Price Analysis Jan 29: BTC, ETH, XRP, BCH, BSV, LTC, EOS, BNB, ETC, ADA
Swiss regulators have given the go-ahead for what is purportedly the country’s first fully compliant initial public offering (IPO) on a blockchain.
Swiss blockchain firm Overture will launch a compliant IPO and offer ordinary class-A shares natively on the Ethereum blockchain, using smart contracts provided by Zug-based EURO DAXX (the European Digital Assets Exchange), a Jan. 29 press release reveals.
A blockchain-native approach to securities offerings
Overture and its financial advisory firm, Andriotto Financial Services, said that the new venture is set apart from other security offerings in that:
“The company has approved the first Swiss articles of incorporation that directly states the digital nature of the shares (tokens) and the use of the blockchain as the technology to keep the shareholders registry […] transfer of the company ownership can be achieved only with a transfer of the tokens on the blockchain and only the ownership of the token can give the status of shareholder.”
Deploying blockchain technology in this manner can boost efficiency in capital markets, they claim, in terms of cost time and other efficiencies secured by disintermediating interactions between actors — i.e. short-circuiting involvement by banks, broker-dealers, central depository systems, notaries, and other financial intermediaries.
This streamlined blockchain-native approach to securities offerings is set to be embraced by major new platforms in the country, such as the forthcoming Swiss Digital Exchange offshoot of Switzerland’s principal SIX Swiss Exchange.
Beyond Switzerland, some industry commentators have suggested that the traditional IPO model — whether issued natively on the blockchain or otherwise — is likely to become increasingly prevalent in the cryptocurrency and blockchain space in 2020.
At Davos this month, Ripple CEO Brad Garlinghouse predicted that more crypto firms will seek to launch IPOs in the coming year, hinting at Ripple’s own potential interest in a public flotation.
The crypto industry has to date focused its energies largely on initial coin offerings, which evolved as an alternative issuance model for still-young, innovative firms that spared them many of the cumbersome legal and regulatory processes involved in a traditional IPO.
Price Analysis Jan 27: BTC, ETH, XRP, BCH, BSV, LTC, EOS, BNB, ETC, XLM
Of all the Ether (ETH) locked in the collateralized debt positions (CDPs) of the old MakerDAO system, 27% belongs to a single Ethereum address. Financial technology data firm Digital Assets Data shared these findings with Cointelegraph on Jan. 26.
Dai, which was created by MakerDAO, allows users to borrow or generate the stablecoin by staking their cryptocurrency holdings as collateral. Dai was not supported with bank accounts of reserve currencies but rather is generated by putting Ether into a CDP smart contract.
In November 2019, the Dai stablecoin reached its 100 million token debt ceiling and introduced multi-collateral Dai (MCD) that can be backed by multiple assets.
The old, single-collateral Dai — Dai that generated only with Ether — became known as “Sai,” while the new MCD is now referred to as “Dai.” CDPs for different assets were rebranded as “vaults” i.e. Ether is stored in an Ether vault, while Basic Attention Tokens (BAT) are stored in a BAT vault.
MakerDAO’s ecosystem growth
According to Digital Assets Data, about 155,000 CDPs were initiated on the old version of the Maker protocol and 77% of those held under 0.05 ETH. Brandon Anderson, a data science lead at Digital Assets Data, told Cointelegraph:
“There is one address that maintains 27% of the value locked in CDP’s. Likewise, the new Vaults system has a similar distribution, with one address holding 15% of the value locked. As Maker continues to grow, we will see how these distributions play out and if there is more adoption within the lower bins.”
Anderson added that these addresses are not necessarily a single entity:
“It is possible that one or more of those addresses could be smart contracts that contain ETH as a part of MakerDAO, and do not represent a single entity. Without a significant amount of additional research, we cannot commit to singling out/identifying these addresses.”
He concluded that, while there are large players that likely control a disproportionate amount of locked Ether in the ecosystem, the amount of total locked assets has increased over time and “these protocols are indeed open to anyone that wants to participate.”
Over 3,500 vaults have been created with the new system, most of which hold over 1 ETH, according to Digital Assets Data.
Ether locked in DeFi applications reaches an all-time high
As Cointelegraph reported in late November 2019, the number of Ether locked in decentralized finance (DeFi) applications reached an all-time high of 2.7 million ETH, according to DeFi monitoring resource DeFiPulse, and has been steadily growing since the end of June.
As of press time, DeFiPulse shows that the total value of funds locked in DeFi applications reached $793.1 million (an all-time high of 3.2 million ETH), of which over 57% ($453.5 million, an all-time high 2.5 million ETH) is in the MakerDAO system.
Decentralized apps (DApp) continue to be a major focus point for developers in the crypto space. However, 2019 ended with DApps still far off from reaching their much-touted potential of being the “future of the internet.”
DApp projects in 2019 continued to suffer from their usual issues like poor user retention and the difficulties of navigating user interfaces (UI), among others. While some projects boast market capitalizations north of $100 million, they fail to attract more than a handful of daily users.
In the early weeks of 2020, some analytics firms dedicated to monitoring the DApp ecosystem have released reports summarizing the performances of DApp developers and projects in 2019. These reports paint a similar picture for the decentralized apps ecosystem with significant increases in on-chain transactions and new projects without any corresponding improvement in user statistics.
Also troubling is the trend of the high DApp turnover rate with as many new projects appearing as those being decommissioned. While such trends might appear common for nascent technologies, DApps will require some staying power to present themselves as viable applications of the emerging blockchain narrative.
However, the 2019 DApp market performance did throw up some positives with decentralized finance (DeFi)-focused platforms and non-fungible tokens (NFT) rising to some prominence within the broader ecosystem.
2019 DApp market review
As previously reported by Cointelegraph, both DApp aggregator DappReview and DApp analytics platform Dapps.com have published detailed reviews of the performance of decentralized apps in 2019. The following is a summary roundup of the information gleaned from both reports.
According to DappReview, on-chain DApp transactions in 2019 amounted to $23 billion with more than 1,900 newly added applications. Dapp.com, however, puts the number of newly added DApps for 2019 at about 1,450, a slight decrease from the 1,500 recorded in 2018.
Figures from Dapp.com show that more than 1,300 DApps were abandoned in 2019. According to the analytics platform, an abandoned DApp is one with no transactions occurring within 30 days.
Despite Ethereum leading the way in several categories, the EIDOS launch in November 2019 skewed the results of Dapp.com’s market report, with EOS accounting for the largest transaction count and volume. Transactions on the EOS blockchain dwarfed all other DApp platforms put together.
Such was the extent of EIDOS’s popularity that transactions on the DApp caused congestion on the EOS blockchain. With EIDOS accounting for nearly 95% of all transactions on the EOS network, nodes with significantly smaller staked CPU resources experienced difficulty sending transactions across the blockchain.
Setting the EIDOS figures aside, the number of active users of EOS DApps declined during 2019. Before its launch, EOS boasted the highest number of daily active users, however, the EIDOS launch saw its average user statistics fall by about 80% from 80,000 per day to 15,000 users per day. The drop in EOS user stats meant TRON became the second-largest DApp platform behind Ethereum.
Concerning user retention
User retention remains one of the major problems for DApp platforms. An excerpt from the Dapp.com 2019 report reads:
“The number of active dapp users in 2019 has doubled compared to 2018, from 1.48M to 3.11M. There are 2.77M new users who experienced decentralized apps. User retention is still a problem for dapps — there are only 348K old users remaining active in 2019, accounting for 11% of all active users.”
For mainstream centralized apps, the existing reality is that users never have to pay for computation. If the app requires a data connection, as long as customers have an active internet subscription, they can make use of the application.
For Ethereum-based DApps, the situation is different with developers not covering gas fees, pushing that cost to the end-user. Gas on the Ethereum network refers to the unit of measure used up to execute a transaction on the blockchain. During periods of high network stress caused by such congestions, these costs can become impractical for DApp users causing a significant outflow.
One probable solution to this issue is the use of DApp sidechains — DAppChains. Instead of running DApps on the main blockchain, decentralized apps can be executed on layer 2 protocols, which can provide efficiency and cost-saving advantages.
Alternatively, DApp creators can move the more computationally heavy activities to layer 2 platforms, leaving only smart contract updating protocols on the main chain. By doing so, only a hash of the DApp data is kept on the main blockchain with the bulk of the work happening on DAppChains.
Such protocols are already being employed by developers of gaming DApps. These hybrid-blockchain games have their core decentralized token economy residing within the main blockchain, while game assets that take up the main bulk of the computing potential are domiciled on sidechains.
Simon Schwerin, founder of fintech consultancy firm Scalewonder, identified some of the major challenges impacting user retention for DApps for Cointelegraph. Commenting on the major problems affecting DApp retention, Schwerin remarked:
“[The] largest problem is the challenge of providing true value to the users (look at apps that you use in your daily life and why you stay there) beyond monetary incentives that are often only possible for a limited time. Additionally, the users still have too often maneuver through a complex setup regarding their wallet and key management.”
Ease of use hampering mainstream adoption for DApps
Ease of use is thus a major issue that negatively affects user retention for DApps. Taking exchanges as examples, centralized platforms still see more users than their decentralized counterparts owing largely to the difficulty in navigating decentralized exchange (DEX) services.
The issues surrounding the ease of use not only affect user retention but also constitutes a roadblock to bringing DApps to the masses. DApp developers need to design user interfaces that do not contain unfamiliar and sometimes technical features, thereby making the learning curve for their programs even steeper than necessary.
DApps and web3 programs, in general, also have compatibility issues with smartphones whose browsers account for the greater percentage of web traffic. Unlike for desktops, smartphone browsers for Android and iOS do not readily have access to suitable web3 upgrades like extensions and plugins. In a conversation with Cointelegraph, Benjamin Cheng, a senior executive at algorithmic stablecoin issuer Timvi, highlighted the need for easier-to-use DApps. According to Cheng:
“Users deal with technology issues such as waiting for transaction processing, chain reorganization, etc. Blockchain technologies are at the ‘geek’ stage, still not for the mass user, hopefully, this will change with the advent of Level 2 solutions (Layer 2 solutions). Tools for interacting with blockchain are also not user-friendly. We need people like Steve Jobs to make the technology convenient and easy for the user.”
The user environment for DApps needs to become familiar for everyday people, which means focusing effort on simplifying the UIs of these decentralized apps. DApps cannot achieve scale if their user base consists of a micro-niche dominated only by blockchain and web3 enthusiasts.
The role of DeFi in the future of decentralized apps
DeFi became a major aspect of the DApps’s narrative in 2019. Simply put, DeFi is a decentralized monetary and financial system built on public blockchains. DeFi encompasses lending, payments, DEX and crypto derivatives, among others.
DeFi proponents say the system aims to create easy onramps for the economically disenfranchised and underbanked, for example, to have access to global financial services using censorship-resistant blockchain protocols.
DeFi DApps, in theory, should allow users to have plug-and-play access to a plethora of financial services using blockchain technology. By leveraging the advantages of decentralized technology, DeFi DApps should allow users to participate in the financial market as a fraction of the fees charged by mainstream actors like stockbrokers and mortgage providers.
According to Dapp.com’s report, DeFi-focused applications, like lending DApps, experienced significant user growth in 2019. Another excerpt from the Dapp.com report reads:
“Financial services (e.g. lending DApps) have the most impressive user growth in 2019. The number of financial DApp users has increased by 610%, and the transaction volume has increased by 251%.”
Data from DeFi Pulse, an analytics hub for DeFi-focused DApps, shows a 100% growth in the total value of locked funds within the DeFi market. In a blog post published earlier in January 2020, DeFi identified the expansion of lending markets and the emergence of interoperability as the major growth areas for DeFi in 2020. Schwerin echoed similar sentiments in private correspondence with Cointelegraph. According to him, the DeFi market will make significant strides in 2020, remarking:
“Most definitely, DeFi will be part of making DApps interoperable to exchange the unique values between DApps in a P2P fashion. Automated markets running in the backend, backed by collaterals of the DApps producers.”
2020 DApp outlook
For DApp proponents, decentralized app developers should focus efforts on solving usability and interoperability issues, like developing frameworks, that would allow values already existing from previous setups to be imported to a new DApp platform. For Schwerin, such frameworks could even lead to the emergence of “killer DApps” — decentralized apps that gain widespread adoption:
“Using a unique way of interoperable infrastructure in the backend will allow you to swap value and KYC/AML Credentials in the background without having to worry about it. Imagine you set yourself up once and then never have to worry about sign ins/ SSO again.”
According to Schwerin, the existence of such a framework will enable cross-platform transactions, on which, for example, gamers can exchange items in one game for desired items in another game directly from their smartphones. Cross-platform interoperability also creates avenues for further financialization of DApps, especially those not directly related to activities in the financial market.
Commentators like Schwerin say DeFi appears primed to drive the actualization of such goals. The expansion of the DeFi market could see robust payment gateways for a wide variety of DApps. Delivering his 2020 DApp market outlook, Schwerin predicted:
“My forecast would be that we will see the first DApps with large user numbers on Blockstacks or other new blockchains that will then eventually move to Ethereum. These DApps will be mostly gaming related with probably DAUs of up to 100,000 if we are lucky.”
Timvi’s Cheng also tips DeFi to lead the charge for DApps in 2020, predicting a major capital flow into the market. DeFi proponents will be hoping that such inflows will positively impact the scale and scope of the market.
Covantis, a blockchain initiative backed by global agribusiness giants like Cargill, has selected major Ethereum-focused firm ConsenSys as a technology partner.
Within the partnership, ConsenSys will build an Ethereum-based blockchain platform to digitize the post-trade finance industry and bring efficiencies and cost savings to the international agribusiness supply chain, Covantis said in a Jan. 23 press release.
Four agribusiness giants established the initiative in 2018, while Covantis’ name came out months ago
The concept of Covantis was established in October 2018, when four of the biggest global agribusinesses companies announced a joint initiative to digitize their global shipping transactions using blockchain and artificial intelligence. Covantis’ founding members include Cargill, Archer Daniels Midland (ADM) Company, Bunge and Louis Dreyfus Company.
While the companies have been investigating ways to standardize and digitize global agricultural shipping transactions since 2018, the official branding of the project was revealed about two months ago.
On Dec. 4, the founding members announced that their joint effort will be called Covantis, also launching a new website for the initiative, covantis.io. Additionally, the project announced that former ADM president and chief risk officer Stefano Rettore will lead the project as an independent advisor until the initiative has a CEO appointed.
ConsenSys will help to launch the Covantis digital platform in 2020
As the company plans to launch its digital platform in 2020, the recent addition of ConsenSys will apparently accelerate the anticipated launch. Initial focus will be on automating grain and oilseed post-trade execution processes, the press release notes.
ConsenSys will provide Covantis with a number of its enterprise-grade blockchain tools and services, including PegaSys Orchestrate, Kaleido and MythX to build the blockchain network on Ethereum. Specifically, the firm will build a secured platform based on Quorum, a permissioned Ethereum-based blockchain developed by major global financial holdings company JPMorgan.
Rettore highlighted the ConsenSys’ outstanding technology expertise, expressing confidence that the company would be a perfect tech partner for their initiative:
“ConsenSys presented prototypes that demonstrated excellence in its field and has a track record of using blockchain technology to digitize processes in the commodity trade finance industry. We are confident this partnership will allow us to build a first-class product, centered around unparalleled functionality, security and privacy.”
ConsenSys confirmed the news in a Jan. 23 tweet, while Joseph Lubin, Ethereum co-founder and ConsenSys CEO, noted that Covantis’ platform is proving the huge potential of blockchain tech:
“The strength of the Covantis initiative’s commitment to leverage innovative, best-in-class technologies to transform global trade operations for agricultural commodities is inspiring. […] This platform is evidence that blockchain technology has started to deliver on its promise of unlocking value through collaboration and removal of information silos within and across industries.”
Agribusiness is one major direction of blockchain implementations. In late 2019, Big Four audit firm KPMG launched a blockchain-based track and trace platform that is designed to increase transparency and traceability of processes in agriculture and other industries. Previously, Cargill — the United States’s largest privately held company by revenue — invested in digital engineering resources to develop Hyperledger Grid to streamline supply chains by using blockchain technology.
The combined valuation of the top 50 blockchain-related firms in the Swiss canton of Zug — known as “Crypto Valley” within the industry — fell by nearly half in 2019.
Swiss investment firm CV VC debuted a new report at the World Economic Forum in Davos, Switzerland on Jan. 22, giving an appraisal of the blockchain and cryptocurrency industries in the Crypto Valley during the last year.
Per the report, the valuation and subsequent price drop in Ether (ETH), the native cryptocurrency of the Ethereum network, led to a 40% drop in valuation of the top 50 firms — from $42.6 billion in H1 2019 to $25.3 billion in H2 2019.
One-year Ether price chart. Source: Coin360
But Ether price isn’t everything
CV VC director Ralf Kubli told a Cointelegraph correspondent at the World Economic Forum that, while all crypto related firms are ultimately influenced by token prices, it is important to examine funding inflows and employment:
“Overall funding has increased, so the real money that flows into the projects that we count in the top 50 has increased, so that’s basically a really important indicator for us that it continues to grow. And since […] employment has increased among the top 50 — employment has increased overall in the space in Switzerland — so that’s kind of how we gauge…”
Indeed, the report notes that funding to the top 50 projects increased from $3.8 billion in H1 2019 to $4 billion in H2 2019. The top selected projects also employ 733 of over 4,400 crypto and blockchain professionals currently working in Switzerland and Liechtenstein.
CV VC co-founder Marco Bumbacher and PwC Strategy Partner Daniel Diemers present the report in Davos.
Last year saw new additions to the top 50
As Kubli further noted, the top 50 companies change every year depending on their annual performance. 2019, for its part, saw the addition of several noteworthy projects to the list, including Libra — the global stablecoin project first proposed by Facebook — cryptocurrency exchange Bittrex Global and Ethereum development firm CasperLabs. The report also noted several unicorns — startups valued at over $1 billion — including Bitmain, PolkaDot and DFinity
Overall, the report states that indicators are pointing to a maturation of cryptocurrency and blockchain industries, with 842 related firms now operating in Switzerland.
Recent research shows that Ether (ETH) was the cryptocurrency most correlated to the rest of the crypto market in 2019.
In a report published on Jan. 22, the research arm of major cryptocurrency exchange Binance suggests that throughout 2019, ETH had an average correlation coefficient of 0.69. The paper, which compared correlation data of 20 top cryptocurrencies, reads:
“Ether (ETH) is the highest correlated asset. With an average correlation coefficient of 0.69 throughout 2019, it is consistently among the most correlated assets. The coefficient started at 0.69 in Q1 and rose to 0.72 in Q4 (Q2: 0.65; Q3: 0.74).”
Per the report, Ether was much less correlated in the first half of 2019 and became the most correlated in the second half. Interestingly, the paper points out that “programmable blockchains” such as Ethereum, NEO and EOS often showed higher correlations with each other than with non-programmable assets.
USD price correlation in the crypto market
Other crypto assets that have shown a high correlation with the rest of the market include Cardano (ADA), EOS, Litecoin (LTC), XRP and Binance Coin (BNB). Furthermore, the researchers observed that correlation is typically higher among cryptocurrencies with the highest market caps.
Comparison of quarterly average correlation coefficients for the five most correlated assets. Source: Binance
The assets with the lowest correlation to the rest of the market, on the other hand, are Cosmos (ATOM), with a correlation of 0.31, followed by Chainlink (LINK) and Tezos (XTZ) with respective coefficients of 0.32, 0.4. Overall, the median correlation between large cryptocurrencies slightly decreased over the last quarter of 2019
Binance’s effect on the crypto market
Another interesting phenomenon pointed out by the researchers is the “Binance Effect,” which refers to the fact that cryptos listed on Binance displayed higher correlations than with the assets not present on the exchange. The firm’s research also claims that, among the top ten cryptocurrencies by market cap, its own crypto asset Binance Coin is the one that has seen the highest returns.
Comparison of quarterly price changes for the ten largest assets by market cap. Source: Binance
While the correlation between crypto assets has been widely observed, the correlation between Bitcoin (BTC) and traditional assets — especially gold — is still subject to debate. Nonetheless, new data suggests that BTC is less correlated to gold than many believe it to be.
In the past, some also observed that Bitcoin had an inverse correlation to the stock market. As Cointelegraph explained in a market analysis piece at the end of October 2019, at the time this trend broke.
It’s the first successful live deployment on the Ethereum mainnet of something called a “scalable Harberger tax contract,” and it might just help save at-risk animals.
Cointelegraph attended the CV Labs pitch session in Davos, Switzerland today, an event running alongside the 50th edition of the World Economic Forum. In the basement of the Pöstli Club, crypto entrepreneurs took to the stage to give brief presentations on their current projects. JonJon Clark gave the audience an engaging rundown on his project Wildcards — maybe it’s his charming South African accent, maybe it’s the fact that his company directly connects to improving the world, but we were intrigued to learn more.
“Wildcards is a platform that represents endangered animals as non-fungible tokens,” Clark said. “These NFTs are always for sale, so they can be traded often to generate funds for the organizations they support.”
Organizations doing relief work for the recent Australian wildfires might list tokenized koalas for sale, for example. Money spent on those tokens goes to the associated organization, which can use those funds to support its mission.
“My cofounders and I all grew up in South Africa, and we were close to conservation there. We’d go to game parks to see rhinos and elephants the way other families go to the beach for vacation,” Clark said. “As we grew up, we saw these animal populations dwindle, and we were eventually unable to see animals we could see when we were younger. We want our kids to be able to experience what we experienced.”
Wildcards packs an impressive technical punch for a project generally aimed at saving the world. It represents the first successful live deployment on the Ethereum mainnet of a scalable harberger tax contract. Clark offered us a breakdown on what that actually means:
“Animal tokens on Wildcards are always for sale. As you buy, you have to immediately set a selling price for someone to buy that token from you. But you pay a percentage of that designated selling price, called a harberger tax, in order to prevent you from setting that price to $5 million. Our system for this is scalable because all those tokens are managed by a single smart contract.”
The project unites user incentives related to patronage, collectibles, and profit. People making purchases on the platform get to know that their money is making a positive impact, and can showcase their platform statistics on social media if they want. Users are inclined to gather more and more animal tokens, like CryptoKitties. And the simple truth of the platform’s economic model is that even though it’s primarily about generating money for relief organization, users could theoretically sell their animal tokens for personal profit down the road.
When asked about what’s next for the company, Clark teased that Wildcards expects to release its token standard soon.
As Bitcoin enters its twelfth year, the past eleven offer a meaningful amount of time to identify key trends that have emerged around cryptocurrencies and blockchain technology. These trends provide insights that are helpful in projecting the future of the digital asset space and how it will take shape over the next decade.
In reflecting on the history of cryptocurrencies over their lifetime, there’s one pattern that immediately jumps out. Each successive wave of interest in the cryptocurrency space has been galvanized by new developments in the ecosystem. In particular, two significant catalysts were the rise of crypto exchanges and the initial coin offerings craze.
These days, crypto users are spoilt for choice when it comes to exchanges, so it’s easy to overlook the seismic impact that these platforms had when they first emerged. Although Bitcoin launched in January 2009, it was over a year before Bitcoin Market — the first cryptocurrency exchange — opened its doors in February 2010. Other exchanges swiftly followed, including the now infamous Mt.Gox. It took less than eleven months from the opening of Bitcoin Market for Bitcoin to achieve parity with the United States dollar.
Fast-forward to 2016, Ethereum unleashed its ERC-20 token standard to the world, which quickly evolved into the 2017/2018 ICO boom. Whether people loved it or loathed it, the ICO craze was probably the biggest moment in the industry’s history. Once tech entrepreneurs became aware of how easy it is to create their own token, the blockchain scene — and the price of Bitcoin — exploded.
Related: ERC-20 Tokens, Explained
Even before Bitcoin hit its peak price of $20,000 in December 2017, there was talk of the ICO bubble bursting. In a nascent sector where so many companies claim to offer a unique value proposition that is often a carbon-copy of its peers, it’s inevitable that many of them would eventually fizzle out.
However, the crypto sector is unusual in that the value of the underlying technology is often perceived in line with market capitalization. Once the crypto winter hit, it hit hard. Once the crypto winter hit, it hit hard. As the prices remained low from the beginning of 2018 all the way until the spring of 2019, the perceived value of blockchain also went down, along with the value of the vast majority of tokens that had been issued during the boom. One study reported that less than half of the projects were still active a mere five months after their token sales.
Crypto cannot live by hype alone
Since the 2018 crash, it’s become increasingly evident that hype alone cannot sustain the industry. The vast majority of firms that promised to “revolutionize” existing industries through the introduction of a token have failed, leading to criticisms that blockchain is “a solution in search of a problem.”
Despite the critics, Bitcoin and many altcoins have survived well. But what’s clear is that many of the initiatives that survived the crypto winter did so by keeping their promise and offering a real-world use case. There are several examples that illustrate this point well.
Related: What’s Next for the Industry as ‘Crypto Winter’ Thaws?
Supply chain was one sector where blockchain appeared to have a lot to offer, promising transparent proof of provenance from factory to end consumer. In mid-2019, Gartner reported that over 90% of blockchain-based supply chain projects were failing. This is allegedly because the technology was failing to live up to the hype.
However, there are several notable examples of multinational firms using blockchain in supply chain and logistics, indicating that the tech’s use case does indeed hold value. Maersk implemented its TradeLens blockchain solution in 2018, which now boasts 90 partners and was adopted by the Thai customs agency in August last year. Coca-Cola is another case in point, having expanded its pilot solution from two to 70 partners late last year.
Gaming is another example of a use case where blockchain is adding real value. In-game assets are big business, with the virtual goods market worth over $50 billion. However, without blockchain, the assets themselves have no underlying value and are under the control of the game developers and publishers. Non-fungible tokens may well be set to transform the gaming sector, enabling users to take full ownership of one-of-a-kind assets, as pioneered by games like CryptoKitties.
There are other applications in the gaming sector. Royalty payments have been an ongoing challenge, with Microsoft Xbox developers working to resolve payment delays of up to 45 days due to difficulties in manual calculations and distribution. The company partnered with Ernst & Young to develop an automated, blockchain-based solution for its royalty payments, creating a more efficient, streamlined process.
Related: Gaming Is Key to the Mass Adoption of Crypto
Creating interest in interest
Ever since the 2008 financial crisis, it’s been virtually impossible to earn decent returns from good, old-fashioned savings accounts. Now, interest-earning accounts for cryptocurrency are opening up new avenues of passive income that doesn’t involve pure speculation on the volatile crypto markets or an active investment strategy.
One of the most popular ways is lending, allowing holders to deposit their funds on a loan platform so other users can take a loan, providing interest to the lender. However, staking offers another way of generating returns, where proof-of-stake blockchains distribute the equivalent of mining rewards to network participants.
Regardless of which lending solution crypto holders opt for, the returns are generally far higher than one would get from placing funds into a traditional bank savings account. Of course, the risks may also be more significant, depending on the type of investment and the chosen platform.
Store of Value
The original use case of Bitcoin was as a store of value, and it remains one of the biggest growth drivers today. Over recent years and throughout the crypto winter, citizens in countries including Venezuela, Argentina and Iran have turned to Bitcoin as a means of protecting their wealth from the effects of hyperinflation. Global or political events may also have an impact on the appeal of cryptocurrencies as a store of value.
Related: Global Economic Crises Show Idea of BTC as Store of Value Catching On
The real-world use case of blockchain as a reprise from hyperinflation demonstrates the bridge being established between the emerging technology and a current economic problem.
Related: Is Bitcoin a Store of Value? Experts on BTC as Digital Gold
More room for improvement
Despite the progress, there is still plenty of room for improvement. In particular, the barrier to entry for new users remains a major issue for the cryptocurrency space. Even now in 2020, owning digital currency often still means navigating unfamiliar technologies and platforms. This can be off-putting to the less technologically capable users, however, organizations such as Skrill are working to eliminate the barriers to entering the crypto space.
Reputation is a separate challenge. In 2019 alone, there were 12 high-profile attacks on exchanges. Scams are also still all too common. It’s an unfortunate reality that the biggest stories about crypto tend to be scandalous, and therefore make headlines in the mainstream media. For example, the BBC’s Missing Cryptoqueen podcast, covering the disappearance of OneCoin’s Dr. Ruja Ignatova, was a major viral hit.
The reality is that for many people uninitiated to cryptocurrency, stories like this will probably form the basis of their perceptions.
Building the reputation of crypto
None of this is to detract from the efforts of key players in the industry to establish a more reliable reputation for cryptocurrency. Coinbase has always worked hard to hold itself up as an example of how exchanges can operate in compliance with regulators. It was the second company to win the coveted New York Bitlicense, followed by others such as Xapo and Bitstamp. In the United Kingdom, Kraken Futures operates under the supervision of the U.K. Financial Conduct Authority.
However, the entry of existing reputable payment firms and banks into the crypto space is critical to increasing adoption among new crypto users. This serves several purposes.
Firstly, their entry creates a concrete link between the existing financial world and the new world of digital assets. As outlined above, creating a real-world bridge between any particular industry and blockchain is a proven recipe for success in the space of emerging technologies. Furthermore, reducing the barriers to entry for new users is critical if crypto is to attain widespread adoption.
A less tangible benefit — but one that is no less important — is to further bolster the reputability of cryptocurrencies among the uninitiated. This reputational problem can be solved by creating a bridge between established, trusted financial services and cryptocurrencies.
The eleven years since Bitcoin’s launch have been a rollercoaster ride for anyone involved in the space. But during that time, the token has grown from its cypherpunk roots to becoming a credible investment vehicle. Meanwhile, the potential of the underlying technology has only just started to make its mark on industry and the economy. Further removing the barriers to entry will go a long way toward allowing cryptocurrencies to settle into their niche among the existing financial infrastructure. Once that happens, widespread adoption should soon follow.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.