Is There A Blockchain “Killer App”? Yes, But It’s Not Here Yet

Game changing technologies often struggle to get market traction until someone comes up with a “killer app” that puts them on every desktop or in every household. The killer app (usually software or an accessory) creates a compelling use case for the product that, in turn, drives widespread adoption.

The history of tech is littered with examples. At the dawn of the personal computing era, Apple, Commodore and others sold their products with limited success. Then someone came up with Visi-Calc, a spreadsheet app delivering such a powerful value proposition that PC’s gained entry into corporate offices everywhere. Visi-calc was the personal computer’s killer app (in fact, it most likely spawned the term “killer app”). Similarly, local area networks were around for years, but with limited market penetration until email, LANs’ killer app, made them ubiquitous. The Internet came into being in 1983, but it wasn’t until 1990 and the development of HTML, the Internet’s killer app, that it took off. There have been numerous other examples.

Today, digital money is looking for its killer app. Sure, cryptocurrencies have a passionate community of advocates. But, I can’t spend crypto at Costco, my bank won’t take it, and my family’s understanding of it is limited at best. It isn’t ubiquitous, and doesn’t seem to have the momentum to get there.

Outside the community of crypto fans, it’s hard to find anyone who believes that current cryptocurrencies can ever sustain themselves. This is because, without the backing of hard assets, the “value” of cryptocurrencies is based solely on their limited circulation.

Crypto advocates will point out that fiat currencies also have little underlying value, but it’s a thin argument. If not backed by hard assets, sovereign currencies at least carry the underlying value of the productivity of their citizenry. Current cryptos can’t match that.

Having said that though, ultimately, digital currencies will change forever what we define as trading tender. Cryptocurrencies, despite their current inadequacies, have numerous compelling features. Security from fraud, high speed of transfer, privacy options, and low transfer cost are some of the more prominent ones. These features are so compelling that digitization will inevitably find its way into common currencies, whether offered by governments or private enterprise. It’s even possible to envision a huge array of digital currencies, crossing international boundaries, and providing easy, truly global payments. Their key differentiation from current cryptocurrencies is that they will be backed by real underlying value — either hard assets or government guarantee.

But, that leaves us with a glaring question. A killer app only exists because it addresses a huge, otherwise untapped market. If the killer app for digital money is hard asset backing, where is its market? Historically, every killer app has found its first use among early adopters for whom the value or utility was most obvious. Other market segments notice these early adopters and follow.

What market will elevate the acceptance and use of asset-backed digital currency to the level of fiat cash? Most likely, it will be a group (or groups) of people who 1) are poorly served by existing currencies and currency equivalents such as credit cards and 2) for whom the utility offered by digital currency outweighs the risk of early adoption. Is it the financial industry? Probably not. Things are working pretty well for them, thank you very much. Is it governments? Probably not. Things are working pretty well for them too, and they don’t handle disruption well anyway.

Most likely, it’s John Q. Public in countries with unstable financial structures or national currencies. These people are thirsty for an alternative. They are in places where runaway inflation makes it impractical to hold cash, or where the banking systems are primitive or corrupt. In these countries, a digital money token, immune from government interference, easily traded, and held stable by the backing of hard assets, is stunningly compelling. This is blockchain’s killer app.