The May Scale of Money

Many years ago, JP May wrote a commentary about the hardness and the softness of money, and created a scale that became famous amongst people who were involved in alternative digital currencies in that era. It is called “The May Scale”.

Your question provokes us to focus on a major factor inhibiting the growth of e-gold — that there’s no common way now to put money into an account fast (as in a matter of minutes instead of hours or more likely, days and weeks). An ironic situation, considering that e-gold is destined for greatness as the currency of the internet.

Simply replace e-gold with bitcoin (or ethereum, or any other cryptocurrency) and the same holds true today as it did then. It is difficult and slow to move softer money (e.g. credit cards) into harder money (cash, crypto), and relatively easy to go the other direction.

Coinbase has 20 times the fraud rate loss as PayPal. The reason for that is obvious: it’s really easy for fraudsters to try, and it’s really hard to for Coinbase to get back the money once its shipped out as cryptocurrency. Moving soft money to hard money is fraught with peril.

It’s no wonder that Coinbase just announced instant fulfillment for crypto purchases with bank transfers. Is not that bank transfers are hard enough, they aren’t, it’s just that they are so much harder than credit cards.

A modern day (2017) May Scale would look something like this:

– hard –
1: Cryptocurrencies
2: Physical cash (major stable currencies)
3: (empty)
4: Physical cash (all others)
5: Interbank transfers of various sorts (wires, etc)
6: Check/ACH
7: Consumer electronic transfers
8: Business electronic transfers
– soft –
9: PayPal and other electronic payment systems
10: Credit cards
– ludicriously soft –

(comments invited)

It is not meant to be definitive, but gives a framework to think in.

It’s difficult to transfer from soft money (e.g. credit cards) to hard money (e.g. cryptocurrency)

Physical cash has dropped in the May Scale. Besides counterfeiting — a problem which crypto solved — AML & KYC compliance on larger cash transactions make it more difficult to accept than crypto (notwithstanding these regulations may apply equally to crypto).

Your question provokes us to focus on a major factor inhibiting the growth of cryptocurrency — that there’s no common way now to put money into crypto fast (as in a matter of minutes instead of hours or more likely, days and weeks). An ironic situation, considering that cryptocurrency is destined for greatness as the currency of the internet.

There, I fixed it. The soft to hard money problem will persist. Today, however, it’s not only about the soft money to hard money problem. It’s also about moving money from the old financial system to the new crypto financial system, and back.

I’ve heard from multiple people that have had their bank block all transactions to Coinbase and other cryptocurrency exchanges.

This is why I am very excited about Crypto ATMs. It’s hard money to hard money; physical fiat cash to cryptocurrency and cryptocurrency to physical fiat cash. It bypasses the financial gatekeepers, and provides an avenue for growth and mass adoption despite open hostility by the gatekeepers of the old world financial system.

The next great “cutting of the cord” will be people joining the new global crypto-financial ecosystem, and leaving the old one behind. The new great “cord cutting” will be saying goodbye to your bank and your broker. Crypto ATMs will be a key enabler of that.

Crypto ATMs offer a very simple and easy introduction to cryptocurrencies for new users. You deposit cash, and instantly you have crypto in a wallet on your phone. How can you get easier than that? I imagine the younger generation will instantly take to it, soon as they figure how to transfer that crypto to video game platforms like Steam. Seattle-based esports platform Unikrn is going to massively popularize cryptocurrencies with the younger generation with their new crypto-tokens.

Crypto debit cards may also be a key enabler, but historically debit cards linked to alternative digital currencies have not fared well. History is littered with failures in this space, for the reasons I outlined above; banks are hostile to disruption, as they should be. I do look forward to when I can use TenX in the United States. I envision future versions of Crypto ATMs may offer to spit out Crypto debit cards in addition to cash.

In first world countries, we take the conveniences of our modern financial infrastructure for granted. In much of the developing world, things are not the same. I very much look forward to leveling the playing field, and giving people in the developing world access to modern financial. If first world financial and securities regulations are slow to change, they may even get it sooner! Why shouldn’t children in Venezuela store their lunch money in bitcoin or Apple stock instead of Bolivars.

I hate to mention Venezuela because it makes me cry. Old cypherpunks have always known the real objective of crypto: to take monetary power away from the despots of the world.

As we move more and more into the age of the “sovereign individual”, where individuals will replace many of the functions of corporate/government entities, there will be more and more demand for money systems that are higher-up on the may scale. — JP May

Can this explain the rise of bitcoin and cryptocurrencies? I think it does.

I am advising Coinme, on their UpToken sale, a cryptocurrency utility token that powers their Crypto ATM network loyalty program. The Token Sale runs from October 16th–26th, 2017 . I’ve written about this here. If you decide to purchase any tokens, I expect you to DYODD. Thank you.