Disclaimer: This is not financial advice. Anything stated in this article is for informational purposes only and should not be relied upon as a basis for investment decisions. Triton may maintain positions in any of the assets or projects discussed on this website.
TL;DR
Part III
Practically speaking…
As we highlighted in the previous segment, while Bitcoin’s technology allows for peer-to-peer payments, it is increasingly being viewed as a digital version of gold. We will focus on the peer-to-peer aspect here and save the digital gold framing for next time. These sections are attempting to provide the rationale for Bitcoin and cryptocurrencies and as such will have favorable slants.
For those who prefer to view financial technology through a practical lens, Bitcoin presented one of the first viable ways to facilitate payments online without having to trust a 3rd party payments company. The core innovation here is Bitcoin enabled a way to facilitate online payments in an internet native way. Said another way, Bitcoin is an internet native value transfer network. The power of this is important to understand, so let’s unpack it by revisiting our simple consumer payments use case.
There are primarily three aspects to any transaction:
Up until the invention of the internet, payments made between two people were largely carried out in physical money or cash. The first credit cards, debit cards, and checks started to abstract this away for consumer-merchant relationships, but cash historically reigned supreme in most transactions. With our three-part framework, cash transactions look like this:
Cash is permissionless and peer-to-peer
With cash, all three of these happen between only the two parties involved (peer-to-peer), at the time of the transaction. There are no 3rd parties that act as intermediaries. Transactors in cash have both agreed to participate in the ‘cash’ network provisioned by the issuing government. Within that network, anyone can anonymously participate by spending or accepting cash. They do not need authorization or help from a third party to do so. Privacy is real, and self-custody of your money is by default.
This ‘network’ is available 24/7, is free to use, permissionless to participate in, fully peer-to-peer, provides instant settlement, and makes chargebacks and associated fraud impossible (ignoring counterfeit bills, general crime, etc.). Cash comes with downsides, such as increased risk when carrying high amounts, no ability to earn interest, and added friction in transactions from having to count specific amounts and receive change. And what is obviously stating the obvious, cash is an incredibly poor instrument when it comes to online payments. Banks and payment companies fill this role.
Quick Aside: Banks and How Money Moves
When commerce began to transcend localities, first via wires, telephone and then the internet, our methods of payment were forced to evolve. Specifically, we created information networks in order to facilitate physical transfers of money. In the mid-1800s, exchange brokers bought and sold banknotes in different cities and states and posted offers in local papers. Bank-to-bank accounts were settled via porter, exchanging checks for gold. Many private banks issued their own money redeemable in specie (e.g. for gold or silver). When telegraphs were first invented, companies such as American Express and Wells Fargo, both major financial institutions today, sprung up to provide cross-country banking services. Though the telegraph allowed ‘payments’ to happen from distance across the country, the actual act of transferring funds – e.g. the settlement – still happened physically through moving gold, silver or physical cash by train and stagecoach. Authorization was an agreement between the customer and the bank that the payment was valid, and that the customer had the requisite funds. Centralized clearinghouses appeared as a way to reduce errors and increase efficiency, and this is the model we generally still use today.
Naturally, technology has progressed to the point where banks do not need to physically move gold across the country (even though dealers are literally still flying planes full of gold bars around in 2025) and instead have adopted ways to transfer money between themselves. In the US, this is done through processes such as ACH transfers, Fedwire, or CHIPS. By and large, these are wholesale bank-to-bank rails. While the general public can send wires or submit ACH transfers, most day-to-day payments are made through debit cards, credit cards, or payment companies.
For a customer to use ACH or wires, they need to go to their bank directly and request those payments be made. The bank will authorize the transaction based on information about the sender, the recipient, the amount and the purpose. Rejections are common. Settlement takes multiple business days. Importantly, however, the sender and the receiver never actually have custody of that money. Instead, those funds are held in accounts by each bank at the Federal Reserve, and when that transfer occurs, it simply results in each updating their respective balances. Even Fedwire’s ‘real time’ processing is time-constrained, processing payments only during weekdays and closed on weekends and holidays.
All of this is to say, all of these ‘payment’ methods are just ways to coordinate how banks update their money balances at the Fed. Your account is a line item in a bank’s database. This is efficient for many applications but naturally comes with downsides and risks. Lack of access to your money on a Saturday, for example, or strict limits on how much you can send a family member in a 24-hour period. One major risk is the exposure to the fractional reserve system, where banks are able to lend out ~10x the amount of deposits they actually have from customers. Since 2020, bank reserve requirements have actually been zero. That is, a bank can lend out 100% of your deposit and keep exactly $0 of it in reserve. For many, this is fine and just how society has evolved. For others, this is an egregious gift of zero-interest loans to ‘the system’ to speculate and engage in risky behavior. The existence of such extreme oversight of banks by numerous government agencies (OCC, FDIC, FRB, NCUA, CFPB, etc.), redlining, predatory fees and frequent banking scares, including the 2008 financial crisis, all highlight the issues inherent in this model.
The Federal Reserve requires banks to hold exactly $0 of your deposit in reserve
Banks have no way to meet all withdrawal demands if every customer demands their money back, and especially not instantly. This is why bank runs are such a concern anytime a bank comes under stress and why agencies like the FDIC have to insure banks accounts up to $250K in case of failures (like the 2023 collapse of the $200B Silicon Valley Bank), primarily as a way to artificially build and maintain trust in the banking system. This naturally comes as a cost to bank depositors via increased fees and premiums and to taxpayers through bailouts. This is also a massive departure from the paradigm of cash and physical money, where individuals are in free and total control of their own wealth. Many rightfully question if the risk is worth 0.01% interest earned in a year, especially when inflation is 3% or more and there are so many additional costs involved.
For better or worse, banks are central to almost all payments today.
Back to Payments
For the vast majority of payments made through credit cards and payment companies, the underlying frictions and trust assumptions are extensive. Many consumers do not think twice when they pay with a credit card. Entering the details during an online checkout feels like you are making an online payment. Few pay attention to what actually has to happen for a credit card transaction to occur. Using our three-part framework, it looks something like this:
A simple credit card payment is not so simple
All of this typically takes 1-3 or more days to happen and is processed only during business hours. All said and done, the merchant typically incurs a 3% cost to cover all of the fees associated with the payment and users pay higher prices and hefty credit card interest fees, while the middlemen take their cut at every step of the process. Chargebacks, as we discussed last segment, are common and incredibly costly. Although it feels like you are making a direct electronic transfer when using a credit card, all of the value transfer still happens through legacy payment rails separately. Visa and Mastercard are largely just information layers that sit on top of the value transfer layers. Eliminating that 3% fee associated with almost all payments made is akin to a 3% income bump for the populations with the highest propensity to consume (i.e. those that earn less or live paycheck to paycheck). For most, it is a reduction in the cost of living by 1-2%. That is enormously beneficial on its own.
Even payment tech companies like PayPal use this similar structure. By and large, they simply coordinate payment flows between merchants and banks. And in this structure, a simple person-to-person transfer is anything but simple:
Note the middlemen involved in a PayPal transaction via Bytebytego
International payments between two individuals are just as bad. Five additional middlemen required just for two people to transact:
Simplified international payment flow via Matt Brown
The unlock of Bitcoin and cryptocurrencies is that they remove all of the middlemen from these payment flows, and bring back truly peer-to-peer transactions made in digital ‘cash’, conducted entirely online. That is, you have full control and custody over your cryptocurrencies like you do with cash; no banks involved. Settlement is fast and irreversible like cash (10 minutes on BTC, the slowest, but less than 1 second on most chains). It is essentially free like cash (transaction fees differ by chain, ~$2 if using an expensive network like Bitcoin, but down to ~$0.003 on most new networks, irrespective of size – a $5 transfer costs the same as a $100M transfer). The network and settlement are available 24/7, accessible from anywhere in the world. There are also no caps on how much you can transact – sending $500M around the world is as simple as sending $2 to a person standing next to you.
Importantly, all users always have access to 100% of their funds on demand, not just 10%, if any at all. Funds are accessible from anywhere in the world, not sitting in a bank that is only open from 9-5 locally, Monday to Friday excluding holidays, and only available to withdraw at physical branches.
Withdrawing money from the banking system no longer means just taking out cash. Cryptocurrencies allow us to withdraw our money from a bank but still retain all of the benefits of online payment functionality. In the current system, we have two options: 1) self-custody our own cash, but limit ourselves to just offline purchases, or 2) give up control of our money to a bank so that we can transact online. With cryptocurrencies, we can finally have both.
And most uniquely, it is truly open and permissionless, meaning anybody with an internet connection, anywhere in the world, can participate in the network at any time. It enables global commerce in a peer-to-peer way. This payment architecture now looks like this:
Payments with cryptocurrencies like Bitcoin cut out the middlemen and return us to a peer-to-peer paradigm for payments over the internet
Access to Bitcoin is the same for a farmer in Sudan as it is for a fisherman in Malaysia as it is for a banker in Ireland. That is truly, globally, unique.
Here is a simple test: how would an unbanked farmer in Sudan pay an unbanked fisherman in Malaysia through traditional rails? How much would that cost and how long would that take? It might not even be possible, or it would be so inefficient and so expensive that it does not happen. With Bitcoin, they can do that very easily if they each have access to the internet – and more people in the world have mobile phones than they do bank accounts. That is a somewhat extreme (and fringe) example and may not be practical, but it serves to show what a permissionless, peer-to-peer network that natively transfers value over the internet can easily do. Here is one far more real:
This is not just theoretical, but happening for real
Remittances are a natural use case. Currently, remittance providers charge an extractive 15-20% fee for that banker in Ireland to send money home to her farmer brother in Sudan, who receives it several days or weeks later. With Bitcoin, it costs her less than 1% and he can use it a few minutes later, with no other party involved, and no bank account needed. That is the power of cryptocurrencies like Bitcoin.
Programmable Value
The above has largely focused on Bitcoin, with only slight references to other blockchain networks. While Bitcoin itself is powerful, it is also simple and cannot do much more than enable BTC transfers on the network at the moment. More advanced blockchains allow representations of other assets to be securely and permissionlessly transmitted over those same networks.
Stablecoins are the pre-eminent example of this. They are tokens that exist on these networks that provide the holder access to an asset that is pegged to a specific currency, most often US dollars. Realistically, the world is not going to start denominating everything in Bitcoin. But much of global trade is denominated in USD and it remains the most stable and in-demand currency in the world. The importance and value of having access to USD for people in other countries cannot be understated, and blockchain networks provide that permissionless access, 24/7. Currently, there is ~$225 billion in stablecoins across blockchain networks that have enabled $32.5 trillion in transaction volume in the past year alone according to Visa. These counts are growing rapidly, up 300% over the past year.
This is not fringe. Visa actively monitors all of this with their own stablecoin tracking dashboard
One subtle aspect of blockchain networks is the unique characteristic of ‘programmable’ value. This is nuanced but understanding this is really the key to understanding why this technology is so exciting and we want to make sure it is front of mind as you read everything else.
Computers, the internet, software, code, have all allowed us to program information. Theory of computers is simple: you have bits that are either in the 0 or 1 state (hence “binary”), and collections of these 0s and 1s represent words, numbers, software and enable everything you see in our digital lives. Software programs are basically just flipping those bits between 0 and 1 in certain ways to make something happen but done incredibly rapidly – somewhere around 5 billion times per second. Through this rapid cycling of bits, we can set deterministic instructions using just 0s and 1s to enable everything we have today, from our phones to televisions to email to artificial intelligence and space navigation. The extent to which we already rely on digital technologies is astronomical.
‘Programmable’ value means we can now extend all of that functionality to include actual representation of value itself in all of those systems. We can literally now move value with the same speed and ease that we currently move information around the world. One tangible example: imagine a retail worker who swipes in and out for their shift at work. Swiping digitally logs the hours they work. Currently, those hours are tallied up at the end of the month and the worker receives their paycheck into their bank account in batches every few weeks, unfortunately giving rise to the situation of living ‘paycheck to paycheck’. New fintech companies and neobanks highlight the fact that they can advance clients a few hundred dollars of their paychecks a few days earlier as a cutting-edge feature. But blogs with the title “How to access your money early” should make us question if the current status quo makes sense.
With programmable value, it would instead look like this: the worker swipes in, and the exact second they do so, they start receiving a stream of micropayments into their account. The exact moment they swipe out, that stream of payments ends. It could be done by the second, minute, or hour, but any cadence is equally as trivial to program and can be done at a far lower cost than any traditional payment/HR platforms can do. At any time during the day, because the worker is paid in internet-native cash, they have access to those funds the instant they receive them and could use their morning’s wages to buy themselves lunch the very same day. No more waiting four weeks to receive the wages earned almost a month ago.
One starts to see where this can go for use cases small and large. An artist can receive micropayments every single time their song is streamed on Spotify. A video game can easily integrate payments and every time a player sells a unique item in game to another player, they actually transfer real value between each other. Autonomous AI systems can use cryptocurrencies far easier than they can open a bank account. And because these networks are fully open and permissionless, all of these systems can operate on the same network (or interoperable ones) and thus that hourly worker who plays in a band on the weekends can receive their song royalties and hourly earnings and use those exact same funds to pay for their CandyCrush habit, all from the same account. No cards, cash, payment companies or bank transfers in sight.
It is difficult to underscore how important this concept is. We suggest the reader spend some time thinking about how easy it is to move information around the world and what that simple ability has enabled us to build. Now try to imagine what moving actual value around the world in the same way would allow. In our next segment, we will focus on the ‘digital gold’ narrative of Bitcoin, but for now, we will leave the reader with a few examples of what internet native value transfer networks already enable. Keep in mind, these are not even scratching the surface of what is possible:
Revisiting the crypto revolution: empowering peer-to-peer payments with bitcoin
Discover how Bitcoin is revolutionizing transactions and cutting costs
Understanding digital assets: addressing real problems beyond the hype and scams.