- Despite the regulatory challenges and uncertain macro future, there are five important themes emerging in digital asset markets that could lead to wider blockchain adoption in the medium to long term.
- Web2 companies are partnering with blockchains to abstract blockchain technology and encourage mass adoption.
- Ethereum is the dominant smart contract platform, but it needs to scale to handle mass adoption.
- Tokenization is gaining traction, allowing for the digital representation of various assets and creating new opportunities for investors.
- Integrating real-world assets onto blockchain networks can counteract the circularity problem in decentralized finance (DeFi).
- Non-fungible tokens (NFTs) have the potential for wider adoption in gaming, music, ticketing, social media, and domain names.
Digital assets have faced challenges in the past year, including the failure of centralized crypto companies and increased regulatory scrutiny. However, there are still long-term opportunities in digital assets, and five key themes have emerged that could lead to wider blockchain adoption in the future.
1. Web2 Partnerships: Web2 companies are partnering with blockchains to abstract the technology and make it more accessible to users. Companies like Google and Amazon have partnered with blockchains for node operation, and more big brands are expected to follow their lead in developing their own blockchain initiatives.
2. Ethereum Scaling: Ethereum is currently the dominant smart contract platform, but it needs to scale in order to handle mass adoption. There are three possible approaches to scaling: monolithic blockchains, modular blockchains, and interconnected blockchains. The prevailing approach is expected to be modular blockchains, but smaller positions in other scaling models may also be a good hedge.
3. Tokenization: Tokenization involves creating digital representations of various assets, including securities, funds, real estate, art, and collectibles. This theme is gaining traction due to the benefits it offers, such as better accessibility and efficiency. It is estimated that the tokenized market volume will reach $24 trillion by 2027.
4. Real-World Assets (RWAs) in DeFi: DeFi has faced criticism for its circularity problem, where users often borrow to trade assets within the DeFi ecosystem. Integrating real-world assets onto closed blockchain networks can break this circularity and provide new opportunities for investors. Platforms like Maker and Maple Finance are already incorporating RWAs into their lending protocols.
5. Non-Fungible Tokens (NFTs): NFTs have gained significant attention in recent years, with sales volume and unique buyers growing exponentially. NFTs have applications in gaming, music, ticketing, social media, and domain names. They allow users to own and trade digital assets, unlocking new possibilities for creators and investors.
Overall, the digital asset space is still in its early stages, but the emerging themes suggest potential for wider adoption. It is important to approach digital assets with caution, as the market is still highly speculative.
