My main question about the coming era of crypto and blockchain is: How will all the funding go into better-regulated digital assets and cryptocurrencies? Over 90% of financial and business assets are “on-shore”—owned and controlled by firms and persons in the countries where they are bought and sold.
Most crypto-assets are traded offshore (80% according to CoinGecko). As more regulated opportunities arise, additional money will enter digital asset environments. I doubt there will be many fresh cryptocurrency growth prospects.
Regular readers of my columns know that I believe Ethereum will dominate like many other technology ecosystems. Ethereum is first and foremost a tech platform. ETH is a cryptocurrency, but payments for transaction processing drive its demand. I suspect ETH will eventually be subject to supply and demand for computing power on this “world computer.”
Standards that enable economies of scale and network effects fuel the tech industry. Ethereum is the default choice because it won the programming standards war and fixed its scalability difficulties. Ethereum will mostly contain digital assets.
Bitcoin has different regulations. Despite popular belief, Bitcoin is a crypto-asset like gold that isn't bought for usage. They buy it for its rarity and wealth appreciation. Like gold, Bitcoin is expected to appreciate through scarcity rather than produce cash flow.
I don't think current initiatives to add a Layer 2 ecosystem to Bitcoin like Ethereum will affect this outcome. Since Ethereum has a huge lead, Bitcoin users who wish to program their asset have begun transferring it to “wrapped” Bitcoins on Ethereum.
Can one Bitcoin exist? Bitcoins are theoretically endless. It seems they are already. Litecoin, Dogecoin, and many more meme coins and cryptocurrencies resemble Bitcoin. I give free NFTs (get yours here!) but no BrodyCoin yet.
Despite the seemingly unlimited amount of Bitcoin copies, I believe there will only be one Bitcoin, the one we have. Keep the gold analogy. Gold is finite, but there are many other precious metals. We could swap diamonds and silver as easily as gold.
Gold dominates the precious metals market despite various options. Gold stores are worth $13.7 trillion globally. Only $1.3 trillion is the market cap of silver. Gold is an order of magnitude above the next alternative, hence I think Bitcoin will remain the top crypto asset.
This has several major implications for individuals preparing for the next wave of expansion in these industries from a regulated age. The first is that creating a new coin may not succeed. Because of its importance, people will buy Bitcoin as digital gold.
Digital assets should and may be more than just digital gold. For now, oil is crucial to the world economy and generates $1.7 trillion in revenue, 10 times more than gold. Creating something consumers or businesses need will increase net new growth prospects. The space is substantially larger than reserve assets. I'll look there for actual growth prospects.
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