Buck Jordan here.
I’ve been following blockchain and cryptocurrencies closely for nearly a decade now. I’ve watched the crypto industry evolve from some fringy tech to over a trillion-dollar industry in its own right.
Crypto has started slowly creeping into our day-to-day life. Now, although we’re currently embroiled in a “crypto winter,” I think we’re on the cusp of more significant adoption, and there are three major areas where I think crypto is poised to seriously disrupt the way things have been done historically.
So, today… let’s talk about the ways in which crypto will continue to change the world.
Payments – Solving the Unsolvable?
This one’s obvious. You shouldn’t be surprised to learn that the payments industry has many problems that make the lives of customers, merchants, and payment processors harder and more painful.
Think about the last time you executed a wire transfer.
Did the transfer happen instantly?
Did it take a day?
Did it take three or more days?
How about when you try to send money overseas…
Did you lose a lot of your money on currency conversion costs?
Did it take days for the money to be sent?
Was the transaction frozen for review?
Cryptocurrencies and the technology on which they run make all of those problems a thing of the past.
While I’m sure you’ve read plenty of articles about how Bitcoin or Ethereum could become the new currencies we use to pay for things, I personally don’t think that will happen. The “coins” are simply too volatile to be an effective means of payment.
Instead, stable coins could be what we need. They’re not subject to the wild swings and many are actually pegged to traditional fiat currencies. For example, the value of the U.S. Dollar Coin (USDC) is pegged to the traditional dollar. USDC has all the benefits of a cryptocurrency – 24/7 settlement, low transaction costs – while also having price stability and being pegged to a real-world currency people trust.
In fact, while USDC is a cryptocurrency developed and managed by a company called Circle, most central banks are looking to develop and issue their own stablecoins. These are commonly known as Central Bank Digital Currencies (CBDCs) and over 100 countries worldwide are currently exploring CBDCs. Ten countries have already launched a CBDC that they use.
Digital Art – Crypto Leading the Way
The biggest development in 2021 in the crypto industry was the rapid rise in popularity of digital art. 2021 saw a whopping $25 billion in sales in this space.
Crypto technology – blockchain – makes digital art ownership verifiable. Each piece of digital art is a non-fungible token (NFT), which means it is unique… irreplaceable. The tokens specify ownership of a specific piece of art.
Now artists can create digital art and then issue it as an NFT into a number of marketplaces, such as the largest and most successful, OpenSea.
When an investor buys an NFT, the blockchain behind it records the transaction details. Later, that investor can resell their NFT, locking in a new transaction entry that specifies a change of ownership.
At this point you might wonder, why would anyone buy a digital piece of art like a JPEG, GIF or video file? To be honest, I often wonder the same. I think the demand for digital art is quite similar to the demand for physical art. People buy it for the aesthetics, some people buy it as investments, others buy it as a passion. Whatever the reasons, and despite a recent cooldown on the digital asset market this year, I have little doubt that the demand for digital art will be a fixture moving forward.
Tokenizing New Assets
Finally, the most interesting emerging trend in crypto is asset tokenization. This involves taking an asset, splitting it into a number of shares, and then creating tokens for each that are easily tradeable. Asset tokenization is an extension of the concept of an NFT in the world of digital art to assets such as luxury cars, handbags, fine wine, and real estate.
Often, these alternative assets are extremely expensive and difficult for most to invest in because historically you have to buy and hold the entire asset outright. Despite their high prices, their returns are often significantly higher than traditional assets like stocks and bonds.
Crypto technology is unlocking the ability for companies to tokenize these assets and allow a broader investor base to participate… thus helping improve liquidity, price discovery, and hopefully returns over time.
If you think about it, this is very much like what the JOBS (Jumpstart Our Business Startups) Act did for the crowdfunding space.
It’s early days but I think asset tokenization is going to overlap significantly with crowdfunding over the next few years. For example, late last year crowdfunding platform Kickstarter announced it was launching a new subsidiary focused on building crowdfunding solutions on top of blockchain. Similarly, in 2017 we saw a big wave of crypto companies doing Initial Coin Offerings (ICOs) for their new tokens, which resembled both an Initial Public Offering (IPO) and a crowdfund at the same time.
In conclusion, crypto and its driving technology has continued to grow year after year, despite volatility and widespread scepticism. In fact, every year there are more participants in the crypto economy, more crypto businesses launched, and more investment dollars going into the space.
The three areas above are the ones most ripe for crypto to disrupt, in my eyes. Keep an eye out for smart crypto investments – I know I am!