Cryptocurrency is a new medium of financial exchange backed by technologies like decentralized blockchain ledger, cryptography and hashing. Some people think crypto is temporary and will vanish in future as it does not have any intrinsic value and some people(like me) believe crypto is inevitable. Let’s discuss crypto’s future in this post.
I personally think that crypto will exist in the future in a significantly bigger shape or form. And the future in which crypto vanishes is highly unlikely. I am not conveying, crypto will be the biggest financial market like the stock and bond market is today, though it can very well happen. But what I am conveying is, crypto will exist in some shape or form i.e. crypto is inevitable.
Here are some factors in favour of crypto. One or two of them individually may not be capable enough for crypto but I think all of them collectively are capable enough for crypto to get a significant market share in tomorrow’s economy.
1. Total market cap of crypto and support from institutions
As of October 2021, the entire crypto market cap is ~2.6 trillion dollars. That is a big number; it’s around the entire GDP of India, 5th largest economy in the world. I don’t think anyone can wipe off that much money out of the world. Private/public institutions and individual people like you and me have invested so much money into it, that any government will think 100 times before deciding to delegalize or ban crypto, unlike China of course! So, crypto is here to stay.
Governments around the world have also started thinking about how to deal with crypto, like should earnings from crypto come under capital gain tax or not etc. Most likely, some laws will come from federal governments and banks to regularize crypto. And by the way, some governments have also started to adopt Bitcoin as legal tender.
Financial institutions are also coming into the crypto market. Institutions like JPMorgan, Morgan Stanley and companies like Tesla and others are coming to the crypto market and it only makes it more inevitable. Because when big players come to the party, almost everyone needs to take it seriously, including governments.
Venture capital firms like Andreessen Horowitz are launching billions of dollars of crypto specific funds to invest into crypto related startups and applications. This money will attract more smart people to join this space and build amazing products.
2. Involvement of smart people
Future is created by smart, hard working and talented people. When a significant number of smart and talented people work on something, chances of that thing failing reduces dramatically. We can almost say that the future is designed by smart, intelligent and knowledgeable people.
And we can clearly see some smart people like Elon Musk, Jack Dorsey and many others supporting crypto. Also a significant number of software engineers and developers are either joining crypto startups or starting their own. Solana and Polygon are good examples of that. Number of startups in crypto space is increasing day by day.
Basically, smart people adapting the idea of decentralized blockchain and its applications like crypto only ensures that, future of crypto is good.
3. Blockchain technology
Decentralized blockchain is a fundamental technological advancement. It eliminates the need of a centralized body who can control the whole system. It conveys that consensus mechanisms like Proof of Work(PoW) and Proof of Stack(PoS) and improvements like Proof of History(PoH) are capable of collectively making decisions in a decentralized manner, without compromising privacy, scale and speed.
DeFi(Decentralized Finance) where we can do all the financial activities like lending and borrowing of money, is set to eliminate the need of centralised banks. DAO(Decentralized Autonomous Organization) is something like a decentralised company or organization. Wikipedia definition of DAO is, “an organization represented by rules encoded as a computer program that is transparent, controlled by the organization members and not influenced by a central government”.
Banks and companies/organizations are fundamental building blocks of our capitalistic economy, and blockchain applications like DeFi and DAO are set to disrupt them.
All these may sound a little far-fetched as of now. But many smart people are working to make them tick, so chances are not zero.
4. Involvement of youth and people’s decreasing trust in governments
Another factor in favour of crypto is significant involvement of youth. What percentage of youth is interested in the crypto market vs. other financial markets. Because today’s youth is tomorrow’s adult generation. So, whatever they believe today, is going to be the future.
Now, maybe because of astronomical returns of crypto in the last decade(196.7% CAGR over the last 10 years), youngsters are seeing it as a “get rich quick” scheme and are attracted towards it and investing money into it.
But, I think young people are also attracted to crypto because of its fundamental decentralized nature. They don’t care about these old politicians and those borders between countries which are dividing them. They believe in “One World, One Currency”, unity and equality.
Also, trust of people in centralized governments and banks is decreasing.
Only 1 out of 4 people think they can trust their government to do the right thing most of the time. In other words, 75% of people don’t trust their centralized government to do the right thing. That’s huge. And crypto is set to provide them a decentralized platform which can not be controlled by anyone, including the government.
I think all of these factors collectively will ensure a significant market share of crypto in tomorrow’s economy. And again, it’s worth saying that crypto may not be the biggest financial market of tomorrow’s economy but for sure it’ll be a major one. Crypto can very well be the next big technological wave.