept ZEC for their goods and services. And, there are people who like to be tipped in ZEC.
But, do any of these things classify as ZEC driving an economy where the users are truly incentivized to use it, outside of their own values and desire to do so?
I don’t believe so. I’m not sure if I’m right on this, but, I don’t believe there is currently a well-known market where ZEC is the preferred currency of choice. If ZEC is in fact, the best form of private MoE and SoV, then creating incentivized economies for ZEC should be a priority in driving its adoption.
If you agree with any sliver of that, read on.
The question is, how does one go about this?
I would say there are a few options available. Let’s focus on two.
One, provide economic infrastructure in an economy where current infrastructure has failed them (likely fiat). I imagine an effort where well-to-do ZEC holders (or a grant) make funds available, and community members are hired to implement the program in a specific geo. A lot of things need to be considered when doing this, the most important being that the community participating is taken care of in the event that said program does bring the results that people were looking for.
The other would be creating an online product or service where ZEC is the engine for purchasing the offering. This offering would need to be substantially better than current products and services, in the market, that accept other cryptocurrencies for payments. I think this is more reasonable.
People in the Zcash community could observe other projects (in adjacent crypto ecosystems) that have some traction, and then attempt to make a substantially better product that can be purchased with ZEC. After the products are marketed and showcased correctly, you could assume people would be enthusiastic about purchasing them. They would then use ZEC as the currency to do so.
One example of this is the Cypherpunk Zero NFT project. The idea for an NFT was spun up, marketing materials were dripped out, and people thought the NFTs were really cool, thus they wanted one. People believed the product (NFTs) was better than other products in the market.
Since the product was better, people were willing to go through the process of sending a shielded memo to a Zcash address to get the NFT. This idea drove Zcash transactions, and showcased a product where ZEC was instrumental in the transaction.
I view this as an opportunity for the Zcash community to develop business and products that are available for purchase through ZEC.
Yes, CPZs can now be bought with ether, but to get the first go-round, you needed to use ZEC.
To Finish
I’d love to see more instances where we use ZEC to transact with each other, not because we think it’s the right thing to do, but because we have a tangible reason to do so.
To say it one more time, these are all opinions and I could be wrong.