The 13 years of Bitcoin and other cryptocurrencies have created a cult of gamblers, a Trojan horse for Ponzi schemes1, and an ecosystem to help illicit financing2, money laundering3, and sanctions evasions4.

Its underlying technology, which some people fancy to be a liberal utopia, will never be a solution because it is trying to solve a financial problem that doesn’t exist.

Laszlo Hanyecz became a part of the crypto history books in 2010 by using 10,000 Bitcoins to buy two large pizzas5. These 10,000 Bitcoins worth $41 in 2010 are now worth $166,075,000. At its all-time high, 10,000 Bitcoins could get you $687,896,300 or 4,58,59,753 large pepperoni pizzas from Papa John’s.

Bitcoin’s “decentralized” nature, with its price dictated by celebrity tweets and subreddits, makes it too volatile to do anything useful. The “freedom” it gains from not having a central governing authority makes it unsuitable to be money6.

The claim that Bitcoin and other cryptos are “decentralized” is also invalid7. You depend on third-party wallets to store and manage your holdings, and the consensus algorithms that govern these are inherently centralized by a small set of elite players in the network8.

Essentially, crypto will take power from the government and distribute it to these private enterprises.

While Silicon Valley is still fantasizing about crypto and Web3, India has been leveling up its digital payments game with Unified Payments Interface or UPI.

UPI is a system that has centralized and standardized digital payments in India. It is managed by National Payments Corporation of India (NPCI), an entity regulated by the Reserve Bank of India (RBI)9.

In the six years since it was introduced, there have been 600 million UPI users in India. A household population of 300 million means that two people in every Indian household use UPI10.

The goal of digital payment systems should never have been to decentralize but democratize. UPI is the ultimate example of this in action.

UPI does not rely on a single bank or company compared to private digital payment alternatives in countries like the US (PayPal, Apple Pay). Instead, it provides a standard set of APIs that companies and banks can use to facilitate online payments.

This means that there are a lot of UPI payment apps you can choose from, and all of them interoperate with each other. Facebook’s WhatsApp Payments, Google’s GPay, and Walmart’s PhonePe (Flipkart) are some popular ones.

Payments are easy. You can use a unique UPI ID similar to an email address (navendupottekkat@okaxis is my real UPI ID) or scan a QR code that will work on any UPI app. Money will be moved directly from your bank account to the payee’s account without intermediaries. These transactions are instantly reflected in your bank account.

India accounted for the largest number of real-time transactions in 2021, with 48.6 billion transactions. The combined number from the US, Canada, UK, France, and Germany was 7.5 billion11.

48.6 billion only represents 31.3% of all transactions in the country. By 2026, it is expected to increase to 70.7%.

Implementing UPI was relatively more straightforward in India as there are lesser banks and all regulations are handled centrally by the RBI. Countries like China can be on par with India, but private digital wallets like WePay and AliPay still dominate.

UPI transactions are currently free (maybe a small fee in the future). Along with the pandemic, this has helped accelerate UPI adoption.

Still, UPI’s success with handling payments at such a large scale has prompted countries like UAE, Singapore, and more recently, France to integrate it with their systems12.

Other countries like the US are building their own UPI-like systems with the help of central entities like the Federal Reserve13.

Crypto has failed to be the payment system of the future. The current trend of fluctuating hype cycles with crypto, NFTs, and adjacent scams will inevitably end.

Relying on a central authority and democratizing the system seems the best and proven way to move forward. I would not be surprised to see more countries adopting systems similar to UPI in the future.

  1. Krugman, Paul. 2021. “Technobabble, Libertarian Derp and Bitcoin.” The New York Times. May 20, 2021. https://www.nytimes.com/2021/05/20/opinion/cryptocurrency-bitcoin.html. ↩︎

  2. Dion-Schwarz, Cynthia, David Manheim, and Patrick B. Johnston. 2019. “Terrorist Use of Cryptocurrencies: Technical and Organizational Barriers and Future Threats.” Santa Monica, CA: RAND Corporation. 2019. https://www.rand.org/pubs/research_reports/RR3026.html. ↩︎

  3. Orcutt, Mike. 2020. “This Is How North Korea Uses Cutting-Edge Crypto Money Laundering to Steal Millions.” Web log. MIT Technology Review. March 5, 2020. https://www.technologyreview.com/2020/03/05/916688/north-korean-hackers-cryptocurrency-money-laundering/. ↩︎

  4. Busch, Kristen, and Paul Tierno. 2022. “Russian Sanctions and Cryptocurrency.” Congressional Research Service. May 4, 2022. https://crsreports.congress.gov/product/pdf/IN/IN11920#:~:text=Potential%20Sanctions%20Evasion%20with%20Cryptocurrency,tamper%2Dresistant%20records%20of%20transactions. ↩︎

  5. Ashmore, Dan, and Farran Powell. 2022. “Bitcoin Price History 2009 to 2022.” Forbes Advisor INDIA. November 1, 2022. https://www.forbes.com/advisor/in/investing/cryptocurrency/bitcoin-price-history-chart/. ↩︎

  6. Taleb, Nassim N. 2021. “Bitcoin, Currencies, and Fragility.” arXiv. June 27, 2021. https://doi.org/10.48550/arXiv.2106.14204. ↩︎

  7. Dailey, Natasha. 2022. “Crypto Isn’t Decentralized. It’s Actually Run by a Handful of Big Wigs Exploiting Low-Paid Workers, Says Long-Time Internet Academic.” Markets Insider. March 20, 2022. https://markets.businessinsider.com/news/currencies/crypto-isnt-decentralized-nft-bored-ape-yacht-club-buys-cryptopunks-2022-3. ↩︎

  8. L. J. Valdivia, C. Del-Valle-Soto, J. Rodriguez and M. Alcaraz. 2019. “Decentralization: The Failed Promise of Cryptocurrencies,”. IT Professional, vol. 21, no. 2, pp. 33-40. 1 March-April 2019. https://ieeexplore.ieee.org/abstract/document/8676128. ↩︎

  9. National Payments Corporation of India. “India’s Unified Payment Gateway for Real-Time Payment Transactions.” https://www.npci.org.in/PDF/npci/upi/Product-Booklet.pdf. ↩︎

  10. Gupta, Vikas. 2022. “Move over Bitcoin, Here Comes UPI, the next Big Investment Idea.” Moneycontrol. August 17, 2022. https://www.moneycontrol.com/news/business/personal-finance/move-over-bitcoin-here-comes-upi-the-next-big-investment-idea-9039791.html. ↩︎

  11. Barthe, Blanca, and Samuel Murrant. 2022. “Prime Time for Real-Time Global Payments Report.” ACI Worldwide. April 2022. https://www.aciworldwide.com/real-time-payments-report. ↩︎

  12. Jain, Sourabh. 2022. “You Will Soon Be Able to Use UPI in France in Addition to UAE, Singapore.” Business Insider. June 16, 2022. https://www.businessinsider.in/finance/news/upi-and-rupay-cards-will-soon-be-accepted-in-france/articleshow/92247190.cms. ↩︎

  13. “Federal Reserve Updates FedNow Service Timing to Mid-2023, Marks Beginning of Full-Scale Pilot Testing.” 2022. Board of Governors of the Federal Reserve System. August 29, 2022. https://www.federalreserve.gov/newsevents/pressreleases/other20220829a.htm. ↩︎