Dealing with something familiar, one is hardly expected to change his basic understanding of the matter. Most entrepreneurs who move towards fiat-associated services from a blockchain/bitcoin background naturally base their thought pattern on experience with crypto. Their very clear and correct technological thinking fails to comprehend the essence of a dollar or a euro, as they are today. Regardless crypto, there’s no “intuitive” mind gate there either. It turns out that modern fiat money is an unnatural and even pathological thing.

A blockchainer would pitch a banker with something like this: “Here are your tokens, they are like cash “traveling” from point A to point B and farther to point C in a reliable, convenient and extremely inexpensive way. Glue some value to these tokens by backing the promise with some reserves or your reputable name. Then, Profit!” Silence is the answer.

What do they possibly miss?

The minimum existing element of fiat money is a three-layer, five-components thing, where each unit “dies” on the settlement level with a clone being “born” again and sent over to the payee. There is no transfer of something from Alice to Bob! The only exception is paper cash and, technically, a thing “just like cash” has no meaning and can not exist. It is either cash itself and it can be directly transferred from A to B or it is a three-story, fife-element construction that burns and creates your payment units, or something even more complicated. Communication channels constitute the integral part of this quantum too.

One can’t just replace or tune any one of the components. When we talk fiat money, it is not the the law that follows but the technology, always being behind the law.

The inalienability of the communication system entails the aspect of size. In fiat, different sizes of payments mean different networks. Those networks have substantial fundamental differences not only in accessibility of institutions participating, but also in many purely technological senses. In the United States, for example, there are many levels of intermediary bodies and networks, such as Fedwire Funds Service, Clearing House Interbank Payments System, the Automated Clearing House, and others. Systems of the different levels are not directly compatible!

It turns out that big money, smaller money, and small money — are all different things of different nature. Making it even less natural, even within the same category, different countries host both incompatible and structurally different system of fundamentally different accessibility class. The table below shows the distribution of participants of various payment networks with an average number of the operations they perform. The difference amounts to hundred folds. From a blockchainer’s point of view it’s an absurdity and inconvenience. Should a technologist prepare a framework for mice in one country, bringing it elsewhere to only find stegosaurus and no mice.

Source: Michael Tompkins, Bank of Canada, data from Committee on Payments and Market Infrastructures (CPMI), Statistics on Payment, Clearing and Settlement Systems in CPMI Countries, BIS, September 2015.

How miserable would an entrepreneur selling “assets-over-blockchain” to a bank appear as he starts his pitch with “p2p transfer of independently existing tokens”. A five words phrase containing three non-existent phenomena. Adding a psychological error to the terminology, one expresses the puzzlement of bankers lacking enthusiasm. Apparently, this is due to an incomplete understanding of the new technology, he thinks. No, it isn’t.

The fact is that the above described inner fiat meanings are embedded and imprinted into bankers’ native thinking. A banker hears the story, comprehends an extremely broken — up to the illegibility of the message — language but still no clear explanation comes to his mind.