Citi released a detailed paper about its forecasts for the future of cryptocurrency. It was titled Money, Tokens, and Games: Blockchain's Next Billion Users and Trillions in Value. This really sums up what the bank's view of blockchain is.
While most focus upon the monetary aspect of cryptocurrency, the real value lies in the technology. When we look at both blockchain and crypto, we see that a new world is rapidly forming. This is something that is going to radically alter the landscape.
Part of the problem with looking at technology is that, even if we are right in the path it takes, it is hard to envision the players that will dominate. The tendency is to look at the established entities and believe they will carry forward.
There is no doubt the world of music changed greatly with the introduction of Napster. File sharing put a quick dent in the revenues of the recording industry. This caused massive fallout. Even though Napster was shut down, the idea of file sharing continued.
Before that event, the distribution of music was controlled by the record companies and the distribution agreements they had. This meant that retail locations were the primary dealers. Almost overnight, this was wiped out.
The big winner in this was Apple. That company was able to enter with the IPod and, later, the IPhone, and secure agreements which ended up on the ITunes store (notice the name).
This is an example of how quickly things can change and how entire industries can be upended.
$5 Trillion By 2030
We are seeing a similar transformation within the world of finance, banking, and money. Few realize the pace which things will change. The end of the decade is not that far away. Adoption rates continue to grow and we are still in the early stages of technological development.
Citi estimates that were are looking at $5 trillion tokenized by 2030. Here is what it had to say:
We estimate up to $5 trillion could move to newer digital money formats such as CBDCs and stablecoins by 2030, of which roughly half could be DLT- or blockchain-linked. Legal reforms and greater interoperability could drive up to $1 trillion of tokenization in global trade finance by 2030. Securities and funds are the big private-sector, tokenization prize. We estimate up to $5 trillion of non-financial corporate and quasi-sovereign debt; repo, securities financing, and collateral market; and alternative assets, such as real estate, private equity (PE), and venture capital (VC), could be tokenized by 2030. Industry estimates for total tokenization volumes are even higher.
Here is the opportunity. The race is on with central bank digital currency projects entering different stages of trial. It is also another example of how we are looking at a transformation due to massive technological changes.
The mistake the bank makes, in my opinion, is they are like the record producer looking to sue those who illegally download music. The tendency to operate within the existing mental framework means most of the transformation is missed.
Citi is a bank filled with people who were reared in the existing system. Many of them have the ideal the central bank is all powerful and that this is under which everything will operate. Over the years, all the research I read from these types of entities has one major constant: stability of currency comes from the monetary policies of the central banks.
Here is where there is a differing of opinion. The USD has nothing to do with the Federal Reserve and its policies. If anything, that institution keeps making itself out to be a bigger fool with the path it takes. Confidence is quickly waning.
Social Media and Finance
One of the keys to all of this is the merging of social media and finance. The idea of tokenizing a community alters the entire concept of a business structure. Here is another area that traditional thinkers go off the rails.
Money is ever changing. This is a point the banks are full aware. However, the role of technology and the threat to banking are only now being realized. FinTech started out as a niche yet has expanded greatly.
The idea that a community can create a token is very powerful. This means that engagement can be tokenized, providing a distribution mechanism we never saw before. When this is applied to social media (along with gaming), we see a new realm forming.
Financial intermediaries are no longer required. This is what Citi overlooked since, quite frankly, it is just that. Cryptocurrency was created in the digital realm. It never existed in physical form.
Of course, just like we still have newspapers and record companies, technological changes can take long periods of time to fully reach its potential in terms of disruption. The human element often allows things that are "out-of-date" to continue. Much of this tends to be tied to generations.
Cryptocurrency is no different. The younger generation is more likely to adopt something like Bitcoin as compared to the Baby Boomers. They are also more adept at cash payment using applications as opposed to a credit or debit card.
The transition to something like this will come from the younger generation.
Where Does Hive Fit In
One of the key segments that Citi referred to was gaming. It cited the fact there are 3 billion gamers globally. This is a group that is accustomed to digital assets and tokens. Therefore, the transformation is not that major for them.
Hive is obviously a blockchain that did well with this. Splinterlands has help to lead the way. There are other games that are now starting to ramp up. We will see if a trend starts in this area.
One of the areas we discuss is the Hive Backed Dollar (HBD). This is a powerful mechanism and something that is targeting what Citi was referring to. Many feel that CBDCs will be successful because they concentrate on those areas where banking is the least accessible. The idea of 2-4 billion people using CBDCs by 2030 is based upon the idea they were excluded from the system.
What is overlooked is the fact that many people in these areas opt for USD banknotes. This is the hedge against the government and its actions. More than 70% of physical dollars reside outside the United States. That is more than $2 trillion.
To presume these people will flock to CBDCs is quite a leap. The problem with a CBDC is they are no more valuable than the existing currency. In other words, the same pitfalls still exist.
Going much deeper into this area is an article all on its own. The key takeaway is that a coin like HBD is a global currency that is not tied to any geographic area or government. This means the economy that it is backed by is potentially much greater than anything these CBDCs can generate.
Ultimately, this is a race to create Web 3.0. Since social media, gaming, finance, and investing are being combined, we are going to be dealing with an entirely new concept going forward. This is something that many overlook.
In the end, it is vital to step back and see how all parts are interconnected. We have a backdrop where many governments are losing the confidence of its populations. This is not only happening in the developing nations. Now it is becoming widespread.
All of this is positioning society society for a seismic shift. Personally, I do not think the entities like Citi doing the analysis realize how big it is.
As was stated, it is one thing to predict the trends, yet guessing the major players is an entirely different matter.
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