Blockchain technology has exploded into the mainstream, powered by notable movement in Bitcoin prices, the rollout of central bank digital currencies (CBDCs), and increased adoption of the tech. At its core, blockchain technology brings decentralization — instead of processes or data being controlled by one single centralized entity, they can be stored on a transparent, shared network of computers, free from corruption or tampering.
The next five years are pivotal for the mass adoption of this decentralized technology. With the world recovering from the pandemic and continuous technological innovation creating more and more opportunities for people across the globe, blockchain technology is set to transform everyday societal and economic structure. Although the blockchain industry is an ever-growing and vast expanse of new technology, there are a number of applications that stand out as leading shifters that will change the world over the next half decade.
NFTs move beyond art and collectibles
Non-fungible tokens (NFTs) have emerged as a significant point of contention for many observers of the blockchain space. An NFT is essentially a digital token representing a totally unique asset, such as a piece of fine art or real estate. When represented by an NFT, an asset can be easily traded digitally across the world on blockchain technology. Famous examples of NFTs in the mainstream media include Tim Berners-Lee’s source code of the world wide web and digital collectibles from musical artist Deadmau5.
Digital art pieces and collectibles being sold as NFTs for incredibly high prices brought blockchain to the forefront of people’s minds. With NFT sales totalling US$2.5 billion so far in 2021, the likelihood of continued development in the space is steadily increasing. Over the next five years, the technology’s use and applicability will also increase. NFT concert tickets and plane tickets are already beginning to pull the technology away from solely being about art trading and into other practical use cases.
NFTs create an unparalleled and verifiable level of authenticity that can be easily incorporated into the everyday ongoings of the global economy. In the future, domains, unique collector items and in-game items could all potentially be represented on the blockchain as an NFT.
DeFi’s Next Steps
Decentralized finance (DeFi) is another increasingly blossoming application of blockchain technology that is set to gain significant momentum in the next 5 years. In Q1 2021, the dollar value of assets under management by DeFi applications grew from roughly $20 billion to $50 billion.
DeFi is a form of finance that removes central financial intermediaries, like banks, to offer traditional financial instruments that utilize smart contracts on blockchains. An example of DeFi in action is the plethora of new decentralized applications now offering easier access to digital loans — users can bypass strict requirements of banks and engage in peer-to-peer lending with other people around the world.
The next five years are vital for DeFi and will see dramatic growth in its applications, regulatory compliance associated with the technology and its overall use. Celebrity investor Mark Cuban, who gained notoriety in the blockchain industry through his advocation of NFTs, has suggested that “banks should be scared” of DeFi’s rising popularity. Although considered in its infancy, DeFi contracts had a combined value of over $41 billion in March of 2021, leading one to assume that Mark Cuban’s foresight is showing increasing signs of ringing true.
The prosperous future of crypto
The prolific rise of Bitcoin, Ether and even Dogecoin has swelled the total value of the cryptocurrency market to $2 trillion at peak, up from $260 billion only one year ago. In many countries around the world, crypto currencies already present unique economic opportunities for financial accessibility and inclusion, while playing an important role in the retail economy.
In El Salvador, Bitcoin will become legal tender from September 2021, with President Nayib Bukele aiming to help the population send remittances internationally, among other uses. Before this, Venezuelan citizens have also adopted digital assets as a means to escape the hyperinflation of fiat currency in the market. Furthermore, developing countries have been seen to spearhead the use of crypto currencies in an effort to bank large “unbanked” populations.
Use of crypto will continue to advance through numerous regulatory developments that seek to incorporate crypto into everyday life. In the U.S., for example, Congressman José Luis Ramón recently presented a bill to allow employees and service exporters to receive their full or partial salary in cryptocurrencies. Slowly but surely, governments around the world are turning their attention to digital assets and recognizing the role of digital currencies in the future of national economies. One profound example of this is in the growing exploration of central bank digital currencies.
CBDC’s become commonplace
A central bank digital currency (CBDC) uses a digital token to represent the virtual form of a fiat currency. Unlike cryptocurrencies, CBDCs are operated by the central bank of a given country, meaning they are more centralized and regulated.
In China, where the idea of a cashless society is already the norm today, the probability of mass CBDC adoption is undoubtable. Non-cash payments are increasing by over 20% year on year, according to the People’s Bank of China. China has already distributed some 200 million yuan (US$31 million) in digital currency as part of pilot projects across the country, showcasing the correlation between the natural move to cashless systems and the timely introduction of blockchain-based CBDCs.
Many other countries have detailed their plans to launch their own pilot CBDC programs. The European Central Bank has outlined their support of a Euro CBDC, detailing their plans to begin working on its implementation. Should this innovation and action continue, CBDCs will be commonplace and held in digital wallets owned by citizens and businesses across the world, presumably within the next five years.
Furthermore, there is potential for EDC’s (enterprise digital currencies) to reign supreme in the world of international commerce. EDCs like the one Amazon is reportedly preparing to release in Mexico and Facebook-backed Diem, which is also currently in development stages, promise to make it easier and cheaper for people to transfer money and make purchases online.
Tip of the iceberg
The rise of massively influential blockchain applications are set to change how we communicate and operate as a society. Throughout the pandemic, we have seen innovative uses of blockchain technology to track vaccine cold storage and delivery and to store medical information and testing data. Whole industries with their supply chains interrupted have begun to leverage blockchain technology to connect suppliers and track goods across the globe.
Over the next five years, leaders in the blockchain world will begin to ask themselves new, more advanced questions. For example, such adopters will need to address issues such as interoperability between different blockchains. Right now, different blockchain applications and ecosystems are siloed, hindering mainstream adoption and scalability. Connecting these worlds to one another to facilitate the transfer of assets will be essential. Similarly, we need to ask ourselves how we can make blockchain technology accessible to anyone and everyone, regardless of training. Reaching the masses will involve more resources, education and simpler platforms for user experience.
Decentralizing the worlds of art, music, banking, healthcare and beyond will take time — and this technology is only in its infancy. Its impact and development will grow into the future.
