As stablecoins grow in impact and mindshare, their benefits, including efficiency, low cost, accessibility, decentralisation, and programmability, are frequently discussed

Most of these benefits are easy to grasp, but one isn’t. Programmable money.

Programmable money is an abstract concept, making it challenging for many people to form a concrete understanding of the idea and its true significance.

The importance of programmable money is that it is the only way to offer billions of unbanked people key financial services. The programmability of money is the only way to change the economics of these financial services, allowing developers and fintechs to innovate in a way that is not possible with legacy financial systems.

This article will go into some examples of what programmable money achieves and why it truly represents such a substantial global unlock regarding how money moves.

From Ultrasound Money to Programmable Money

Recently, I tweeted this, and I wanted to explain it:

Working in crypto should result in us all being aware of how powerful memes are. Whether memes are genuine and real, or false and fluff, they can play a significant role in distributing a concept through a collective of individuals.

The last dominant meme around money was Ethereum’s North Star of ultrasound money.

For those who do not recall what this was, at a high level, Ethereum as ultrasound money is an evolved form of sound money, leveraging scarcity and incentives to ensure ETH as a currency holds its value overtime and is resistant to supply inflation. The term “ultrasound” represents a modern framework for a reliable store of wealth, and many in the Ethereum community rallied around continually striving for such a monetary policy.

However, the promise of ultrasound money ultimately fell very short of expectations, leading to a decline in its credibility

Yet, using memes to describe money in a new form remains powerful. The next meme that represents a monetary innovation is programmable money.

The beauty of programmable money is that it addresses a much larger total addressable market (TAM) than ultrasound money. The TAM is money, not crypto.

The TAM is Money, not Crypto

I mean this. And what they are here to takeover is money.

There is a lot of money, and many types of money. I’m going to quote directly from @bridge__harris here who wrote recently fantastically about a new mental model for stablecoins.

True dollars & the Fed

Currently, there are roughly ~4,500 entities (banks, credit unions, certain government entities, etc) that have access to these “true dollars” via a Fed Master Account. Zero of these entities are cryptonative, unless you count Lead Bank and Column Bank, which do service select crypto customers like Bridge. With a Master Account, these entities get access to Fedwire, a super cheap and near-instantaneous payment network where a wire can be sent 23 hours of the day and settle basically instantly. True dollars sit in M0: the sum of all the balances on the Fed’s master ledger. The “fake” dollars (“created” via loans by private banks) are M1, which is approximately 6x the size of M0. A true dollar is an entry in the Federal Reserve ledger.

I strongly encourage everyone to read the full article, which is directly below.

Here, Bridget alludes to what the M0 and M1 categories of money are. The only relevant category to think about in relation to stablecoins is M2 supply. M2 supply covers cash, deposits with banks, and other easily convertible liquid deposits, making it the key measure for stablecoins. The difference between these two is that M1 is a narrower category that includes only cash and bank deposits, while M2 adds savings accounts and other near-cash, liquid assets.

Currently, stablecoins contribute to over 1.08% of the USD M2 supply.

Shout out @PlasmaFDN

Again, there are many types of money; and Bridget is only referring to US dollars here. There are many other currencies. The estimated global liquidity, that is, global M2, is over $90 trillion US.

To reiterate, the TAM for money is big. And stablecoins are here to takeover.

Programmable Money

The new meme for the biggest possible market is programmable money.

Programmable money allows for complex rules to be hard coded into the currency. Whilst money is a store of value, its other key utility is its movability. Stablecoins are key for redefining how money moves given its nature as programmable.

Stablecoins are digital cash, predominantly tokenised versions of US dollars. Their programmability means that software can dictate conditions under which these assets transfer between wallets. And like a program or smart contract, these rules and parameters around how the money moves are autonomous.

Allowing financial transactions to be automatically executed and governed by pre-set rules makes payments, settlements and compliance substantially more efficient. Programmability acts as major upgrade and unlock for the financial system as cash finally becomes digital.

Globally, the impact of programmability is profound, especially in developing regions, where stablecoins address critical needs in remittances, microfinance, and everyday transactions. With stablecoins’ programmability, people in these regions are given the ability to utilise these services, unlocking true financial inclusion.

Examples of Programmability

To simplify the abstract concept of programmable money, here are several practical examples.

Remittances

Let’s imagine a system where a smart contract is used to automatically convert a sender’s local currency into stablecoins and transfers them to a recipient’s wallet abroad. The smart contract, when triggered upon conditions being met, would release the stablecoins and convert them to fiat, subsequently transferring the funds. This removes intermediaries, reduces fees and provides near-instant cross-border transactions.

Baking in parameters such as a payment confirmation or a certain threshold amount, highlights the usage of programmability.

Global payroll systems

Consider a payroll solution that leverages stablecoins to pay employees worldwide. For instance, imagine you reside in a developing country and work remotely for a US company, but you lack a US bank account. And this company doesn’t use stablecoins. With a programmable payroll system, you could invoice your company in fiat, have it automatically converted to stablecoins and sent to your wallet.

A similar solution exists with releasing payments in stablecoins to numerous wallets at scheduled intervals. When the payment is made, only then are the stablecoins swapped into the receiving currency.

Microfinance solutions

In many developing regions, small business owners face challenges in accessing bank loans. Decentralised lending platforms enable these individuals to use stablecoins as collateral for microloans, with smart contracts managing collateral, disbursement, and repayment schedules. Previous barriers to access this service are removed through the programmability of the rules how money moves.

Supply chain financing

A supply chain encompasses the entire process of moving a product from raw materials to the end consumer, including sourcing, manufacturing, and distribution. Programmability brings a substantial unlock, as smart contracts and blockchains enable for the recording of information, and then distributing stablecoins or cash automatically based on progression along the supply chain.

Taking a more practical example, let’s look at the supply chain in agriculture. Many farmers supply produce to a local cooperative. With delays, miscommunication and an over reliance on traditional financial rails, it can take days to weeks before these farmers receive their compensation. However, through the use of sensors and trusted verifications to track the shipment, once the produce is confirmed at its destination, a smart contract can instantly release a stablecoin payment to the farmer.

The Digital Unlock

Programmability is a core catalyst for innovation, allowing for iterative improvement, and valuable learning from experimentation.

Currently, cash is fundamentally archaic, and even its digital counterparts are limited in programmability. Although fintech and open banking have advanced these systems, they remain constrained by the inherent limitations of legacy cash.

Programmability is native to the digital era. Without real programmability, cash cannot fully transition into the digital realm. Therefore, now that stablecoins are reaching escape velocity, we are entering into the first digital era of money.

Thank you programmability.

To conclude, forget about ultrasound money, programmable money is here.

Disclaimer:

1. This article is reprinted from [Nathan]. All copyrights belong to the original author [Nathan]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
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