Goods & Services On/Off Ramps

by Proof of Steve

In 2020 we had DeFi Summer, and in 2021 we saw NFTs become arguably crypto’s first consumer facing product success story. Across CT, influencers and investors alike are asking, “What’s next? What is going to be the big thing in 2022?”

At TripsTrade we have our own theory for what the next big move in crypto will be, “Goods and Services On/Off Ramps”. Phrased alternatively this is the ability to buy or sell Goods and Services with crypto, without ever first transferring crypto into fiat. This prediction should not be taken as some sort of assertion that the ability to purchase goods and services directly with crypto does not currently exist. Anyone familiar with Bitpay can tell you it does.

However, nearly every merchant who currently accepts crypto for payment for goods/services is doing so with the express intent of cashing out some or all of the crypto they receive for payment. Systems like Bitpay do not represent an elimination of the need to “cash out” to fiat, but rather a transferal of the responsibility to do so from the customer to the merchant. It’s a step in the right direction, but to be clear our prediction is that the next big “thing” will be a wave of applications slowly reducing (and eventually eliminating) the need for merchant or customer to ever cash out.

Later in this article we will cover:

• Why is this important?
• Why do we think now of all times is when this trend towards “Hypercryptoization” will finally happen?
• How do we think this will play out?
• How do we think TripsTrade can play an important role in this trend?

However, before that let’s first examine on a very basic level how exchanges of goods and services work in reference to the idea of “money”.

Before gold coins or fiat, before the idea of “money” in general, trade was done on a barter basis. You had a good or service I wanted, I had one you wanted, and we exchanged these things after agreeing upon a ratio (I’ll give you five chickens, you give me one cow).

Then the concept of “money” came into play. Whether fiat or gold backed or seashells, the idea was that a certain thing was considered “money” and all exchanges of goods or services would have this money as a common denominator. We no longer traded my five chickens for your one cow, I traded my five chickens for an amount of money, which I could then use to buy a cow. You have a good or service I want, I have money, and you trade me your good or service for money.

The reason you are willing to exchange your goods or services for money is that you are confident that later, you will be able to trade your money with another party or with me for other goods or services you might want. In other words the important thing was not that you necessarily believed in the legitimacy of the “money” we were using. The important thing was that you believed that I would accept it, and you further believed that I believed someone else would accept it, ad infinitum. Even if you think every one of us knows the paper we are accepting has no “real value”, it doesn’t really matter so long as we all still think we will be able to buy groceries with it tomorrow.

This confidence that a critical mass of parties within an economy will accept a form of “money” is what enables it to serve as a “common denominator for value”, and accordingly function as a medium of exchange. Given that the money itself has no value beyond the shared belief in its ability to serve this function, we will refer to this critical mass of confidence as the “common suspension of disbelief”. We believe this is the primary factor which determines whether any given thing can serviceably function as “money” or not.

Now cryptocurrencies have entered into this equation. Unfortunately for all of us, while crypto has become immensely popular, it still does not serve well as a medium of exchange. While there are many merchants who accept cryptocurrencies, they are the minority. Unless you live in El Salvador you probably cannot use cryptocurrencies to buy most goods or services that you rely on to live without first cashing out into government backed fiat. And even if you can buy goods or services with cryptocurrencies, odds are good the merchant you are purchasing from is just immediately cashing them out into government backed fiat anyways.

This adds a layer of complexity to all cryptocurrency → goods and services transactions when compared to government backed fiat → goods and services transactions. Before the final exchange of value can be had, either the customer must cash out from cryptocurrency into government backed fiat (as pictured below), or after the exchange the merchant must do so.

Imagine the hypothetical of party 1 having bitcoin and wanting to buy an apple from a grocery store (party 2). The grocery store has overhead costs it must pay in order to continue functioning as a business. Wagies must be paid to stock shelves and clean, electricity bills must be paid to keep the lights on and freezers cool, and in all likelihood either rent must be paid to a landlord or a mortgage must be paid to the bank. The grocery store does not have a high degree of confidence that when it needs to pay for its goods/services that the vendors it purchases these from will accept bitcoin, and so it will either require its customer to cash out into government backed fiat first, or alternatively the grocery store will cash out immediately upon receiving the bitcoin. There is no common suspension of disbelief when it comes to crypto’s ability to serve as a medium of exchange and as a result cryptocurrency → goods and services transactions are complex and burdensome.

Now let’s get into the hypothetical future of “Hypercryptoization”. This is a state of affairs wherein a person can directly exchange crypto for valuable goods or services and the vendor they are purchasing from has a high degree of confidence that the vendors they need to purchase from will in turn accept crypto. Once this reaches critical mass, there will be a common suspension of disbelief around crypto as a medium of exchange. This diagram is identical to the earlier “money” chart (but with “money” replaced with “crypto”) because, when there is a common suspension of disbelief, crypto is capable of serving as money.

It’s important to highlight that just like the earlier “money” chart, the exchange of crypto and value goes in both directions. This is what we mean by “Goods and Services On/Off Ramps”, the ability to onboard yourself to the crypto economy through the sale of goods and services, or offboard yourself from the crypto economy, through the purchase of goods and services without ever dealing with government backed fiat intermediaries. In the same way that government backed fiat denominated economies grow through the addition of valuable goods and services (and not solely through the printing of more money), the crypto economy will see the same kind of “growth” from these new ramps.

Why is this important?

The proliferation of Goods and Services On/Off Ramps will have a multitude of serious consequences, however the most profound and important of these will be its consequences in respect to the government’s role in commercial activity.

Crypto has in the last few years become large enough that, at least in the US, politicians are beginning to see its regulation as a high priority. Some of the more savvy observers have noticed that regulating a permissionless and purely digital economy is difficult if not outright impossible. There exists no one party for Congress to serve a subpoena if they wanted to force the Bitcoin network to take a given action. Even in the case where a protocol’s founders are Doxxed, once the code for a smart contract has been deployed on a given network all that forcing a Doxxed founder to shut it down or alter it would accomplish is pushing the control of its valuable functions into the hands of Anons who fork it.

However, in spite of these challenges there does remain one highly critical piece of the crypto economy that Congress and federal authorities can effectively regulate. Namely, government backed fiat on and off ramps.

The US government has the ability and willpower to require AML and KYC regulations, as well as any other regulations they may see fit (short of constitutional overreach), on any and all transactions from crypto into dollars. Given how critical this on/off ramp is to the current crypto market, these regulations are not only feasible to implement but highly effective in allowing the US government to steer the developing crypto economy in the directions they see fit. There are a limited number of parties within the US capable of providing the kind of scaling fiat cash out services that the crypto economy needs to function (mostly commercial banks), and so all the US has to do is ensure the compliance of those few “choke point” parties and they can control the vast majority of dollar inflows and outflows to the crypto economy.

However, in a world where each individual within the US’ borders has a high degree of confidence that the next time they need a good or service the seller will accept crypto directly, the feasibility of implementation and the efficacy of these regulations is reduced drastically. Suddenly the US government does not need to merely track a few dozen “choke point” financial institutions, but instead all three hundred million citizens within its borders. And it needs to somehow prevent them from accepting MATIC in return for mowing a neighbor’s lawn, or DOGE as payment for an old snowboard, or ETH for fixing a broken pipe. This is a challenge considerably more difficult than eliminating the sale of marijuana or prostitution, as it functionally pertains to all P2P commerce.

Additionally consider that politicians are behest to the whim of their electorate. It may be politically popular to “crack down” on the rich or big corporations for avoiding taxes, but will that same popularity extend to politicians sending IRS agents after poor individuals getting paid for manual labor in crypto? Against a backdrop of rising dollar inflation? I would not want to be a politician forced to explain how I was running on a campaign of helping marginalized communities while simultaneously prosecuting them for having the audacity to accept payment in $DOGE. To say nothing of potential constitutionality challenges in court.

That is not to say that attempts at “cracking down” on goods/services → crypto trades (and vice versa) will not be made. Rather, they will be as ineffective as attempts to “crack down” on marijuana → fiat trades, and likely significantly less popular even at their onset.

In short, with a common suspension of disbelief allowing for crypto to serve as “money” (and with the resulting proliferation of Goods and Services On/Off Ramps) it becomes more practically and politically difficult to monitor, regulate, and tax commercial activity to an effective degree.

Why do we think the explosion in Goods and Services On/Off Ramps will happen soon?

There are three main points to cover in this answer.

1. It has already started, visual art NFTs were the first wave.
2. The necessary infrastructure and userbase for the scalable onboarding of “value” into the crypto economy through onboarding users who provide goods and services is now developed and consolidated.
3. Crypto has demonstrated it can and will offer better compensation for the sellers of goods and services than government backed fiat economies.

It has already started:
There was a lot of speculation as to why exactly the NFT art and profile picture space grew so explosively in 2021. Fooo wrote an excellent essay on Ersatz Prestige, there has been unending speculation on themes of ownership within a soon to come “metaverse”, and yet others simply viewed it as a twenty first century extension of the historically outperforming fine art market. We have a different, simpler theory.
Economies don’t grow (solely) from new money being printed and added to the system, but from new goods & services being added to the system, generating value. The reason art and profile picture NFTs exploded was that the crypto economy was a giant pool of capital searching for goods and services to onboard and visual art was the option which most neatly meshed with this tech stack and could be quickly scaled to meet massive demand.
With the advent of NFTs and easy to use marketplaces for them, all the infrastructure necessary for users to on-ramp value to the crypto economy using their art was in place. Visual art has a purely digital output which fits in nicely with the NFT tech stack and is easy to display and market (jpegs) and it requires little to no capital to produce other than the artist’s labor. The crypto economy was given a chance to finance value in the form of art, and artists worldwide had a chance to on-ramp into crypto purely through producing artistic goods and services without ever having to spend their fiat. Up until that point value based on and off ramps into crypto were scarce and not scalable. So when art stepped up to fill this role, the significant capital that crypto markets could bring to bear was ready to finance it, with no other real alternatives for value onboarding that could scale the same way art production can.
While the NFT PFP market seems to have peaked, we believe it did successfully prove concept: The crypto economy stands ready and able to finance the creation of goods and services, and will jump eagerly when presented with a scalable opportunity to finance real world value.

The necessary infrastructure and userbase for it to scale is now developed and consolidated:
The outputs of a service based economy in particular are usually non-fungible. No two Uber rides, even from the same locations, are the same in every respect. No two stays at an Airbnb are identical. No two paintings created by the same artist are the same, nor are any two performances by a musician (even if the same songs are played). While the production of commodities or finalized goods are usually fungible, the same cannot be said for services (and we include in our use of ‘services’ sharing economy staples such as stays at an Airbnb or an Uber ride).
We are taking as a given that there exists a huge userbase within crypto who would prefer to spend their money directly on services without ever having to cash out into fiat first, and as we stated earlier we believe that the willingness that the crypto market demonstrated to finance the creation of art demonstrates this. However, up until recently, the non-fungibility of service industry labor outputs was a major stumbling block to tokenizing or otherwise creating a market for services crypto.
To be clear, NFTs have existed for a long time. The challenges around using NFTs to onboard users into the crypto economy (or to ‘cash out’ of the crypto economy by buying the goods and services you actually need) were focused more around the lack of commonly used marketplaces with significant relevant inventory than they were the ability to use the NFT tech stack itself to create instruments representing said goods and services. It’s all well and good to be able to mint an NFT corresponding to an hour of your time as a graphic designer, but if there are no popular marketplaces like Opensea or Rarible where people can find your NFT, it’s going to be difficult for you to sell them. And that’s to say nothing of the difficulty of explaining to an interested buyer what an NFT is when even most crypto savvy folks didn’t know much about NFTs just eighteen months ago.
But now, NFTs aren’t just crypto mainstream, they’re popular culture mainstream to the point that South Park is doing episodes about them. The venn diagram of people who know how to use Metamask and people who know how to use Opensea is slowly, but surely, converging into a single circle. Now anyone capable of providing a good or service which is non-fungible, can tokenize it with the confidence that there is a massive userbase familiar with NFTs and willing to spend capital to acquire them. Anyone listing a popular product on Opensea or Rarible can be confident that it will get eyeballs.

The crypto economy has demonstrated that it can and will pay a premium for goods and services when compared to government fiat based economies:
Earlier we discussed the explosion of art NFTs and how due to a surplus of capital awaiting productive use, artists were able to find financing for their endeavors of the sort that only their most well connected colleagues in the traditional art world could ever expect to have access to. In addition to demonstrating the crypto economy’s willingness to finance the production of goods and services at scale, the popularity of art NFTs also demonstrated the crypto economy’s willingness to finance labor and goods at a premium. Where else could several dozen collections of 10k slightly different monkey drawings each have been trading at a floor price of several thousand dollars a piece?
On a very basic level the goods and services market in crypto is a “seller’s market”. There is a surplus of demand (capital) and a lack of supply (labor, goods/services). Accordingly, wages for simple services such as graphic design work or community management/moderation are often higher than they are in traditional economies, a trend which we expect to see reflected broadly across most labor pricing.
Workers are often compensated at least partially with the opportunity to be a stakeholder in the project they are working for (through native token allocations, equivalent to earning equity or stock options in a company), which is a prospect many find attractive. And last but not least, crypto is one of the few places in the world where a person can have a ‘full time job’ which is both remote and anonymous. While it is not strictly legal, a person who can earn a wage without disclosing it to tax authorities can be paid an equivalent salary to a ‘real job’ and earn 20–40% more depending on the jurisdiction they reside in.
In sum, crypto stands ready and willing to offer competitive employment opportunities for those willing to pursue them.

How do we think this trend will happen?

To recap, our prediction is that the next “big thing” in crypto is on/off ramps centering around goods and services instead of fiat becoming more and more popular. With that said, we will offer some specifics to our prediction of how this will play out.

What factors will determine which goods and services come next?

1. The value provided will mostly be in the form of either services rendered or digital goods created, and not physical products which a customer purchases and then physically takes possession of forever.
2. The services will mostly be low or mid skilled labor which do not require significant start-up capital to provide. Or, if a service requires capital or infrastructure, it will be the kind which only requires resources which significant numbers of low or mid skilled workers already have. In other words, that which can easily be scaleably provided due to its low start up cost.
3. One of the primary factors to determine whether a given service will be included in this ‘first wave’ will be how ‘smoothly’ it can be tokenized as an NFT in such a way it can be easily (and accurately) displayed and sold on marketplaces.
4. Because of regulatory scrutiny and political realities, larger businesses and corporations will be at a significant disadvantage trying to participate in these markets compared with smaller entities and entrepreneurs.

What kind of goods and services do we expect to see first?

1. Included in this first generation of services will be “sharing economy” clones which enable people to provide commonly needed services which only require resources they already have (homes or cars for example).
2. Also included in this first generation of services will be tokenized representations of short periods of labor or consulting, or what you might call “gig economy work”.

As we previously discussed, we believe that art NFTs were the first example of a scalable “Goods and Services On/Off Ramp” into the crypto economy. We used that as a basis for reasoning the above listed factors. When we asked why visual art was able to function so well as crypto’s first scalable Goods and Services On/Off Ramp, these were the factors that stood out to us. Visual art NFTs rarely have a corresponding physical good with the vast majority of the market being purely digital. While high quality art does require a high level of skill, the most popular visual art NFTs are not the kind which could only be created by a highly skilled artist. And lastly, visual art is arguably the most perfect output for NFT tokenization, especially with respect to how easily and accurately they can be displayed on marketplaces like Opensea or Rarible.

We think gig and sharing economy goods and services fit nicely into the listed factors above, as well as coming with a few other benefits that makes them ripe for tokenization. They are typically provided as services rendered and almost never as the production of physical goods, they involve only low or mid skilled labor with minimal start-up capital needed outside of resources which their workers already own (such as a car or spare room), and they can be tokenized and displayed as NFTs in such a way that they can be easily understood and sold.

Additionally while they are not listed in the earlier cited factors, there are a few other reasons we think the sharing and gig economies are “ripe for decentralization”.

• A significant portion of costs for hiring someone for sharing or gig economy work goes towards subsidizing middlemen (the platforms themselves). While gas costs are a real thing, decentralized systems can be built in such a fashion that platform/middleman costs are significantly if not altogether eliminated.
• Gig and sharing economy platforms bear regulatory risk which often lead to significant increases in their cost of use, or significant decreases in their attractiveness as opportunities for employment. Decentralized systems are regulatory resistant. While a court can force Uber to change its app such that its workers earn a minimum of $15 an hour, the same thing would not be possible with a decentralized ride sharing protocol.
• Elaborating further on the regulatory resistance angle, another significant cost factoring into sharing and gig economy services is taxes. To put it bluntly, decentralized sharing and gig economy services will enable more “under the table” activity which is not easy to tax. If a driver could make $10 driving for Uber but must pay $3 in taxes, he can instead do a $8 ride for a decentralized ridesharing protocol under which he is not KYCed and keep all the fruits of his labor. This will allow him to provide a cheaper service while making a greater profit for the same labor.

How do we think TripsTrade can play an important role in this trend?

TripsTrade is a KYC free and decentralized platform for property rentals and financing, in which each “booking” is represented as an NFT held in its owner’s wallet. If you’re not familiar with what it is and how it works, you should check out our white paper. This article is already getting very long so we won’t go into the various functions that can be accomplished with TripsTrade that traditional mortgages and booking engines cannot accomplish, as we have published multiple papers and articles on these.

We believe that in the same way traditional economies have real estate and real estate development as one of their largest “goods and services” based on and off ramps, so too will the crypto economy. Everyone needs a roof over their head, and many in crypto are searching for a home or debt financing to get one but having trouble accessing credit due to a lack of traditional salaried income. Between this need and the crypto economy’s unsated appetite for productive outlets for their capital, we think TripsTrade stands well positioned to seize on the massive opportunity that is being the primary bridge between the digital economy and physical real estate.

In conclusion, the time is right, the tech is ready, and we think our approach is the correct one. It’s a big world out there anon, you should really own a piece of it.