15 March 2021
Many people thought Bitcoin would disappear in a puff of smoke or dissolve into nothingness in a few years.
The convergence of blockchain, cryptocurrency and gaming industries has sparked a revolution toward transparent and open digital asset markets.
While there are still plenty of
non-believers, Bitcoin's recent meteoric price jump convinced many businesses
to allocate a portion of their cash reserves into cryptocurrency. Wall Street hedge funds and
global investment banks are taking enormous Bitcoin positions to hedge against
global market volatility. Many financial leaders now see a future for Bitcoin
as a successor to gold.
Several remarkable technologies like blockchain and NFTs (Non-fungible tokens representing digital or tangible assets) gained notoriety from Bitcoin's success. While all three technologies are nascent, cryptocurrencies, NFTs, and blockchain-based platforms worldwide could solve global problems
Investors have been on a
turbulent ride since Bitcoin's creation in January 2009. Various notable
government and financial figures spoke out against Bitcoin during the early stages.
Warren Buffett has repeatedly criticised Bitcoin and other cryptocurrencies as risky, speculative assets; "I can say almost with certainty that they will come to a bad ending". Bitcoin pioneers shrugged off the oracle of Omaha's warnings, as the price has continued to surge from $0.08 to over $60,000 per coin.
Many people noticed early the most significant potential lay not in cryptocurrencies but the technology underpinning them; blockchain and NFTs, which have exploded in popularity since 2009. Blockchain has seen an enormous interest spike throughout the past decade. Entrepreneurs are using the distributed ledger technology for projects like peer-to-peer energy networks and storing health credentials securely.
A precursor to NFTs called coloured coins entered the scene in 2012, representing various assets like subscriptions, property or in-game items like skins. While coloured coins had issues, they opened the door to NFTs and global digital asset markets. CryptoKitties, a blockchain-based game where players adopt virtual cats, helped NFTs garner extensive media attention. Soon after launch, players made enormous sums of money from trading cats, which even caught CNN's attention.
From 2018, hundreds of different NFT projects have started, many in the gaming space.
Retail and Investment banks
continue to adopt blockchain technology. Santander recently
issued a $20M bond stored on a blockchain, in addition to working with Ripple
to build a cross-border payments app. The bond issuance demonstrated that
institutions could conceivably trade bonds in secondary markets without
security concerns. Blockchain-based international payments systems already exist and will likely become commonplace in the next ten years.
The insurance industry is starting to implement blockchains to speed up operations. Aon is building a blockchain-based insurance platform for companies to buy reinsurance to hedge the risk of insuring others.
BMW is currently partway through a program with its suppliers to track materials and parts on its supply chain. Developers believe the technology could one day track their cars from raw material through manufacturing all the way to scrappage.
Many people are hopeful blockchains could also resolve sustainability issues by creating transparent supply chains to track a company's carbon footprint. Additionally, peer-to-peer green energy networks facilitating local trading of solar-generated energy could reduce our reliance on fossil fuels.
While media outlets have widely reported increased worker automation, many experts predict blockchains could put intermediaries out of business. Vitalik Buterin, the founder of Ethereum, states, "blockchain puts Uber out of a job and lets taxi drivers work with the customer directly".
Cryptocurrencies are on the cusp
of widespread adoption. Entrepreneurs create new coins all the time, solving
problems like expensive cross border payments. Most cryptos have a finite
amount of coins, so there is a permanent supply limit. For this reason, Banks
and investors increasingly perceive Bitcoin and other cryptos as a safe bet
against currency inflation as their value should continue to rise in the long run.
While there are regular setbacks like the SEC's lawsuit against Ripple, media outlets increasingly report on cryptocurrencies favourably. In particular, Bitcoin has enjoyed historic price surges as institutional investors and international organisations invest a portion of their cash reserves into the crypto.
Tesla was the first household name to invest in Bitcoin, allocating $1.5B of their cash reserves into Bitcoin and accepting Bitcoin as payment for their electric vehicles. Tesla's Bitcoin purchase has led to a media frenzy, with many news services speculating Netflix or Apple could also jump on the bandwagon.
The crypto industry is expecting a lot of regulation in the next few years. Governments worldwide are working with industry leaders to keep consumers safe and protect against fraud and other issues. While governments initially rebuked the idea of government-backed cryptos, they are now playing catch up. Businesses like Facebook and JP Morgan have already released stable coins which track the US dollar, called Diem (formally Libra) and JPM coin.
The US Federal Reserve is considering a cash-backed cryptocurrency to speed up payment systems by giving people immediate access to their funds. People would no longer have to wait for days or even weeks for money to land in your account.
As governments worldwide take more and more interest, it seems that cryptocurrencies, blockchains and NFTs aren't going anywhere. We're excited to see what the future holds for these technologies.