Since its very early days pizza has played a key role in understanding Bitcoin and conceptualising its utility. When Laszlo Hanyecz bought two pizzas for 10,000 bitcoin (BTC) in 2010 he was unwittingly making the worst deal of his life - and probably the century - given the stratospheric rise in the ‘Big Daddy’ of cryptocurrencies of late.
However, Hanyecz, a programmer from Florida who was the first person to use this cryptocurrency in a commercial transaction, did at least demonstrate how transactions could take place and value be transferred free from centralised third parties. That day is known as ‘Bitcoin Pizza Day’ and the exercise with hindsight might be described as a massive multi-million dollar mistake.
As the blockchain industry (or digital ledger technology (DLT)) sector, first utilized by Bitcoin, continues to develop and innovate new services and products, it seemed fitting that pizza delivery could be used to showcase the potential utility.
During the recent ETH Denver conference, which was held this February, the Foundation for Interwallet Operability (FIO), which facilitates easier cryptocurrency transactions, invited attendees to see how easy cryptocurrency transactions could be using the FIO protocol by ordering pizzas, which by some bizarre twist of fate coincided with ‘National Pizza Day’ in the USA!
By setting up an FIO address such as user@fio participants could simultaneously request a payment for a pizza as they would with Venmo, a mobile payment service owned by PayPal, and dispel the myth that blockchain is a solution in search of a problem.
Now given the restrictions that the current pandemic has placed on people’s ability to interact, the team at FIO wanted to create a live demonstration during the ETH Denver conference about how cryptocurrency transactions need not be stressful and complex with long addresses that needed to be copied and pasted.
How does it work? Well, with a few clicks a FIO address could be set up and with a code request a pizza from team members who went and bought it with traditional fiat currency (US dollars, Sterling, euro, Yen, etc). An FIO address is a single identifier that eliminates the need to see, or even know about, blockchain public addresses.
This simple interactive experiment was run with the aim of helpfully explaining to technologists and journalists who participated at the conference that cryptocurrency transactions need not be complex, stressful or face operational risks of any kind.
It follows the recent and exponential growth of DeFi (Dentralized Finance) as an asset class over the last two years. Just look at the numbers: starting out from only $275 million (m) back in early 2019 of crypto collateral locked in the DeFi economy, it had shot up to $1 billion (bn) by February 2020, eventually hitting $4bn by late July before reaching around $14bn today.
That said, this explosive growth can only continue if the average person actually feels comfortable interacting with DeFi and has the same sense of security about making a transaction as they would do with traditional ‘bricks-and-mortar’ banks.
DeFi revolves around applications known as ‘DApps’ (aka decentralized applications) that perform financial functions on blockchains (digital ledgers).
The current user experience with crypto though is awful. Indeed, too many people have lost funds when using cryptocurrencies - nearly a fifth (18%) according to a survey FIO conducted - or suffered a ‘man-in-the-middle’ attack (6%). Clearly this is something that needs to be improved on.
For DeFi to enter the mainstream and achieve exponential adoption the status quo has to change and FIO is working with some of the industry’s leading service providers to ensure that anyone can make a request or send cryptocurrency as easily as they could send fiat with Venmo.
People often draw parallels to the growth of blockchain adoption today with Internet adoption back in the 1990’s.
However, they often forget that the initial Transmission Control Protocol (TCP), one of the main protocols of the Internet protocol suite, and the Internet Protocol (IP), the principal communications protocol in the Internet protocol suite for relaying datagrams across network boundaries, were developed for the US military in the 1970’s. But were too complex for the average person to use.
With the Hypertext Transfer Protocol (http), the foundation of data communication for the World Wide Web, came the design for a system that would make it possible to format these documents in a standardised way, publish them online and make them easy to access.
We are at a similar stage today with DeFi, although usage is increasing, the lack of secure, standardised processes for transactions to take place will hamper exponential adoption.
Currently cryptocurrencies and blockchain technology remain a relatively small and niche area of the global economy. As such for this technology to enter the mainstream and disrupt existing infrastructures and systems it will have to standardise processes and ensure anyone can use it as they would with fiat currencies.
Pizza may be a simple food product but it can go a long way to illustrate complex ideas and solutions for how the 21st century’s financial infrastructure could work. For Hanyecz, he expresses no regrets about his pizza purchase with crypto all those years ago.
About the author: Luke Stokes, MD, Foundation for Interwallet Operability (FIO), a consortium of leading wallets, exchanges and crypto payment processors, has been involved with cryptocurrency since 2013 and developed the FIO protocol as he wanted to improve the user experience and avoid potential ‘man-in-the-middle’ attacks so that anyone would feel comfortable making cryptocurrency transactions.