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Back in February we noted that 2021 would likely see exponential growth in cryptocurrency adoption. (See “CRYPTO SANITY,” 16 Feb 2021)
That happened, with crypto users and investors more than doubling in the space of six months.
The year has also marked a sea change in the attitude of traditional institutions toward cryptos. Speaking at a “Token 2049” conference in London this past week, Darren Jordan, managing director of EMEA at BitGo, noted:
“The dramatic change—and I have this conversation many times per week—is with corporates. And they are looking to allocate a small percentage of their balance sheet. That has been the most significant change we’ve seen over the last 12 months.”
But it doesn’t mean there still isn’t a long way to go.
Despite cryptos moving considerably into mainstream consciousness, most people still don’t own, trade or use cryptos. Institutional exposure and investment is in its infancy.
What’s more, much crypto use is still narrowly focused on financial use cases, and raw speculation. It’s no wonder that many people still wonder whether there’s really any “there” there, when it comes to cryptos.
The answer is that not all crypto projects are alike. But make no mistake, the technology powering the best and most advanced projects has revolutionary potential to change how people live.
The Age of Crypto Utility may very well define the next decade, offering enormous opportunities along the way.
Those looking to participate don’t need to sift through the more than 12 thousand crypto projects currently out there.
There are a relatively small number of backbone layer 1 and even layer 0 network technologies that are proving their real world relevance and utility.
Constellation is working with the U.S. Airforce. Hedera, a 3rd generation distributed ledger technology that is tops in terms of low energy consumption, has completed more transactions on its network in two years than Ethereum has in its entire existence.
It also boasts relationships with some of the world’s top technology companies.
CBDCs might be issued on Hedera, which offers high compliance and security. Ripple (XRP), a leader in working with financial institutions in currency exchange and cross border payments, is another contender, though its legal fight with the SEC is currently clouding its picture.
Quant and Cosmos offer ways to link DLTs (Distributed Ledger Technologies), which is more and more important.
Blockchain networks like Solana, Algorand and Cardano all are developing relationships with companies to offer NFT and DeFi platforms, and are all offering rival solutions to Ethereum’s relatively slow transaction rates and high network “gas fees” for projects that build on top of it.
But Ethereum and Bitcoin, the two oldest and largest crypto fueled networks are far from fading. Via upgrades and integrations with other technologies, their use and adoption continues to grow.
The projects just mentioned are a good starting point when looking for the backbone of crypto utility that will define the coming decade.
It’s 1977, 1991 and 2001 and 2011
Most of the web is still built on centralized services and companies, dominated by “web 2.0” social media platforms and commercial and digital service providers.
That is going to change. So what time is it? It is 1977 in the age of personal computers. Or 1991 in the age of the internet. Or 2000 in the age of social media. Or 2011 and the dawn of cryptocurrencies.
In other words, for those that haven’t already, it’s time to recognize and take advantage of the “next big thing.”
But by any reasonable estimate or metric, the wave is still in its infancy. Worldwide, an estimated 200 million people currently hold or trade cryptos. That’s about half the population of just the United States.
How many people will have crypto wallets, use crypto exchanges, and own and trade crypto assets in 2030? A billion? Two? The entire planet?
The total global crypto market cap was $762.9 billion at the end of 2020. As this sentence is being written, the global market cap is 2.3 trillion.
What will it be in 2030? Some say 20 trillion. Some say 200 trillion.
The Trends Journal is about making the most of the trend. As Gerald Celente explained himself in 2014:
“Are you an astrologer? Maybe some other kind of fortune teller? What can you tell me about fashion trends? How about entertainment trends?
“When I started trend forecasting, these are the types of questions that people asked me. I would reply that I was neither a fortune teller, tarot card reader or astrologer. In fact, I was not predicting the future. Rather, my work was to analyze the myriad social, geo-political, cultural and economic events that occur daily. My mission was to assess their implications and forecast how those trends would affect us near and long term.”
The trend that will define the next stage of crypto adoption is utility (sorry to all those “cute” meme coins).
It’s important to understand what utility specifically means regarding different crypto projects.
By identifying which projects represent real world utility via introducing novel and valuable uses, efficiencies, etc, those wishing to take advantage of crypto technology can make wise investment decisions.
Next Generation Technology, Expanding Utility: NFTs
Imagine a music artist financing their album by selling ownership of their songs with investors, via NFTs (Non-Fungible Tokens). Or fractional real estate purchases of properties in hot markets like Austin or Miami being issued as NFT stakes.
It’s already happening.
Crypto outlet The Block reported this past week that investment platform Republic is introducing “Security NFTs,” to give music fans the opportunity to share the rights to artists’ royalties.
“The same membership units that may typically be represented by an LLC Membership Certificate will novelly be represented by the S-NFT instead,” explained Republic’s Chief Strategy Officer Pialy Aditya.
Initially, fans will be able to invest in a new song called Mona Lisa by rapper Lil Pump. Artists could eventually offer tickets, merchandise and “non-security” NFT drops to investors as well, via Republic.
The whole initiative relies on a decentralized peer-to-peer loan platform, Opulous, which offers DeFi loans for musicians and NFTs that allow music fans to have a share in artists’ music copyright. Opulous is built on the Algorand blockchain.
NFTs represent an unrivaled way to establish and confer ownership rights over digital property, and, via tokenization, to establish ownership over real world property as well.
In other words, anything that has provenance today via a contract, deed or key, may one day have an NFT in a digital wallet that confers ownership.
Crypto networks like Algorand, Solana, Cardano and Hedera all offer next generation technology that reduces costs for companies building NFT platforms. The tokens of these crypto networks are still extremely cheap, compared to what their potential valuations might be, if their networks attract more NFT usage.
Ethereum is currently king of this space, and in many other areas of utility, including DeFi, for example. But Ethereum is working to overcome transaction speed and costs that some newer generation networks like Hedera and Algorand have solved.
In some respects, more established Crypto projects have an edge of being there first, while newer networks have an advantage in terms of technological efficiency and capability.
But no matter which networks prove most successful, it’s clear that opportunities of NFTs are only just beginning.
A World of Decentralized Autonomous Organizations: DAOs
DAOs and the crypto networks they are built on, will likely see widespread growth in the coming decade.
What is a DAO, and what can it do?
Conceptually, DAOs are like a corporation with no mediating board, or a business without the layers of human management. The collection of smart contract codes that make up a DAO can handle many of the administrative and financial functions of businesses and organizations, via code, and a system of decentralized participation and widespread governance.
As Investopedia notes, there are many blockchain projects working to bring the DAO revolution to real businesses.
For instance, DAOStack offers a platform that allows organizations and companies to build and access DApps via a simple dashboard, basically introducing a WordPress-equivalent for blockchain DAOs.
Some predict that by 2030, digital, democratic, transnational co-operatives organized as DAOs will power countless business and social initiatives, and guarantee a degree of financial participation and fairness to stakeholders that current corporations and organizations can’t match.
According to crypto outlet Blockonomi, “There will be venture DAOs, esports DAOs, lobbying DAOs, social DAOs, and so on. Basically if you can imagine any kind of group now, someone will likely have DAO-ed it, or something akin to it, by 2030.”
For those wishing to take advantage of DAOs, it’s not necessary to know every technical aspect of how they work. But basic research on the networks and projects that enable and power them, can help determine potential participation and investment opportunities.
The Blockchain Council identified some of the top DAO projects of 2021 in an article here.
Finance Is Turning to DeFi
Lending, borrowing, financing and leveraging: from safe and steady interest yields, to risky advanced capital leveraging, cryptocurrencies arguably made the biggest “utility” splash in 2021 in the area of DeFi (Decentralized Finance).
Again, DeFi projects and platforms built on Ethereum represented the lionshare of activity. Maker, Compound, Aave and Uniswap are all Ethereum-based platforms.
DeFi offers a way of accessing the utility of banking, while dispensing with traditional banking institutions.
The just mentioned platforms can all be used to stake, lend and borrow crypto. Their tokens can also be purchased and held as investments.
Other crypto networks either work with or compete with Ethereum in offering the smart contract functionality that is used to build DeFi apps. For example Raydium and Mango Markets, both built on Solana, offer DeFi.
DeFi and DeExs (Decentralized Exchanges) often work by going to a website and connecting a wallet. From there, users can do things such as stake or lend their crypto assets, exchange crypto tokens, etc.
BlockFi.com, one of the more conservative players, is not a true DeFi, though it utilizes blockchain DApps to offer users the ability to lend crypto assets like Bitcoin to yield interest.
Again, whether users choose to utilize DeFi via more or less anonymous avenues or platforms, or to just invest in the tokens that power promising related networks, the point is that the sector is likely to see further significant growth in the coming years.
Liquidity And Frictionless Payments For Individuals and Institutions
Remittances have been an area that has arguably seen some of the most real-world crypto utility for average, non-tech savvy users. Many people working in other countries opt for crypto payments to cut down on transaction and other fees that previously were gobbled up by companies like Western Union.
Steller and Celo power platforms that end users are using in remittances.
According to a report by payments industry news leader Pymnts.com:
“Out of the 16% of United States consumers who send a total of $76 billion annually in remittances, the majority of those who own cryptocurrencies have found it to be a viable method for cross-border payments—and a more attractive alternative to traditional forms of payment.”
Many consumers increased the frequency with which they sent funds overseas over the past two years, and their need for cheaper, more convenient alternatives led them to turn to virtual currencies for cross-border remittances, according to the study, which was published in collaboration with the Stellar Development Foundation.
But cross border payments between financial institutions are also increasingly leveraging crypto networks. One of the most established players in the arena is Ripple.
A legal battle with the SEC is currently holding its price down. Should Ripple prevail in the case, its utility and relationships will likely spell good things for its token price.
Bitcoin: Still King, But Does it Have Utility?
This past week saw Bitcoin surge to some of its highest levels of the year, apart from the run to an all time high back in February. In doing so, it has, at least for the moment, grabbed back attention and market cap from next generation cryptos and blockchain projects.
But the age old (or at least decade old) question: does Bitcoin have any real utility?
An answer to that question, for those who haven’t read it yet, can be found here: “WHAT IS THE VALUE OF CRYPTOS AND BLOCKCHAINS?” (15 Jun 2021).
To sum up, as crypto technology continues to evolve and innovate, look for speculation and obsession with meme coins to transform more and more decidedly to real work problem solving and utility. The best crypto projects have utility that can’t be denied, and that will make a lot of fortunes in the coming decade.
NOTE: No information in this or other TJ Crypto articles should be construed as investment advice. Due diligence should always be done in participating in any financial investments or activities, especially in the sometimes perplexing world of cryptos.