By Cryptohopper on The Capital
Blockchain technology is one of the top emerging innovations of the decade. While bitcoin is the first application of blockchain, the tech has expanded its possible use-case to some of the world’s biggest industries, including banking, healthcare, real estate, supply chain, and agriculture. A decade after the blockchain’s establishment, the technology is now settling into mainstream adoption.
According to a report by the World Economic Forum, 10% of global GDP will be stored on blockchain by 2025. Deloitte’s research suggests that blockchain is now moving far beyond its initial fintech applications.
Blockchain enables a decentralized ledger that records and stores data, transactions, documents on a shared platform. The key principles of blockchain — decentralization, immutability, and transparency — facilitate an ecosystem that revolutionizes existing systems.
Let’s see where the blockchain ecosystem is likely to bring maximum transformation starting this year.
Today, the crypto market consists of more than 5000 currencies. These digital currencies enable instant transactions between any two parties across the globe with almost negligible transaction costs. This major advantage has led central banks and governments across the world to explore a regulated Centrally Backed Digital Currencies (CBDC).
A survey conducted by the Bank for International Settlements indicates that nearly 70% of central banks are exploring CBDCs.
Leading the charge, China is set to launch a trial of the digital Yuan in its urban centers this year. The People’s Bank of China has introduced its digital currency e-RMB to enable faster transactions, efficient settlements, and lower transaction fees by leveraging blockchain technology.
If these trials are any indication, Centrally Backed Digital Currencies are just getting started.
Decentralized Finance, also known as DeFi, is one of the top emerging trends of 2020. DeFi consists of decentralized applications, smart contracts, and protocols in the financial ecosystem. It is a decentralized alternative to each kind of financial services including loans, savings, banking, etc. DeFi includes a range of decentralized apps (dApps) from peer to peer payments, stablecoins, open banking, debt, management of digital assets, insurance contracts, and more.
DeFi assets have already seen a 10-fold increase since May 2019. As of Feb 2020, nearly $1 billion USD have been locked in DeFi apps. The number of DeFi app users are also rising exponentially. Blockchain wallets dedicated to DeFi apps are further proof of how decentralized finance is rapidly garnering attention.
Ethereum, the leading platform for building decentralized applications, has also seen an increase in the development of DeFi protocols. Moreover, in the upcoming decade, various decentralized applications will be launched for different use cases in the financial ecosystem.
Blockchain technology is the instrument that has converted the concept of asset tokenization into a reality. From art or real estate buildings to commodities and financial instruments, all kinds of securities can be converted into digital tokens.
Asset tokenization refers to converting a tangible or intangible asset into digital tokens that are further represented on the blockchain ledger. This means that a real estate property can be fractionally divided into security tokens wherein each token gains its inherent value from the underlying asset. Further, these tokens can be stored or traded on a blockchain platform.
Using blockchain and smart contract protocols, the token representing the asset can be digitally transferred. Additionally, the ownership rights of each asset can be governed through the blockchain infrastructure.
In 2018, the security token market grew by $442 million. The market for globalized financial assets is expected to rise to $24 trillion by 2027. One significant study states that the market of asset tokenization in Europe is expected to rise to $1.5 trillion by 2024.
Asset tokenization encompasses wide possibilities in the landscape of a number of industries. This decade will see new models of asset tokenization empowered by blockchain technology in different sectors.
In the past two years, traditional financial instruments like futures and derivatives have been incorporated in the cryptocurrency industry. The industry is gaining attention from institutional investors who are now drawing their attention to crypto investments.
Further, the market of cryptocurrencies is starting to see a degree of regulation. Countries like Germany, France, Switzerland, Singapore have turned crypto-friendly nations by drawing a legal structure pertaining to crypto. The onset of leading players like Facebook is drawing mainstream attention towards cryptocurrency investments. The gradual adoption of cryptocurrencies can also be seen through the rise in blockchain wallet users in the last 3 years.
Along with mainstream adoption of crypto, subsequent infrastructure services like cryptocurrency trading bots will also witness an expansion. Since markets run 24/7, automated trading bots are an important tool for trading in cryptocurrencies. With Cryptohopper, you can safely manage your cryptocurrency trading portfolio through our automated trading features.
As people across the globe are getting familiar with the crypto and blockchain industry, we will likely see the inclusion of retail traders, institutional investors, venture capital, large firms, and corporations in this space. However, to have progressive growth at a global scale, the industry needs to overcome ongoing roadblocks.
The lack of regulatory framework continues to be a source of numerous challenges. In order to grow in a sustainable way, the technology requires legally compliant policies around blockchain and crypto functionalities. Such policies include drawing a legal framework around various aspects of the industry: cryptocurrency exchanges, infrastructure, dApps, security tokens, and utility tokens.
Another key challenge rests with the potential of blockchain’s scalability. As the industry is at a nascent stage, the scalability of blockchain’s infrastructure is unknown. For blockchain protocols to work on an international scale, the global market needs to see scalable infrastructure.
Blockchain has already started revolutionizing industries with its decentralized capacities. Public and permissioned blockchains are currently in development for domains ranging from enterprise to energy. Moreover, digital currencies like utility tokens and security tokens will play a vital role in optimizing the usage of dApps.
The future belongs to decentralization!