Hindsight allows us to trace seismic shifts in financial norms to singular events in history. The genesis of the credit cards we use every day is generally traced back to the “First Supper” – when the would-be founder of the credit card forgot his wallet at a dinner. Similarly, we will one day look back with similar reverence to the genesis of cryptocurrency based transactions in “Bitcoin Pizza Day” – when a developer offered to pay for his pizza dinner with Bitcoin.
What is “Bitcoin Pizza Day”?
In the lore of Bitcoin, Pizza Day was a momentous occasion when a developer offered 10k bitcoins if someone would arrange to have two pizzas delivered to him. The ingenious (and hungry) developer “laszlo” made a post on Bitcointalk.org with the simple request of “Pizza for bitcoins?”. A few days after the post, on May 22nd, 2010, the forum user “jercos” obliged, ordering a couple Papa John’s pizzas on a credit card and had them delivered to Laszlo.
As I’m sure you have realized by now, that 10k BTC is with a lot more than two pizzas today. Using the exchange rates of that date, the 10k BTC was worth about $25 – a completely reasonable cost for the pizzas. However, using today’s exchange rates, those two pizzas were purchased for about $100M. This is the legend of Bitcoin Pizza Day.
Why does Bitcoin Pizza Day matter?
Bitcoin Pizza Day represents a tremendous milestone in the development of cryptocurrency, the blockchain, and in general human financial norms. This was the first known time in human history that at cryptocurrency was exchanged for a physical good. It is an early indicator that a blockchain based system of wealth could actually function in an everyday context. Two parties were able to conduct an economic transaction without the need to have their mutual trust established by third-parties such as banks, payment card processors, or governments.
The underlying decentralized blockchain running bitcoin facilitated the trust the two parties needed to conduct the exchange of wealth for pizza, and history was made. Bitcoin Pizza Day was the genesis of blockchain backed currency facilitating a transaction.
What is the “The First Supper” of the Payment Card Industry?
The First Supper refers to a legend in the credit card industry where the eventual founder of the first credit card, Frank X. McNamara, forgot his wallet when out to dinner with some friends in 1949. Panicked by his forgetfulness, McNamara vowed to create a system where this embarrassment of being cashless would never happen again. After his wife bailed him out by bringing him some cash, he created the Diner’s Club card.
Why does The First Supper matter?
The First Supper was the genesis of the credit card and the consumer credit markets as we know them today. They allowed consumers to have simple access to credit when needed, without the need for physical currency. Additionally, the First Supper was the event that spurred innovation which led to a major paradigm shift in payment processing. With the advent of the Diner’s Club card (and the ensuing mega industry credit cards), consumers and merchants had a new way to transact with one another, creating useful layers of convenience, security, traceability, and trust.
How are Bitcoin Pizza Day and The First Supper Similar?
There are interesting similarities between Bitcoin Pizza Day and The First Supper, including –
- Food – Both of these genesis events involved food. In each case, innovation was spurred by the basic human need to exchange wealth for a meal.
- Massive New Industries – Both events surround the earliest known transactions associated with a new paradigm that would become a massive new industry. The total transaction volume on credit cards worldwide was about $20T in 2016. Meanwhile, the current market capitalization of the top 50 cryptocurrencies is $425B. While these two metrics aren’t an exactly an apples to apples comparison, they give perspective to the financial scope of the innovation.
- New Paradigm of Convenience and Trust – Both of these events in legend serve as the origination point for new paradigms of trust and convenience. Currency serves as a message of wealth transfer, and humanity has steadily progressed forward in our ability to transfer wealth with great ease and convenience, alongside increased trust and security.
What are some of the key difference between these two events?
Of course, there are key differences as well in the nature of the two events, and the shifting paradigms they represent. Here are two of the key difference in the nature of the events –
- Trust vs. Trustless – With credit cards, the payment card industry (PCI) creates a layer of trust between customer and merchant. The payment card industry is validating the transaction and verifying that the parties duly possess wealth they wish to transact with (this is the merchant service provider i.e. Visa or American Express). In the case of cryptocurrency, the decentralized ledger (the blockchain) creates that layer of trust. The blockchain is not a middleman entity attesting to the validity of the transaction, but rather a system where trust is inherent via a process of trustless consensus. Thus, the blockchain and its ensuing transactions of trustless – i.e. the concept of trust does not apply.
- Introducing a New Middleman vs. Removing All Middlemen – The advent of the payment card industry at The First Supper brought another value-adding middleman to the consumer transaction experience. With a credit card, the consumer/merchant wealth transfer involves several middlemen including the merchant service provider (Visa, Mastercard, etc.), the underlying financial institutions (banks maintaining deposit ledgers to debit/credit), and the government institution(s) which issue and manage the fiat currency. Every one of those middlemen is being funded somehow by the transaction, and value in the transaction must be allocated to pay those various middlemen. The transaction fees are relatively massive compared to cryptocurrency. The system is corruptible and the various players may collude.With blockchain based cryptocurrency, all of those middlemen are eliminated. The transaction fees are minimal, and fees are paid out to system agnostic participants where the possibility of corruption/collusion is astronomically low (this is called engineered absurdity).
My Own Personal Bitcoin Pizza Day
Recently, I used a cryptocurrency (in this case Bitcoin) to make an actual purchase for the first time. This was my personal Bitcoin pizza day. It shifted a financial paradigm for me in that it was my first time executing a wealth transfer without a government being the source of trust and security. Rather, a blockchain provided that trust. What did I buy? I paid for the band that will play at my upcoming wedding in Bitcoin. This transaction was proven to be valid and was added to the Bitcoin blockchain where it will be publically viewable for the rest of time.