This post is part of CoinDesk's 2019 Year in Review, a collection of 100 op-eds, interviews and takes on the state of blockchain and the world. Halsey Minor started CNET, and was involved in a string of companies. Today he leads Live Planet VR and the VideoCoin Network, video infrastructure for the blockchain-enabled internet.

I started in the crypto industry in 2013 launching Uphold, the payment service and exchange that created one of the first stablecoins. It still allows users to buy and trade bitcoin and 15 fiat currencies today. At the time, Coinbase required traders to sell bitcoin and send the money back to their bank accounts. It had no USD service. We wanted to give traders the ability to convert bitcoin to their native fiat currencies and back again without leaving the ecosystem and to send funds all the way back to their banks. Back then, holding fiat “stablecoins” on a service like ours was not well liked in a bitcoin-or-nothing world. 

In 2019, as traders sought more pricing stability, we saw the rise of Tether and its many competitors. Stablecoins have become the solution to move fiat among exchanges without using banks directly. Fiat trading on blockchain has exploded and US dollar-backed stablecoins have attracted more than $4.5 billion of investment. What this proves is that fiat and crypto were never enemies. They were complementary in any effective trading ecosystem, and both have prospered. 

For convenience, crypto-users need to be able to use their bank accounts to pay for products and services. If, instead, you force them to open an exchange account and to use some new, volatile form of money with low liquidity just to use your service – then you’ve created significant friction. If blockchain-based businesses are to succeed, they must be as convenient to use as non-blockchain services. 

At VideoCoin, a company building a decentralized video infrastructure platform, we asked ourselves a simple question. If Paramount Pictures or 20th Century Fox were a VideoCoin customer and they wanted to spend $100,000 a month on our video encoding service, would they be willing to open an exchange account, hire a trader to avoid driving the price up at acquisition, and then deposit funds whose value on our services would fluctuate every minute of every day? You see the problem, here.  

Our competitors at Amazon Web Services let customers use a regular bank account in all its forms – credit card, wire transfer, ACH, and so on. These methods are simple to use and the value they deposit does not fluctuate significantly from moment to moment. Even though we are building a service that is dramatically lower priced, the payment friction would be so great it would substantially hurt our ability to compete. 

We collaborated with a third-party (which we’ve yet to announce) to create a fiat-based blockchain connected to banks. This provides access to traditional payment methods like credit cards and ACH while keeping all of the inherent benefits of blockchain. Even the gas – the fuel necessary to do any transaction on a blockchain network – is fiat-based creating the first tokenized fiat blockchain supporting smart contracts and traditional payment methods. This model allows 20th Century Fox to pay in dollars and our workers (data centers) to be compensated in dollars upon completion of verified work. No friction, just lower cost. 

Tokens used as payments are not competitive with fiat when it comes to reaching customers outside of the crypto ecosystem. Unfortunately, almost all of the business world today lives outside of the crypto ecosystem and they do not have access to crypto exchanges, but they do have credit cards. We need to make VideoCoin as easy to use as any other competitive service, if not easier. 

At VideoCoin, our utility token VID plays an incredibly useful function in securing and powering the network, ensuring the most qualified network operators are serving customer needs. The VID token does not act as a payment mechanism. Instead, it’s a reputational staking mechanism for building the global infrastructure that runs the worker nodes on the VideoCoin Network. Miners are continuously selected by the VideoCoin Network services algorithm as operators to process video files based on three factors: quoted price, number of staked tokens, and performance. This drives the least expensive and highest quality network operators to perform—the best rise to the top. Staking is the perfect use for tokens in a utility model. Instead of burdening the network with payment friction, our tokens power the network to function securely and in return, workers receive staking rewards in fiat. 

This means customers of the VideoCoin Network pay in fiat, the data centers get paid in fiat, and those staking are paid in fiat plus a small staking reward in VID tokens. Reward tokens are automatically purchased by the Network from exchanges, at the then-prevailing price, when a job is started so stakers end up with fiat they can send to their bank and a small additional amount in tokens.

Just as Tether, Paxos Standard and other stablecoins have made it easier to use exchanges, trade and move money into and out of the banking system, so too can a fiat-integrated blockchain liberate crypto from payment friction, which is a business killer. If crypto startups want to take market share from traditional businesses, they need to allow for the convenience of fiat-based payments. 

In 2020, those who have come to this understanding will be poised to compete outside of the narrow crypto domain. These are the very people we want to engage when the VideoCoin Network reaches full system release in May 2020. Embracing fiat payments is not capitulation, it’s the first step toward making the businesses we envision real.