Crypto assets have evolved enormously since Bitcoin's inception. Originally conceived as a peer-to-peer payment system, cryptocurrency now powers applications far beyond its original scope. While the primary function of assets like ETH and BTC remains debated, digital currencies are used for much more than paying for goods and services. Here we examine five key use cases that demonstrate the depth of this fintech revolution.
Use Case 1: Digital Cash
Bitcoin was designed as a peer-to-peer electronic cash system, and for its first five years it fulfilled that role. It fueled a nascent digital economy including black market goods (Silk Road) and gambling (Satoshi Dice), and was accepted by hundreds of merchants for purchases ranging from graphics cards to t-shirts. As network fees rose, many merchants dropped BTC support, and a growing segment of Bitcoin Core advocates shifted to a 'store of value' narrative. The P2P torch passed to Bitcoin Cash, which forked from Bitcoin in mid-2017 and maintained low-cost payments. Thousands of merchants now accept BCH. During the 2017 ICO boom, many projects issued generic payment tokens, but most failed due to high velocity and low liquidity. Today, surviving P2P currencies are largely pre-2015 coins like Dash and Litecoin.
Use Case 2: Programmable Money
Smart contracts predate Bitcoin, conceptualized by Nick Szabo. They are executable blockchain code that automatically execute outcomes when conditions are met. While synonymous with Ethereum, most crypto networks have smart contract capabilities, including Bitcoin via RSK, which leverages Bitcoin's security and network effects. As BTC dominance over altcoins has grown, building on Bitcoin has become more attractive. The Bitcoin Cash network's Simple Ledger Protocol (SLP) enables token issuance using opcodes originally included by Satoshi.
Use Case 3: Collateral Lending
Lending is a cornerstone of decentralized finance (DeFi). Individuals can collateralize fiat loans against crypto and vice versa. On Ethereum, protocols like Maker, Compound, and Instadapp have flourished, with hundreds of millions of dollars locked in lending contracts. Alternatives include Dharma, dYdX, and centralized services like Salt, YouHodler, and Nexo, which offer fiat loans in exchange for locking crypto. Hodlers can also earn annualized interest by depositing assets into these protocols.
Use Case 4: Governance
On-chain voting ensures provable voter turnout. Bitcoin miners have long signaled support for protocol changes by signing blocks; in June 2017, 80% of BTC hashrate added 'NYA' to support the New York Agreement. Governance has become more sophisticated, with Dash introducing a budget voting mechanism emulated by many projects. Crypto assets like 0x, Maker, Decred, and Dfinity now have governance as a primary function. Projects like Aragon enable token holders to vote on key decisions via dapps. However, participation remains low, reflecting universal voter apathy.
Use Case 5: Digital Collectibles
Non-fungible tokens (NFTs) represent unique digital assets, typically in-game items or virtual land. They enable peer-to-peer trading and full ownership. However, NFTs still depend on centralized platforms like CryptoKitties or Cheeze Wizards to host images and control virtual worlds. Nonetheless, collectibles represent a growing vertical, with NFTs expected to integrate deeply into esports and virtual reality in the coming years.
Evolving Applications for Crypto Assets
Cryptocurrencies are still young, and many envisioned use cases—security tokens, hybrids, derivatives, crypto commodities, privacy coins, stablecoins, work tokens, discount tokens—are still emerging. From national reserve currencies to timestamping documents, Bitcoin proves its versatility. The beauty of permissionless networks is that anyone can innovate at the base layer or through secondary layers. The crypto space has advanced dramatically over the past decade. In ten years, crypto assets will serve functions we cannot yet imagine.