In Greek and Egyptian Legends, the Ouroboros is a snake or serpent eating its own tail. This is an indication of a system that is constantly consuming itself but also constantly being reborn.[1] Within the space of the cryptocurrency realm, we see this occurring - limiting growth because of the constant consumption.[2] In order for the field to advance beyond its present state as a secondary currency system to fiat currency, the innovation (rebirth) needs to continue, and the constant infighting and consumption of our progress must stop.[3] 

One of the biggest drains on the economy of the cryptoverse is the concept of TradFi liquidity.[4] This ability to convert to “cold-hard cash” is redundant in a system created to move away from that same cash. The cryptocurrency industry either needs to expel the term liquidity from its lexicon or enforce changes in the meaning of the term to allow it to move into the digital space. Both of these options have promise, but they also have drawbacks.

Expulsion of the term from the lexicon may seem like the front runner in this case; however, liquidity has already been adopted by the field in some areas. For centralized exchanges (CEXs) and Decentralized Exchanges (DEXs), liquidity is a must—but not in its present form. In these cases, liquidity is a pool of tokens and coins that ensures the smooth transfer of tokens within the system.[5] CEXs and DEXs both need pools of tokens to ‘sell’ when there is demand. A small pool of the native coin also needs to exist to ensure that gas/transactional fees can be paid to prevent denial of transfer.[6] Tokens should also have a limited liquidity pool of the native coin in their wallet to ensure that they have the gas fees/transaction fees to move the currency out of their wallet.[7] The terminology of these pools is based on the idea that tokens convert to coins which convert to fiat currency through an on-ramp/off-ramp policy; unfortunately, this is one of the problems with the current system.[8]

Changing the terminology also shows promise but threatens to mire the financial industry in a system of competing lexicons. For TradFi, liquidity is well established as the ability to convert something into fiat currency.[9] The current global system is built on this concept (along with debt financing).[10] Within the cryptoverse, there is a movement to convert liquidity into meaning “ability to convert to additional goods and services.” Basically, this idea comes from the fact that cryptocurrency is, in fact, currency. The concept of converting currency into another type of currency is wonderful for the forex markets - but if the currency is not able to be exchanged for goods and/or services, it is not useful.[11] Therefore, the front end of the cryptocurrency industry is moving for a terminological change. This change is being resisted by the TradFi industry, for good reason as the idea of liquidity is the basis for the debt financing system, and the Degen/DAO wing of the cryptoverse who simply uses cryptocurrency is an observation of fiat transactions.[12]

Models, such as Geocommerce’s “Closed Loop Currency Exchange” allow for transactions to eliminate the need for a currency intermediary.[13] Trading direct fungible assets for other goods and services allows humanity to overcome the classic problem of currency being used as a methodology to alleviate the need to carry large amounts of assets with a person as the currency was a direct representation of the assets.[14] By allowing the direct exchange of crypto or physical assets within a closed network, the system allows for unimpeded growth and minimizes the necessity for state-issued currencies.

The simplest solution is to clarify the term, rather than expel it or completely change it. Digital liquidity is a simple term that states the meaning the field needs, that the currency is able to be changed into goods and/or services readily. If the cryptocurrency industry treats fiat currency like fiat currency treats cryptocurrency as goods, then the system continues to work. Terminologically, the idea of digital liquidity makes sense in the digital space. Fiat can keep physical liquidity, which adds an extra step to the process, while the digital field can eliminate that extra step- bringing people one step closer to their wealth. Thus, Ouroboros is freed from the destructive cycle of self-consumption, and the industry can continue with the innovation.