Anthony Lesoismier, Co-founder & Chief Strategy Officer at SwissBorg, speaks to us about his cryptocurrency predictions for the coming year and how businesses can best take advantage of them.
With the advent of cryptocurrencies and the various ecosystems and industries that emerged out of them came a promise of a new state of affairs, one that returns power back into the hands of the individual.
Cryptocurrency has been the rage, and the last 12 months have been for the books. Cryptocurrency has witnessed a meteoric rise and is the buzzword of the decade — causing heated debates on whether it is a worthy investment.
Whether you ventured in or not, you’ll also now have heard about all this business with the cryptocurrency exchange, FTX, and its stunning multi-billion-dollar meltdown – a saga that has naysayers saying, ‘I told you so’. As we process the (what I believe to be short-term) shock of the breakdown, it is essential we differentiate between what factors failed and what didn’t.
Blockchain – the technology behind cryptocurrencies – is still intact. One of the most popular cryptocurrency exchanges in the world, FTX, has failed after it misused users’ funds. We are at a make-or-break point in crypto history that will rely on crypto firms to make a case for the technology that can withstand the current scenario.
Traditional financial (TradFi) prioritises profit over everything and thus its institutions systemise their products and services so the best service is only available to the affluent few, blocking entry to others by setting a high minimum investment as a barrier.
This is contended by the fact that there are a vast number of people who don’t have access to TradFi services, with 1.7 billion adults globally still unbanked. Of those who do have the tools to access professional financial services, many cannot bypass the barrier as they are unable to equal the minimum investment levels. In the MENA region, 79% of young adults are unbanked and 72% of the lowest-income citizens can benefit from financial inclusion.
Cryptocurrency is the only investment asset that has not been created by a financial institution. Crypto market capitalisation – calculated as the price of cryptocurrencies times the number of coins in the market – stood at some US$1 trillion as of 23 July 2022.
Some trends for 2023 ahead include:
- Stricter regulation will be utilised to minimise the repeat of debacles that have brought down several crypto players recently.
- DeFi, which aims to redefine TradFi products without middlemen and decentralised autonomous organisations (DAOs), could soon be a new internet community and is poised to be the highest growth area of crypto. As of the start of November 2022, the total value locked in DeFi protocols was approximately US$56 billion representing a 141% CAGR over the last two years.
- We anticipate that security tokenisation will propel more financial institutions to tokenize off-chain assets.
The business side
More organisations worldwide are using digital assets for several investments, operational and transactional purposes as important clients and vendors want to deal with these.
Companies can get access to younger demographic groups, in the Middle East, for example, where people under 30 constitute 55% of the population, this is beneficial. A study found that up to 40% of customers who pay with crypto are new and their purchase amounts are twice those of credit card users.
They can also get access to new capital and liquidity pools through traditional investments that have been tokenised and new asset classes, serving as an effective alternative or balancing assets to cash. Companies exploring this avenue should be clear on their strategy to undertake the action.
Two burgeoning industries that we see that this is especially useful in are gaming and social media.
Gaming x Web 3.0
The gaming industry is growing worldwide. According to a Newzoo report, in-game transactions will generate 9.6% revenue growth on a mobile platform this year. In 2021, the entire gaming community generated US$61 billion in in-game purchases. Analysts speculate the figure will reach upwards of US$74 billion by 2025.
Blockchain gaming is forecast to reach two billion users — these are decentralised immutable systems where players can engage with one another. Gamers will be able to create and develop numerous games within a single gaming ecosystem.
Some trends in the gaming industry that stakeholders can capitalise on:
- Composability and interoperability are gaining ground in Web 3.0 gaming and Web 3.0 social. For example, Laguna Games, a Web 3.0 game development and R&D studio, have announced a collaboration with Lens Protocol that will enable players to connect across multiple gaming experiences.
- Decentralisation in the gaming world will lead to a democracy and aid smaller game developers to breakthrough and establish their games without as many obstacles. This will only lead to more innovations in gaming.
Social media x Web 3.0
In the last 20 years, social networks have reshaped our life from the way we communicate to the way we collaborate. The average person spends around 2 hours and 17 minutes per day but provides little value to most users, eating up our most precious resource — time.
However, there is hope that a new breed of technologists and entrepreneurs can build a system with a community that benefits all.
Crypto is a social tool that breaks down industrial-age economies of scale and replaces them with digital-age coordination at scale. In the current macroeconomic atmosphere, today’s workforce is on the lookout for ‘side hustles’. Continuing in this direction, we predict that social protocols will define how people organise and how culture flows.
Furthermore, we can explore the concept of decentralised social networks, which are based on open-source protocols where platforms are legally obligated to share the algorithm that decides what appears in users’ feeds. Decentralised social networks play a key role in crypto as developers can examine and innovate on code, giving full control of data to the user and content to the creator.
It also greatly impacts the evolution of DeFi. In TradFi, most of the financial operations are performed on credit scores where little collateral is necessary. In DeFi the opposite applies, transactions are fully or over-collateralised. With the progress of Web 3.0, soon we will be able to provide credit scores based on digital identity and by extension under-collateralised peer-to-peer loans. At this exact moment, DeFi will replace TradFi.
How is this all linked?
Countries, companies, the gaming guild — these are all social networks, and to thrive, humanity likes to reinvent the way we operate with technology.
Web 3.0 technology is providing a very strong foundation to build a new nation governed by humans and enforced by technology. Something impossible in the ‘corrupted and censored’ Web 2.0 world. The ultimate goal of crypto firms is to empower, connect and govern a community unfettered by borders — and we are slowly moving towards this. Stakeholders who jump on the Web 3.0 bandwagon will be the key decision-makers in its adoption and will leave behind a legacy for future generations.