Cryptonomics: Exploring The Future Of Cryptocurrency In A Global Economy
Cryptocurrency has had a momentous impact on the lives of many since bitcoin – the first and best-known form of “peer-to-peer electronic cash” – made its debut in 2009. Touted as a novel solution that permitted frictionless payments without the need for a trusted third party, bitcoin was, and continues to be, viewed as a threat to traditional banks and government-issued fiat currency. Little wonder: the soundness and stability of the latter relies on power brokers not inflating its supply, while bitcoin’s finite, auditable supply assures its status as an ideal store of value.
While bitcoin is but one of many weightless, virtual commodities, its cultural status and popularity means it is the one crypto worth studying if we are to successfully predict how the global economy might one day look. In order to do that, however, we must first consider how bitcoin, other currencies and blockchain more generally have shaped today’s market.
What have cryptocurrencies achieved thus far?
We have come a long way since 2009. While bitcoin had no inherent value in the beginning, today it is a globally recognized $150 billion network, having transferred over $2 trillion of value. Bitcoin is accepted in over 15,000 venues and surpassed gold, oil and the US dollar as the decade’s best-performing asset. The wider industry, meanwhile, has provoked a Cambrian explosion of interest among institutional investors – mainstream traders accustomed to dealing with stocks, securities and other financial instruments have gradually gravitated towards this exciting new asset class, as have tech giants such as Microsoft and Google, not to mention everyday users.
Governments including China and Russia, meanwhile, have commenced work on their own digital currencies, as have banks. And let us not forget Facebook, who while mired in regulatory hell remain committed to releasing their own Libra cryptocurrency.
To say the financial industry has been fundamentally altered by cryptocurrency would be an understatement. Digital currencies have challenged the state’s monopoly on seigniorage and opened up a new monetary frontier. In recent years, stablecoins – digital tokens pegged to a fiat currency – have proliferated, and some commentators are convinced that they represent the industry’s best hope of mainstream adoption. Others point to the increasing number of fiat-to-crypto onramps or sophisticated blockchain projects that deliver real-world value, whether in supply chain management, government, healthcare or other industries.
What is the future of cryptocurrency and blockchain?
On the currency side of things we are seeing a greater number of investment vehicles enter the market (exchange-traded funds, fully-regulated physical bitcoin futures) and the world of decentralized finance (defi) is pushing innovation to hitherto unseen levels. Barriers are also falling for merchants, with payment platforms such as Bakkt and Cred making it easier for business owners to accept digital assets securely from consumers paying via mobile apps. As for consumers, US digital wallet adoption is occurring at twice the rate as social media adoption between 2006-2012.
For the future of blockchain technology more generally, there is a good reason to be positive. Hardly a day passes in which we do not hear about new use cases: in financial services certainly, but also in manufacturing, retail, construction, energy, cybersecurity, identity management, healthcare, life sciences, agriculture and the automotive industry. According to Deloitte’s Global Blockchain Survey, “sentiments about blockchain remain strongly positive,” with 86% of those surveyed agreeing that blockchain will “enable new business functionalities and revenue streams in my industry.”
Although trading and speculation have been the primary use cases for blockchain over the last decade, the next 10 years is likely to see a much greater emphasis on utility and real-world application across an array of sectors. An interesting use case will be Web 3.0, the next generation of the internet, which is expected to heavily leverage blockchain to deliver transparency, trust and an enhanced browsing experience.
It is impossible to say what the world’s economy might look like in 10, 20 or 50 years. However, given the speed at which bitcoin and other top-performing cryptocurrencies have grown, the scale of development and the commitment of their evangelical communities, it is inevitable that digital assets will have a major influence. Decentralized cryptocurrencies will continue to highlight the inadequacies of traditional financial institutions, while more focus will be placed on forms of money that promote privacy, inclusivity and security. Blockchain tech, for its part, will continue to impact industries, delivering enhanced trustlessness, interoperability, fungibility, and private smart contracts, benefiting enterprises, governments and end users.
Contributed by Anonymous Rabbit