Jack Dorsey just tweeted a link to monitor the adoption rate of Taproot (a new protocol that is supposedly privacy oriented):

🟩 https://t.co/U8rJyyPED5

— jack (@jack) May 2, 2021

Berkshire Hathaway recently had their annual shareholder meeting. They weren't very bullish on Bitcoin this year despite the strong rally; it's interesting to see how much things have changed for Bitcoin since his 2018 interview when it entered "crypto winter" compared to today when several Fortune 500 companies have purchased Bitcoin. 

With taxes due soon, it occurred to me that the grand vision of cryptocurrencies one day replacing credit card payments is probably unlikely to happen in the near future. Each time someone pays using crypto, a taxable event is triggered (assuming the value of the crypto exceeds its cost basis). Why would someone want to incur an additional expense and headache just to pay for a coffee?

The IRS has setup a really simple to understand FAQ:

Q14.  Will I recognize a gain or loss if I pay someone with virtual currency for providing me with a service?

 A14.  Yes.  If you pay for a service using virtual currency that you hold as a capital asset, then you have exchanged a capital asset for that service and will have a capital gain or loss.  For more information on capital gains and capital losses, see Publication 544, Sales and Other Dispositions of Assets.

I recently came across the Maker token because of a donation made by Vitalik, co-founder of Ethereum. In his donation, he transferred 100 ETH and 100 MKR to a fund setup to help with the COVID-19 situation in India. I think it's amazing that we have the ability to transfer vast amounts of wealth simply (and quickly) by the click of a button. 

I've been trying to understand more of what Maker (MKR) is and why it is so important. There's a lot of jargon tossed around and it can sound very confusing when you start hearing about governance, burning and collaterals. I think Coinbase does the best job in summarizing what Maker is and can be through a series of three short videos.

The token itself is very nascent (only a few years old). But I think it has a lot of room to grow as more users from all over the world, especially for users living in developing countries or countries with high inflation, begin to use the token. 

My simple takeaway is that Maker allows users to:

• Put up cryptocurrencies as collateral and receive DAI, which is pegged 1:1 to the USD, in return
• Repay the loan in DAI after a period of time
• Once repaid, the DAI is "burned" or removed from the system
• MKR creates DAI to ensure the 1:1 peg is maintained; or in some cases, MKR is burned to maintain the peg

The above is my understanding from watching a few learning videos, and I welcome any comments if I misunderstand or misstated anything. I am certain MKR today will look nothing like MKR in 5 years, and that is why I am excited about it. Holders of MKR can vote on its future as part of its governance protocol. 

Several highlights for me from the interview with Dan Schulman:

And how are we going to pay for things?

There are probably going to be six to 10 superapps that evolve. You won’t have 50 apps on your phone, because you can’t remember 50 usernames and passwords; you don’t want to put in your financial information into every single one of them; you can’t remember the nav system on all of them. These superapps that will basically intermediate other apps, so you log in once, you have a common password, you have all of your data and information in one place that can be used to feed products and services on that platform. It will make it simpler and easier for the consumer.

So cash is no longer king?

Ten years from now, you will see a tremendous decline in the use of cash. All form factors of payment will collapse into the mobile phone. Credit cards as a form factor will go away, and you will use your phone because a phone can add much more value than just tapping your credit card. And so when all of those things start to happen, then central banks need to rethink monetary policy as well, because you can’t just issue more paper money into the system because people aren’t using paper money. And so this is the advent of digital currencies.

What does this pending shift to digital currencies mean for the financial system as we know it?

In the next five to 10 years, you’re going to see more change in the financial system than you have over the past 10 to 20 years. How do we think about modernizing the existing financial infrastructure? It needs modernization, because it’s inefficient today. If you cash a check, it can take three days for you to get your money. If you do an international remittance, it can take seven days to get your money. And it’s too expensive. The “take rate” across the financial system throughout the world is about 2.8%. For the last 10 years, which, by the way, you’d expect with volume and technological improvements that would drop, but the worst part about the 2.8% is that if you have less income, or are outside of the system, and you’re not affluent, then that take rate is like 1,000 basis points; it’s not 280 basis points. And if you’re really affluent, the take rate is 25 basis points. And so, when you think about it being expensive, exclusionary and efficient, we really need to start to think about, How do you modernize that system? Is there a way that you can do things more efficiently, with less cost, more inclusively, and add more utility into the system?

What is the difference between Bitcoin and other cryptocurrencies from central bank–issued digital currencies?

Central bank–issued digital currencies can also take advantage of distributed ledger technology [DLT] or other modern technologies, but they’re basically digitizing a fiat currency like the U.S. dollar. A digital dollar would be fully backed by the U.S. government, but done in a digital fashion, and that might allow the government to open up Fed funding to other institutions besides banks, potentially companies like PayPal, where you could fund straight from the Fed right into a digital wallet. You wouldn’t have to send out stimulus checks in the mail—just go directly into their digital wallet through a digital currency, instantaneous access, no cost and friction.