2017 has been a breakout year for crypto with Bitcoin surpassing $10,000 and more than $3.8 billion raised this year in ICOs. We’ve seen truly mind-bending appreciation (like Ethereum’s 50X gains YTD) and witnessed the beginnings of countless new projects. In all the funding frenzy, we’ve also likely sown the seeds of some of the larger calamities that will befall the space.
One thing is certain: this technology has been distilled to practice and open sourced to world. It’s out of (Pandora’s?) box, and there’s no putting it back.
Source : https://www.hatimeru.com/2020/01/prediction-bitcoin-for-futures.html
Pundits are quick to argue, given wild asset appreciation, that we are in something that looks like the internet bubble. Even if this is true, the question is whether this is the year 1994 or the very twilight of 1999. So without further ado, let’s make our way to 2022, and see what world we may be inheriting.
Bitcoin Price Will Surpass $100,000 per Bitcoin
The champagnes were popped, balance screenshots commemorated and last-minute Vegas trips planned while Bitcoin price soared past $10,000 this week.Short of entire system failure, Bitcoin is currently the most battle-tested crypto asset and we are still early in the exponential curve. Many along the sidelines may call tulip bubble, our society has never had an element so global and so artificially scarce before. [Disclosure: this is not investment advice; author invests in and holds crypto assets.]
Despite this year's appreciation, usage is outpacing Bitcoin's price. Daily transaction volumes (in USD) for Bitcoin are currently around 100X what they were at the beginning of this year, when the price was hovering closer to $1,000 per Bitcoin. This volume growth is while most institutional managers are still sitting on the sidelines, waiting for custodianship technology to matureEven the corruption use cases alone still have orders of magnitude more growth for total market capitalization of Bitcoin. If just one country's worth alleged corruption confiscations were moved to Bitcoin to escape seizure, it would nearly 5X the total amount of value trusted to the currency today. Some in the financial community are already calling for the $40,000 price markin 2018 alone.
Commodity Markets for Everything Digital
One of the biggest areas facing disruption will be electronically deliverable (and verifiable) services: compute, bandwidth, and similar. Advances in blockchain technology will make it easier for marketplaces to form and bring a huge amount of supply online. Why have every hosting company compete for user acquisition and retention, set up billing accounts, etc. when you can simply hook your equipment into a standardized service that has payments baked in?
We expect to see one or more major digital commodities traded readily. We may even see miners for hire who will provide their hash power to secure a particular coin with a contractual bounty above and beyond the transaction and block rewards the protocols offer natively.
Still uncertain are which protocols, existing or yet to be created, will be the winners. The winners will naturally bring the speculators (both purely financial and node providers) required to make a market. Also in question today is how much these markets will eat into Amazon’s AWS or Google’s cloud businesses or whether many speculative operators will run their businesses on top of these platforms.
Fully Decentralized Exchanges
Many are quick to note the challenges of building a liquid and deep market in a decentralized fashion. Current centralized exchanges while currently minting a huge amount of profit are eager to see how their business will evolve. Market forces will drive all decentralized order books to share and interconnect but once the entire market is completely connected, exchanges become completely, well, exchangeable.
A major driver spurring decentralization will likely be regulation as certain currencies or exchange of currencies becomes more heavily regulated, it will drive behavior either to institutions that have proper compliance (for institutional investors) or underground.
For instance, even if a token offering is deemed an illegal equity offering, there still may exist a market of buyers and speculators. As a historical example, look back to penny stock spamming pump and dump schemes of 10 years ago. Brokerages would block trading of equities suspected of being manipulated in their UI, but buyers would still call their brokers to manually override and ride the pump (either up or down).
There is a lot of underlying infrastructure yet to be built to help decentralized exchanges discover and share order volume, split economics as well as the consumer and professional trading infrastructure to make this easier and more approachable.
In 2022, many trades may not actually be settled on chain. Additional layers of abstraction off-chain is currently a very ripe area for R&D. These kinds of projects, while still in their infancy, suggest an even braver new world: where assets can be traded instantly without any public trace of their movement. The very first public cross chain swap, a trade between Litecoin and Bitcoin, just happened weeks ago. This is an area to watch closely.
Nations Struggle With Tax Collection
Governments are currently sitting by learning, watching, and waiting. But they don’t yet realize how existential of a thread the crypto ecosystem represents to their business of governance. This isn’t about regulation of scammy ICOs. This is about small nations being able to collect taxes from their citizens and maintain their operations on any scale like the present.This also isn’t about crypto being used by bad actors to launder money, avoid taxes or similar.
When everyone has a completely international, unseizable asset system at their disposal — the question becomes not if one pays taxes but where. Why repatriate value to a country that overcharges relative to the value provided?
It has never been easier to to run a massively lucrative multi-national empire from the comfort of home, and only convert a tiny fraction of one’s wealth to local currency. (Maybe save the largest expenditures take place in a lower tax jurisdiction.)
Just as Apple shelters billions in Ireland as payment for IP of products sold around the EU, expect far more corporate innovation in keeping value far away from the tax collectors.
Government Issued Crypto is Real
As more and more reserves are moved into crypto assets (the “digital gold” use case), nations will see their own currencies less viable or valued to other nations looking for safe reserves. Just this week, the US Federal Reserve publicly announced that this is an approach they are considering.
Wise nations (likely small) will lauch their own crypto fiat currencies digital currencies on a ledger with the creation and distortion controlled by the government (and presumed parity between the governments own currency).
While this misses the large point of digital currencies and may be a short-lived “tweener” state it will create short-term demand for that nation's currency as an easy-to-hold, easy-to-move money that’s backed by a government.
Nations Stockpile Crypto Weapons
As crypto becomes critical infrastructure, replacing much of the existing banking system, governments will seek to regain control.
Crypto weapons could have many forms: mining attacks to reduce transaction throughput and cause chaos. Attempts to break and discredit individual currencies. Backdoors to control mining infrastructure. Secretly launching their own crypto with backdoors built in. Or simple quantum computing to brute force existing monetary supply before maintainers could react.
What’s clear at this moment is just as “cyber space” became a new battle front, so too will battles be waged for control of, and access to, distributed value technologies.