The current cryptocurrency looks like the original Visa?

In the darkest moments of the market, you may ask whether and when Ethereum will become a core part of the financial infrastructure. But we humans are impatient, and sometimes it takes time to recognize such a great project.

As Bill Gates said:


I like to observe the present through a review of the past. Recently, I read David Stearn’s “Electronic Value Exchange” book, and I was shocked by the similarities between the early Visa and the current Crypto currency.

What is Visa?

Before studying these similarities, we must first understand what Visa is. Many readers may be surprised to find that Visa itself does not issue cards. It is neither a bank nor a public institution or government agency. Visa does not provide credit services to consumers, nor does it maintain their accounts. It did not recruit businesses and accept cards bearing its name, nor did it maintain corporate accounts. It does not even build or sell small point-of-sale terminals for reading bank cards. So, what is Visa and what does it do?

Visa is essentially an enabling organization. For most of its existence so far, it has existed as a non-profit cooperative member association, owned and managed by the financial institutions it serves. Visa provides an infrastructure (including technology and organizational structure) in which multiple competitive financial institutions can cooperate to provide services that no financial institution can provide alone.

In short, Visa moved the money.

Ok, with this basic understanding, let’s take a look at the five similarities between the early visa and the current Crypto currency

1. “Money Memes”

Facts have proved that changing people’s habits of using money and their views on the nature of money has never been an easy task. Visa ’s founder Dee Hock knew that he had to get people accustomed to electronic payments before he could believe this new currency exchange method (ie, non-banknote and paper check transactions). This is why Dee takes advertising as his personal mission. From media advertisements to brochures and business cards, everything that affects the image of Visa in the public’s mind (such as advertising) is done through him. “Think of it as money” is Visa’s iconic slogan and the first large-scale advertising campaign for Visa. This publicity event was broadcast on TV, print media and other news media. Interestingly, the sponsor of these advertisements is not just Visa, all member banks have invested funds.


In the field of Crypto currency today, “Memes” is a powerful method of spreading ideas around the practicality of crypto. However, we do not need to rely on the company for advertising. In the Crypto currency field, every investor is a stakeholder, so slogans like “ETH is money” or “Money Legos” appear because they are created by the entire community.


2. “Airdrops”

Visa understands that the success of every payment system depends on the network effect, so Visa expands its network effect by allowing users to use Visa credit cards while expanding the merchant base.

In order to build a user base, Visa member banks will airdrop cards to people’s homes and provide them with credit lines without asking any questions. Once the user starts using these cards, the bank will be able to learn more about the customer’s purchase behavior and adjust the credit limit.


This practice was later determined to be illegal by the US Congress. Because it was not only incentivizing people to bear more debt at the time, it also exposed users to the risk of fraud. Since the user didn’t even realize that he was issued a card, they often knew about it only one month after they received the card’s first bill.


Does this remind you of the airdrop plan in the field of Crypto currency and the negative media coverage of Crypto currency?

3. Poor user experience (Bad UX)

We often say that the user experience of Crypto currency is not good, but the user experience of bank card payment in the 1970s is even worse.

For example, suppose you had a “Visa” card (called BankAmericard at the time) and wanted to buy a TV. Since the transaction amount has exceeded the maximum limit of the merchant (usually 50 US dollars, but sometimes airlines and hotels will be higher), so the merchant must call their bank (acquirer) and verbally communicate the transaction details to obtain the transaction Authorization.

Next, the acquirer will call the customer’s issuing bank, and the issuing bank will manually check the following two items:

Whether the card is in the “blacklist”.

The user’s current balance, credit limit and purchase history

If all goes well, the card issuer will hand over the authorization code to the recycling party, and the acquirer will hand over the authorization code to the merchants waiting in line throughout the process. Then, the merchant will get the customer’s signature and write it on the “sales and sales record” together with the authorization code.


The whole process above lasts an average of 15 minutes, don’t ask me why someone would voluntarily choose this payment method!

For the buyer and seller, the whole process is over. But this is not the case for the bank, because the payment was only confirmed, but settlement has not yet occurred.

After the transaction occurs, the merchant must mail the sales draft to the acquiring bank, and the acquiring bank must manually classify all the drafts received before recourse to the invoicing bank for payment. Finally, the invoicing bank will settle through the normal check clearing system.

This process is very error-prone, and it is no wonder that there were frequent disputes between banks at the time.

Therefore, we need a lot of technological innovation and various experiments (at that time, there were multiple payment networks in the development and trial application stage) to obtain a better payment experience. The high-speed communication network between the point-of-sale equipment, the magnetic stripe, and the authorization center ultimately helps to replace manual authorization with automated computer logic, but this is not an overnight thing.

And you may now think that it is difficult to send transactions using MetaMask!


4. The Revolution

The sensation caused by the birth of Visa is much larger than it is now. In fact, Visa founder Dee Hock will certainly be a fan of Crypto currency today.


Here are a few words Dee Hock once said:

“If electronic technology continues to develop (which is almost certain), then the bank oligopoly that has controlled the custody, loans and transactions for more than two hundred years will be irretrievably broken.”

“The state’s monopoly on currency issuance and control will be weakened … At present, the entire system will be in the hands of those who are best at handling and guaranteeing Crypto assets.”

“Visa may be the origin of a new form of global currency.”

Dee Hock has slowly realized that “money” is nothing more than “guaranteed alphanumeric data”, and the competitiveness of traditional banks will become increasingly worthless in the coming decades.


Is there no better way to guarantee alphanumeric value data on the blockchain?

5. Credit neutral (Credibly neutral)

Dee Hock knew that for banks to join, the network must be credit neutral. After all, member banks are still essentially competitors. This is why Visa was established as a joint organization (no stock, no dividends), and all accumulated net income is used to fund Visa operations.

The key is to establish an organizational structure that can balance the incentive mechanism to ensure that small banks also have decision-making power. Therefore, from the core, the Visa network is composed of operational rules and regulations, that is, from the physical design of the bank card to the fees that each party must pay, and the rights and responsibilities of each party in the transaction dispute, there are a series of rules and regulations. These rules and Visa’s role as an arbiter have established the necessary trust among members, and this trust is fundamental to the operation and development of the system.


For the blockchain, the blockchain embeds these “operational principles” into the protocol, eliminating the need for dispute resolution; in addition, they greatly relax the threshold for participation. The issuance and settlement must be based on the trusted neutral rules of the blockchain protocol, and these rules are executed by the code and maintained by the user’s social consensus.


Interestingly, Dee Hock later said that he always wanted to include merchants and even cardholders as the true owner of the organization into the Visa organization, but this idea has been strongly resisted by banks.


If Visa is an enabling organization, then Crypto currency is an enabling platform, and there are important differences between the two.

In the case of Ethereum, it no longer needs an organization to manage the network, because the blockchain itself provides economic finality, and each transaction is equally uncontroversial. In addition, actors can not only collaborate, Ethereum composability means that developers can build their own services based on any existing application. The Ethereum network can not only facilitate the transfer of fiat currency, it can also facilitate the transfer of other assets such as securities and collectible assets.

Finally, the participation of Ethereum is open to anyone. Participants include both individuals and various organizations. In other words, a Crypto currency network like Ethereum is the next logical step in the evolution of value exchange networks.

The early Visa and the current Crypto currency have strong similarities. “Wealth effect”, “airdrop”, user experience issues, revolution, and credit neutrality are very important for Visa in the 1970s, and also for today’s Crypto currency.

Again: the way we trade will change.

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